Finishing campus comes with lots of joy and for my campus friends and me, it meant we could now explore our ideas as much as we wanted and possibly grow together.
We hit the ground running and decided to form a Chama immediately we graduated from campus. At the time, all we desired was to start a Chama and thought we had it all figured out.
The big idea was to purchase land around the coastal area in Kenya and build rental units to target tourists who frequently visit the coastal area. Great idea, right? We borrowed the idea from our predecessors who graduated the previous year and we firmly believed in it. Four years down the line, nothing has progressed.
We dissolved our Chama and our treasurer refunded the monies we had collected. Our predecessors’ group, on the other hand, acquired their piece of land and are now looking for funds to start building. This got me thinking, ‘What did my predecessors do differently?’
Here are some of the management tips that I learned from our predecessors?
Membership
Before forming a Chama, every member must be aware of the objective. In our Chama, each member was aware of the objective, and we had an agreement on how much each member should contribute.
On the downside, we were not strict on the deadline each member would have to make their contribution. Some members fell off the bandwagon and went for months without contributing and this negatively impacted our newly established Chama.
Furthermore, we had entrusted one member with the treasurer role which is a critical role in the management of any Chama. The key role we gave our treasurer was that she would receive the cash, keep it safe, and be update everyone on the status of our funds. This also meant our money was not getting any interest, we were just storing money hoping it would magically grow. This is where many Chama’s go wrong as you simply can’t store money and expect it to grow.
We later realized It would have been wiser to open a money market account that offers you high returns and deposit the funds every month. I believe if we did this, we would now be managing our rental units in the coastal area. In conclusion, each member of the Chama must always be committed.
Chama Rules and Regulations
Other than how much each member should contribute, we did not have any other rules. Some of the rules we should have drawn up would have included, what will the penalty be if a member did not contribute?; What officials were required to efficiently run the Chama and what would their powers be?; and What would have been the exit strategy in case a member wished to exit the group?; These rules would have prevented bitterness from the members after the group fell out.
It is critical to have an operating manual that has Chama rules clearly stated. Operating without one could prove problematic
Management Committee
Appointing a trustee chair, treasurer, and secretary among other officials would have made it easy to run the Chama. Especially because, we came from different parts of the country. They would have invested on our behalf and updated us on our funds. They would also have acted as signatories when we wanted to invest.
Member Education
We did not research on investments. Yes, we had all graduated from university but we were still financially illiterate. We did not understand the basics of making money work for us. Nothing pays like investing in the members’ financial education.
Did you know Cytonn offers free Wealth Management Training for Chama’s at no cost at all? Sign up here
Being Committed to the Goal
Like ours was, your investment goals might be long term. It is important that every member understands the risk of the investment and remains committed to the goal of the Chama.
In conclusion, Chamas do work but every member must play their part in ensuring its success. Never underplay continuous financial education for your Chama members and ensure you have an operating framework; an agenda and member roles are clearly defined. Lastly, before investing make sure you conduct due diligence, research, and get to understand the investment and the risks. It is also important to seek advice from a trusted financial/investment advisor.
Written by Mercy Jepchirchir, who is part of the business development team as Cytonn Investments.