From friendship to developers: Platform nets 150,000 users

Chumz team at their office premises in Nairobi. [Nanjinia Wamuswa, Standard]

Several years ago, three friends set out to establish why few Kenyans had taken up investment options, despite the State statistician - Kenya National Bureau of Statistics (KNBS) revealing that only 13 per cent of Kenyans were engaged in it.

The three, Titus Marenye, Njogu Kinyanjui and Samuel Njuguna had observed that most investment platforms and fund managers had high initial investment requirements. 

“In essence, this meant that they could only cater to institutional investors and high net worth individuals, leaving out many Kenyans, a vast majority of whom are in the informal economy,” says Samuel Njuguna.

Similarly, they also realised that most investment platforms used complex financial jargon that made potential clients shy away from investing and lacked methods to keep people engaged in saving. 

To address these gaps, the trio undertook to develop an application dubbed Chumz, that would enable people to start investing with as little as five shillings.

Njuguna explains that with support from an angel investor, they built and launched the prototype by the end of 2020. “We reached out to an angel investor who agreed to support us to build the prototype, and by the end of 2020, it was ready for the market,” he explains.

Fund manager

They then acquired a license from the Capital Markets Authority (CMA), to enable them to channel the funds deposited by investors to a licensed fund manager, who would generate returns on the fund and thereafter distribute the interests to individual clients.

The platform would use behavioural psychology to guide clients on when and how to save and invest. When a user gets a discount on a purchase for instance, the app prompts the user to invest the money they have received as a discount, instead of spending it elsewhere.

“For example, if cooking oil was going for Sh500 but a customer finds it is on discount for Sh400, they can save the Sh100 difference,” Njuguna notes.

The same applies when users negotiate for lower prices. They can save the difference between the marked price and the negotiated price. “Psychology-wise, this makes sense because the user had planned to spend the money anyway,” posed Njuguna.

The app sends alerts to users when they are in places where they are likely to overspend, such as on outings. “A user in a pub for instance can get an alert which will help him or her to avoid overindulging in consumerism,” posed Njuguna.

It has a group functionality for merry-go-rounds (chamas), that sends an alert once one member makes a deposit, to encourage other members to follow suit.

The platform also sends reminders at strategic times during the month to encourage users to save and invest so that they can make the most out of their income.

Since it began operating, the firm has managed to onboard more than 150,000 retail users to the platform, who collectively have invested over Sh500 million. Some of these are people who have never thought of investing, as they were even unable to save.

“One of the beneficiaries is Maina, a shoe designer based in Ngara, who has been saving Sh50 every day. He confides to us the returns he has been getting are what have enabled him to buy tools of trade such as leather fabrics, which he would always purchase using mobile loans,” explains Njogu Kinyanjui, co-founder of Chumz.

Other users are parents who use the app to teach their children about various aspects of finance including how interest accumulates, how to create future financial goals and the long-term benefits of deferred gratification.

“Eliud, a father of three, has been using the app to save for his kids and train them on how money grows,” posed Kinyanjui.

Titus Marenye, co-founder of Chumz notes that while the milestones they have achieved are noteworthy, the journey has not been without its fair share of challenges.

For instance, getting people who have relied heavily on predatory mobile loans for quick cash to change spending habits, and instead focus on saving small amounts of money that could in the long run guarantee financial independence has been tough.

 It is why they have created financial literacy content on the platform in partnership with financial institutions, to educate users about investing in a simplified manner.