How to Start and Run a Successful Chama in Kenya

How to Start and Run a Successful Chama in Kenya

Most banks and other investment companies in Kenya started from the base, as Chama’s. The now revolutionary Chama had been left for the village women who would make small contributions to buy utensils, wheat flour and all those items our mothers used to buy. However, this has already advanced and the Chama’s are now formal business entities for workmates, students, business owners, etc.

A Chama is a group of individuals who come together with the aim of pooling their resources to invest in different ventures.

These ventures can be real estate, stocks, or any other investment that the members deem suitable.

In Kenya, chamas are very popular, and they are seen as a way of achieving financial freedom. If you are thinking of registering a chama in Kenya, this article is for you.

Create a Name

The first step in registering a chama is to come up with a name. The name should be unique and not be similar to any other chama in the country.

Once you have a name, you need to conduct a search on the eCitizen website to ensure that the name is available.

If the name is available, you can proceed to reserve the name. The name reservation fee is Kshs. 100, and it is valid for 30 days.

After reserving the name, the next step is to register the chama. To register the chama, you will need to have a minimum of five members.

The members should be at least 18 years of age and Kenyan citizens. The registration process can be done online through the eCitizen portal.

You will need to create an account on the portal if you don't have one. Once you have an account, you can proceed to fill in the chama registration form.

The Chama registration form requires you to provide the following details:

  1. Chama name
  2. Physical address of the chama
  3. Names and ID numbers of the members
  4. Email addresses and phone numbers of the members
  5. Proposed activities of the chama
  6. The contribution amount per member
  7. The duration of the chama

Once you have filled in all the required details, you can proceed to pay the registration fee. The registration fee is Kshs. 1,000, and it can be paid through mobile money or online banking.

After paying the fee, you will receive a confirmation message, and your chama will be registered.

After registering your chama, the next step is to obtain a chama constitution. A chama constitution is a set of rules and regulations that govern the operations of the chama. The constitution should be in line with the Kenyan laws, and it should be signed by all the members of the chama. If you are not sure how to write a chama constitution, you can seek the services of a lawyer.

The chama constitution should contain the following details:

  • Name of the chama
  • Objectives of the chama
  • Membership details
  • Contribution amounts per member
  • Meeting frequency and venue
  • Roles and responsibilities of the members
  • Procedure for admitting new members
  • Procedure for withdrawing from the chama
  • Procedure for expelling members
  • Procedure for winding up the chama

After obtaining the chama constitution, the next step is to open a chama bank account. The bank account should be in the name of the chama, and it should be used for all chama transactions. You can open a chama bank account in any bank that is convenient for the members.

To open a chama bank account, you will need to provide the following documents:

  • Chama registration certificate
  • Chama constitution
  • Minutes of the meeting where the decision to open the bank account was made
  • Identification documents of the signatories
  • Two passport-size photos of the signatories

After opening the bank account, the next step is to hold the first Chama meeting. The meeting should be used to discuss the chama objectives, investment opportunities, and the contribution amounts per member.

Here is a simple process of running a successful Chama:

  1. Defines the Investment goal
    Running a success Chama requires total dedication from members and should have a clear vision, mission and objectives like any serious business entity. Lack of a clear vision is the leading cause of Chama failure. Have a clear goal of what the Chama wants to achieve in terms of investments, increasing income and potential businesses.
  2. Identify individuals with similar interests 
    A successful Chama needs serious individuals who are committed, innovative and share the same interests as the other members. A good Chama should be able to benefit from the diversity, knowledge and strengths of its members. It may consist of professionals, self-employed, students or any category of persons that agree to the same cause.
  3. Choose a leader
    Success of any entity majorly depends on the type of leadership provided by those at the helm. Similarly, a Chama should have good leadership that will change the dynamics of the group. Also, it will ensure that members are committed to the investment goal. The members should also contribute to decision making and this will strengthen the leadership of the Chama.
  4. Agree on Duration
    At the start, it is important for the members to agree on how long the Chama. The duration will depend more or less on the investment goals of the Chama. For long-term investments, the Chama will last for a longer time e.g. 10 years. The duration will also allow members to make enough contributions to start a sustainable investment.
  5. Agree on a savings plan
    The members should agree on a savings plan depending on the type of investments they plan to undertake. The contributions may be made daily, weekly, monthly or even quarterly. Members may agree on a fixed or varying amounts of contributions.
  6. Agree on regular meetings
    The members should agree to hold regular meetings to keep members updated on the progress of the Chama. The venue of the meeting should be decided in advance prior the actual day of the meeting. To cut on cuts, most Chama meetings are held at the residence of members or at their work station where the Chama members comprise colleagues working in the same station.
  7. Invest in low risk project
    Once the investment group has enough savings, it is wise to invest in low risk projects that will yield returns within a period of one year. The low risk project aims at building members confidence. After a few successful investment projects, the members can now try larger and slightly risky projects that will give higher returns than the previous low risk projects. Part of the profits can then be shared, either equally or as per the contribution ratio. Other profits can be re-invested in other profitable ventures.

Editors final word

The group leaders should work extra hard to keep the members committed in the affairs of the investment group. The leaders should ensure that contributions are made on time and the members contribute in the decision making process. Regular meetings will keep everybody updated on the progress of the Chama.

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