Rules For Chama Success
INVEST REGULARLY
Build up your capital first before beginning your investments. Once you begin the investment process, don’t stop. Try to avoid holding your contributions for more than three months before investing in opportunities.
REINVEST DIVIDENDS/EARNINGS
Take a long-term view to your investment and re-invest back all your profits for the first couple of years. This will have tremendous impact on your overall return in the future.
INVEST IN GROWTH OPPORTUNITIES
The purpose of the Chama is to grow your capital, and the investments should reflect that. This isn’t for cash that you may need in a medical emergency or to cover monthly expenses.
DIVERSIFY YOUR INVESTMENT PORTFOLIO
Diversify your assets and portfolio in terms of investment type, sector and level of risk.
SOCIAL ASPECT
The purpose of the Chama is to grow capital.
Chamas are usually founded on two basic reasons:
- The common bond between the members.
- The financial goal of the group.
As most groups begin with trusted friends or family, it is important to have clear objectives in the beginning about the group’s purpose otherwise, the Chama can end up only as a perfect excuse to get together once a month to socialize.
However, note that having social activities cements the group’s relationship dynamics by strengthening them.
It is important for Chamas to work towards enhancing their bond outside their financial and investment aspects. Some
activities that can improve the relationship between members are:
- Taking up group insurance covers for members, their families or their businesses.
- Setting up a benevolent fund that caters for any eventualities or calamities a member may suffer.
- Having a party or a ‘Goat-eating’ get-together where member’s families, friends and business associates might
also get invited. - Having training sessions to increase knowledge in any agreed area for the members done by outsourced
professionals. - Doing or exchanging business services with the members as opposed to sourcing from outside the group.
• Having group visits to members’ life events like weddings, anniversaries, birthday parties and contributing
towards these occasions. - Engaging in a socially responsible activity like visiting a children’s home, donating books to a local library or
school, offering investment skills at a local prison etc.
A popular form of Chamas has been the “Merry Go Round” otherwise known as a Welfare Club. Members contribute a pre-determined amount of money each month and the total amount is given to one member until everyone benefits. The member will pursue a personal activity with this money i.e. pay school fees, invest in shares or real-estate, upgrade their home. Some groups are able to retain a proportion of the contribution for investment purposes but many remain in this state for years with no additional benefits.
Many Chamas are either transitioning from welfare clubs to investment groups or are clearly beginning with a goal of pooling their resources together to seriously invest and grow their portfolios.
However, many Chamas are increasingly either transitioning from welfare clubs to investment groups or are clearly beginning with a goal of pooling their resources together to seriously invest and grow their portfolios.
The world’s first investment club on record was founded in 1898 in Texas, United States where individual’s came together to spread the risk away from their cattle business1.
Since then, there are hundreds of thousands of investment groups around the world that have generated millions for their members. If properly founded and maintained, a Chama can give it’s members great returns every year whilst providing valuable knowledge and experience that lasts a lifetime.