Savings and lending groups, also known as Chamas, have long been a vital source of financial support for communities across Africa. These groups, often comprising individuals with limited access to traditional banking services, pool their resources to provide loans, offer support to members during times of need, and promote economic growth.

Many African men and women belong to one or two Chamas. Most groups begin as friends, family members, classmates, church members, or workmates come together for one cause – to save money. Chamas have provided women with increased social support during times of need, serving as an anchor during periods of financial and emotional distress. The women use the money saved in Chama mostly to pay for utilities and advance projects, which may be business-related or for personal needs.

 Membership in the groups is usually determined by each Chama according to its purpose. Some chamas are formed to improve members’ economic status, while others serve as an avenue for social activities.

In recent years, the government has also stepped in to support the growth of these chama groups. These groups need to be registered and regulated by the Department of Social Services within the Ministry of Labor. Once a group is duly registered, it can open a bank account and transact business. However, to date, the majority of Chamas operate informally, as they are interested in a system of”merry-go-round.”

In this scenario, the money is collected and distributed to one or more members, and the process is repeated until all members have received their shares. Some groups refer to this concept as “table banking” when distributing money. Table banking is similar to the merry-go-round. The only difference is that the member’s contribution is not given to one person. What happens is that the money is collected, and then members take out loans until all the funds are exhausted. Each member agrees to repay their loan with a small interest rate, as determined by the group’s decision. This way, the money continues to grow, and more funds can be made available for members to borrow each time. The concept of Chama has grown from sharing money to achieving essential milestones in investment.

There are high-end Chamas, for lack of a better description, where members meet virtually to discuss projects. They then send their contributions to a single bank account. The funds could be sent through electronic bank transfers, mobile money, or other means that can save both money and time, which in the past characterized the management of Chamas. 

Nowadays, technology has enabled every investment group member to access the group’s accounts from anywhere. This brings about better transparency because keeping track helps with accountability and records.

Technically, a smart chama provides accountability and transparency in saving groups. Each member can know their money in the Chama and the amount available for loans or projects. Through tech, groups can remotely hold meetings, take minutes, review projects, automatically take attendance, and penalize offenders.

As technology unfolds in the social and business arena, the Chama movement could witness a significant evolution as digital disruption becomes more common.

The study found that savings group digitization improved members’ perceptions of fund safety and resulted in measurable time savings, which group members appreciated.

Chama Management System will be a revolutionary platform designed to empower chamas by digitizing their operations. The platform allows group members to save, request loans, make loan payments to the group, and receive loans and share-outs through mobile money. It eliminates the need for physical lockboxes to store cash, improving the safety of funds and addressing one of the biggest concerns related to traditional group operations. The entire process occurs in real time, promoting viability and responsiveness.

Moving from the usual desk paperwork to digital record keeping, Chamas can boast the following advantages of using Chama Management Systems:

  • Digital Platform: One no longer runs the risks of keeping paperwork records, such as misplacing the books, losing them in a fire, or maliciously destroying them. With Chama Management Solution, Digichama, or Echama, financial institutions can utilize cloud, on-premises, or hybrid storage to ensure that members’ data is safe and easily accessible. These solutions come with multi-layered security systems and encryption that reduce the chances of being hacked.
  • Transparency and Group Management: Each Chama member can view the group balance in their account. They can track contributions, loans, fees, and penalties, and receive reminders about contributions. Should the leaders try some mischief, the members will be able to see and ask questions. This will foster accountability and transparency regarding how Chama funds are used and managed. Manual record-keeping processes can be both time-consuming and prone to errors.
  • Track Savings: Once the group has set a specific goal, all the members can see how they are doing and how far they have yet to reach it. Members can also set personal goals and track their progress. This allows for ease of saving and progress tracking to achieve said goals.
  • Loan Management: As a member, one can see how much they are eligible for as a loan from the group. One can apply for a loan through the same platform, have it approved by the Admin online, and manage repayments digitally.
  • Automated Reconciliation: When a member or an authorized leader makes any changes or moves funds, the system quickly detects this and updates the details instantly. You can view your account status in real time, as well as active loans, contribution standing, and more.

 

How Chama Management Systems Works:

  1. Easy Registration: Simple and intuitive registration process for chama leaders.
  2. Customizable Settings: Customize the platform to meet your Chama’s specific needs and requirements.
  3. Secure Transactions: Conduct secure and transparent financial transactions within the platform.
  4. Real-time Reporting: Access real-time reports and track the financial performance of your Chama.
  5. Ongoing Support: Benefit from our dedicated support team and ongoing access to new features and updates.

Mobile-based savings and lending are the way forward, judging by Africans’ uptake of numerous mobile lending apps, such as Branch, Tala, Saida, and bank apps. By now, most banks offer mobile banking facilities, and many utilize apps to connect with their customers.

The Talk of Equity’s EazzyBanking App, KCB app, and Co-op Bank app, among others, are all venturing into the risky space of serving customers in a virtual space, including lending money. It is interesting, however, that banks are now warming up to the idea of lending through their mobile apps. The problem with borrowing through bank apps is that your account must have shown some activity. For example, Equity Bank disburses loans through the application but requires at least six months of active account use for a user to qualify for credit, a requirement that most mobile lending apps do not have.

This is quite unlike mobile lending apps that give money to strangers as soon as they sign up. Banks, having realized they could have lost their grip on the financial sector, have developed products for investment groups. These products provide Chama groups with an opportunity to organize their contributions through an attractive array of account offerings, including no charges, interest earned on funds maintained, and access to credit facilities, among others.

Banks include Faulu, Bank of Africa, Kenya Women Finance, and Rafiki Microfinance Bank. They are mainly deposit-taking banks that offer products suited to investment groups.

We cannot underestimate the potential of these investment groups. Many men and women have used them to educate their children, complete projects, and even make business moves that were previously unimaginable.

Initially considered the preserve of rural women, their success among womenfolk, even in urban areas, has proved that mainstream banking is not the only solution for financial freedom.

However, Millennials would be best placed to benefit from investment groups despite the common misconception that they have no money to save. Millennials, therefore, have the chance to form their investment groups around a mobile option. This works well because they are comfortable with their gadgets, which they can use to invest and monitor their investments virtually.