Before you join a ‘chama’, keep these in mind

Savings groups can come in handy, especially during an emergency or when you need a loan to kick-start a project. They are fast, convenient and the terms are far much more favourable than street lenders and loan sharks.

The best part about a savings group is that at the end of the day, you will reap the benefits of your savings and interests.

Savings groups are gaining momentum fast and their popularity is growing, especially among women - where they are popularly known as chamas. When chama money is properly harnessed, it can facilitate development and promote women’s empowerment.

However, not all savings groups are right for you, and neither can all be trusted. Here are things you should know about savings groups before joining or setting up one:

Know your saving circle: Money is the root of all evil, they say, and you can learn the true colours of people when money in concerned. Before setting up a savings group or joining one, ensure members are not randomly selected just because they look like people who can invest easily. Know your circle. If possible, you should know them personally. If not, ensure they are people of integrity or at least responsible with money. This way it can be easy to start up the group and be sure it will prosper. Some people also have commitment issues, be wary of such. They will start the race like anybody else and quit halfway, through without a reason. This can be a setback to the group. Also, if you have been invited to join a group, do your research first before committing yourself or your money to the savings group. Integrity is key.

Set down rules: With every institution there must be a structure of governance. The same applies to savings groups. You must all have a common agenda before you start saving. Saving is a long-term investment. When people come with their personal interests, it kills the whole point of saving as a group. Ensure you all agree and it is clear to all members on how much you plan on saving monthly, loan limits, monthly shares and interests per loan and any other issue that might be of importance.

Register the savings group: When saving with people you do not know, even if you have a common agenda, it can be hard to trust a stranger with large sums of money. In order for everyone to be at ease and to guarantee the safety of your money, you will need to register your savings account. If you plan to join a group you do not know, ensure it is registered. Registering your account will also mean you will be able to enjoy the benefits of having a business account, as your money continues to grow. Furthermore, in case your designated treasurer tries to run off with your money, you can take legal action against them. The best part about registering your savings group is safety, in that the account will have more than one signatory. This means for your treasurer to withdraw the money, they will need to be at least three people signing off.

Have a common goal: Last but not least, it is important to have a common goal when setting up a savings group. The main reason most savings groups do not make it to the finish line is saving with people who are not like-minded. When you save with people who do not have a common goal, you will find a lot of people dropping out while others defaulting from their loans, which will eventually weaken the group. Always ensure the people around you have a consistent cash flow and the amount of time you plan on saving is understood and respected. Also, it is important to know what you plan to do with the money you invest. Do not just save without an end goal. This way members can stay motivated and driven.