Chama revolution:Banks train sights on investment clubs

By Nicholas Waitathu

Opportunity: There are about 300,000 groups with an asset base of Sh300 billion

Informal investment groups, popularly known as chamas, have morphed into financial machines that have initiated multi-billion-shilling projects in various sectors of the economy.

Investment clubs are today key drivers in the stock market, real estate, transport, offshore markets, bonds, energy, wholesale and retail, hotels, transport, energy and agriculture sectors.

And the growth of chamas has drawn the attention of commercial banks, deposit-taking microfinances and credit unions, which are looking to boost their deposits. Financial institutions have developed tailor-made products to woo investment groups.

Kenya Association of Investment Groups (KAIG) Chairman Patrick Kariuki told Business Beat that chamas are becoming such powerful investment vehicles that the government is contemplating collaborating with them to raise funds for development projects.

There are currently an estimated 300,000 groups that collectively hold an asset base of more than Sh300 billion.

It is estimated that one in three Kenyans is in a chama, registered or unregistered.

Financial institution

Rafiki Deposit-Taking Microfinance, a subsidiary of Chase Bank, is the latest financial institution to launch a new product targeting chamas. The new product — Chama Supreme Banking – allows clients to access up to Sh200 million for investment.

“We want to empower investment groups to own more as a means of securing their future. That is why we are not limiting them to any area of investment. We are supporting interested groups in the 47 counties, and are willing to reach out to wherever the chamas are,” Rafiki DTM CEO  Daniel Mavindu said during the product launch last week in Nairobi.

Other banks that have so far developed products targeting chamas include K-Rep, Co-operative Bank, Barclays Bank, Kenya Commercial Bank and Bank of Africa.

Chamas have been in existence since before independence, but as Kariuki explained, they became more visible during the 80s and 90s when the country’s economy was struggling, prompting people to come together to endure the harsh economic conditions.

“Chamas have matured over the years, becoming big development drivers in various sectors of the economy,” he added.

Kenya’s biggest private equity company TransCentury Ltd, Home Afrika, Norwich Union Properties Limited (NUP), Mhasibu Investment Company and Amalgamated Chama Limited (ACL) are good examples of investment groups that started small but are today controlling a huge portfolio.

“Many young Kenyans are joining or forming chamas see as avenues for empowerment and enhancing social networks. Even those working in the diaspora have formed chamas where they mobilise funds to help them exploit investment opportunities back home,” Kariuki added.

Mwai Kihu of ACL, a commercial wing of KAIG, added that chamas are good capital producers despite operating outside the financial radar.

“The trend in terms of forming chamas is changing, supported by global dynamics such as an appetite for wealth creation and availability of investment opportunities,” he said.

Reginald Okumu, an analyst, added that the biggest challenge facing investment groups is how to multiply the cash they raise.

Beyond savings

 “Chamas are good at mobilising capital, but most of them haven’t gone beyond the savings level. This is the reason commercial and other financial institutions are aggressively developing products to target them,” he said in an interview last week. “Banks also need to grow their deposits and informal groups offer them a good source.”

Cooperative Development and Marketing Permanent Secretary Seno Nyakenyanya added that the Government has noticed the potential of chamas and is helping them get registered to get legal protection. 

Seno added that most young people forming investment clubs are driven by unemployment and economic hardship.

“The young generation is also able to conduct research on available investment opportunities. Furthermore, investing is no longer regarded as a preserve of the older generation.”