A group of 12 women is gathered at a home in one of Nairobi’s upmarket neighbourhoods sipping tea and biting on beignets and samosas on a Saturday afternoon. The secretary of the group calls the meeting to order as she reads the minutes from the last meeting and awaits the group’s approval. Everyone is in agreement and she proceeds to the next item on the agenda - collecting the month’s contribution from each person.

The group that holds meetings like that has given itself a name, Mulika Mamas. It is rather a loose affiliation of people than an official organization. Mulika Mamas is part of a phenomenon that has spread all over Kenya: Chamas, the Swahili term for informal investment groups of individuals whose objective is to pool together capital or other resources for investment. Apart from that, chamas are also about collaboration, friendship and social security.

Mulika Mamas was formed in 2007 by a group of friends who wanted to invest in real estate and who realized they can achieve more as a group than as individuals. “We knew each other from different forums and we all kept saying we want to form a chama so we met and started the group,” says Catherine Butaki, the group’s chairperson. The members are diverse in terms of daily activities and incomes. Some of them work in the communication sector, several are bankers, there are teachers, consultants, entrepreneurs, civil servants and a farmer. Each member contributes Sh5.500 ($55) every month. So far they have been able to buy a piece of land that they sold off at a profit. “One of our major goals is to own a housing estate,” says Catherine.

Almost every adult in Kenya belongs to such an investment group. Many people are even in multiple chamas — one formed to buy a large piece of land for subdivision, another for saving money to visit one another’s homes. There are even extremes where groups have been formed to create a pool of funds for Friday night beers.

Chamas are so much a part of the Kenyan psyche that one barely realises when he/she is joining one. You’ll be having a Whatsapp conversation with a group of friends when one person suggests you start contributing money to start a farming project because everybody is making money from agriculture. Soon everyone goes along with the idea and just like that, you have a chama running.

It's hard to pinpoint exactly when the phenomenon picked up but it seems Kenyans have always been about getting together to save money to accomplish specific goals. “There are currently around 300,000 groups, with at least $3.4 billion in assets. But there are many more informal ones that are unregistered,” says Alex Mwangi, head of secretariat at the Kenya Association of Investment Groups (KAIG), an umbrella body for chamas. “By aggregating the funds of a large number of small investors, an investment group gives individuals access to a wider range of opportunities than they would have been able to access alone.”

The most chamas are merry-go-rounds. People regularly contribute an amount of money per day, week or month and the total collected sum is given to one of the members with each turn, rotating until all the members have received the money. Merry-go-rounds are mostly geared towards members’ welfare as the money received goes towards a personal activity like paying school fees, saving for a holiday or building and furnishing a house.

Mary Wambui, a bank manager, is in such a group that she joined because it enables her to save money. “We are a group of five. I only know two other members because we do not meet. We just send money at the end of the month.” Everyone in her group contributes $200 a month, meaning every month a member receives $1,000. “This is a good amount that you can use to achieve specific goals at home or in business, but which is hard to save in the bank because you keep accessing your account,” says Mary.

Chamas are about friendship, welfare, savings and investment Chamas can have anywhere between two and 100 people. Old friends from high school can link up and form a chama. So do members of extended family, workmates or people who attend the same church or live in the same neighbourhood. For one to be allowed into an investment group, he/she has to be introduced by a member and be vetted by the group.

Ephrata is another investment group that was formed by friends who met at the university. “We thought that since we knew each other from the university, we could come together and buy land and build homes. That would help us know our neighbours,” says Davis Muguimi, the group’s chairman, an entrepreneur.

Ephrata was founded in 2011 by 10 friends and their spouses and registered as a limited company. Each member contributed an initial capital of around $2,500 and a monthly contribution of $70. The investment group has managed to acquire a 2-acre piece of land at $20,000 in Nairobi city’s outskirts that they hope to resell at a profit. They have also invested part of the cash in government securities and it is also lent to members at an interest.

Five years on, however, the group is yet to achieve its goal of building homes. “We took long before identifying the piece of land to buy so some members went ahead to buy their own homes, diluting their commitment to the group,” notes Kennedy Omami, a member who works in the insurance sector. “With time people became disengaged and stopping sending their monthly contribution,” he adds pinpointing some of the challenges most investment groups face in Kenya.

Alex Mwangi of KAIG says he has seen many groups fold because of lack of commitment. “People often come together excited initially by their ideas but because they do not think through what they want to achieve and write a strategic plan with specific goals to be achieved in the long term, their interest wanes and they pull out or become disengaged.” Therefore the KAIG tries to empower chamas to adhere to their investment goals and to come up with strategic plans and constitutions.

A Chama Handbook published by KAIG recommends that investment groups have clear objectives in the beginning on the group’s purpose to prevent them from becoming a socializing forum. “However, having social activities cements the group’s relationship dynamics,” Alex adds. Some activities that groups undertake to strengthen their bonds include goat-eating parties to connect and have fun, visiting each other’s life events like weddings, visiting children’s homes or donating books to a school library.

What boosts most chama members is the hope to be part of a collective success story one day. The Critical Mass Growth Group (CMG) is one of those stories. Born in 1996 at a farewell party in a church, the company is now worth over $20 million. It has evolved from a 30-member chama to include three companies, one of them public, and own various real estate properties including a 10-storey building at the heart of Nairobi’s central business District, the Norwich Union House.

“Our seed capital came from 30 members who initially contributed $100 each per week for two years to build the capital,” says Bob Karina, CMG chairman. “Whenever we require money we do cash calls to our shareholders.” The firm’s portfolio is in real estate, stock and money market. CMG sensibly applied the advantages that chamas bring along. They allow members to pool resources quickly, spread the risk and the groups offer cheaper loans than banks. The group accountability forces the members to acquire a discipline of saving.

“A good chama offers its members the opportunity to interact, research, analyse and spot the most viable opportunities. With enough eyes and ears within the group, an informed and rational decision can be formed,” analyzes Alex from KAIG.

Even the government has realized the benefits of chamas and actively encourages young people and women to join groups whenever they want to apply for tenders from the State. Also various monies allocated to youth, women and persons with disability can only be accessed through such groups. Commercial banks, deposit-taking microfinances and credit unions are also developing tailor made products to woo investment groups as they eye the deposits. Even if chamas already are all over the country, it has just been the beginning.


In cooperation with Digital Development Debates.