Investment clubs: a source of wealth creation

Investment groups and clubs, commonly known in colloquial parlance as chamas are now a popular source of generating wealth. Their basic objective is to set up self-help groups that comprise members who pool resources to form entities bound by a social and commercial agenda. Over the past decades, chamas have been transformed into a wealth generation and creation phenomenon, firmly entrenched within the social fabric of numerous African
communities. Ideally, numerous individuals’ come together seeking to make decisions and the choice to save and invest collectively. This cooperative movement of sorts is nothing new in Kenya but notably ranks as one of the best example of how groups form joint savings and credit cooperatives organizations (SACCOs).

Often, such groups fix their focus of investments to zero in mainly on nurturing agricultural and small business ventures. For several years, cross-sections of Africans replicated this strategy to create informal investment group vehicles as a source of social empowerment. Savings are pooled from regular monthly contributions for the sole purpose of investment. The logic behind this approach is simple but powerful. Larger amounts of
money can be raised within the group or club. In efforts to benefit from the fruits of broader investments, skills and diverse experiences, group members take charge to innovate projects on basis of making contributions, which in long term translate to wealth creation.

Indeed, an increasing number of formal investment groups, have over the past two
decades transformed into financial machines capable of initiating multi-billion-shilling projects in various sectors of the economy. Statistics for instance indicate investment clubs and chamas are key drivers in the stock market, real estate, transport, offshore markets, bonds, energy, wholesale and retail, hotels, transport, energy and agriculture
sectors. As of two years ago, there were an estimated 300,000 duly registered groups registered across the country with a collective asset base worth more than Sh300 billion. It is this steady growth in capital generation and potential of chamas, which over recent years has caught the attention of commercial banks, deposit-taking microfinances
and credit unions – all eager to boost their depositors’ base. Lydiah Maina, a microfinance banking expert, asserts that this ever-evolving concept of members-driven chamas has morphed into a powerful investment pooling resource.
And that the government is contemplating collaborating with these groups to raise funds in efforts to fund indigenous development projects.

Arguably, the Women’s Enterprise Fund and the National Youth Enterprise
Fund are the most visible indicators of the government’s commitment to invest in its populace. It is estimated one in three Kenyans is already affiliated to a chama, notwithstanding whether it is registered or unregistered. Consequently, mainstream financial institutions have taken an initiative to conceptualize tailor-made products
seeking to rope in and address the needs of investment groups. According to Robinson Muthama, a personal finance advisor, “chamas are good at mobilizing capital. However, many such clubs or groups now face the challenge of breaking through beyond the savings level to multiply their member contributions. This partially is the reason why microfinancial institutions and commercial banks are aggressively developing concepts to target the investment entities,” he remarks.

Cases in point are numerous products conceived to suit chamas unveiled by K-Rep, Bank of Africa, Co-operative Bank, Barclays Bank and Kenya Commercial Bank. Notably, numerous Deposit-Taking
Micro-finance institutions have been keen to introduce a raft of tailor-made products targeting chamas, with some enabling clients to access up to Sh200 million for investment. Although self-help groups have been in existence since before independence, they only became more prominent beginning the late 1980s through to the mid-1990s.

This was after advent of the now infamous donors funding-backed Structural Adjustment Programmes [SAPs] – whose repercussions edged Kenya into the precipice of gradual economic downslide. It was the subsequent day-to-day struggles to make ends meet that prompted scores of the less privileged citizenry lower class to come together and pool their limited financial resources to cushion and endure the harsh economic conditions. Within various key sectors of the economic sphere, chamas have matured over the years as catalysts for tangible development.

Todate, scores of young Kenyans are joining or forming formal investment clubs as avenues for empowerment and enhancing their social networks. An increasingly percentage of Kenyans resident in the Diaspora have notably also
jumped into the bandwagon and no longer shy away from forming chamas in their local, residential neighbourhoods.
This way, many have managed to effectively mobilize and raise pools of funds which are then channeled back home
driven by global dynamics of wealth creation. Many have subsequently thus taken advantage of emergent investment
opportunities in various sectors particularly in real estate and housing development ventures.