Why Chamas are of Enduring Importance in Kenya

While only 32% of Kenyans have traditional bank accounts, chamas are used by 41 percent of the population

A chama member holds money collected from a chama group in Kawangware, Nairobi, Kenya (Pic courtesy of AlJazeera)

Aljazeera recently did an indepth piece on community-run saving groups in Kenya that allow entrepreneurial women to access informal loans away from banking bureaucracy. The research provided a better understanding of why chamas continue to be of vital importance in the lives of Kenyans when it comes to financial access.

Chamas – self-organised groups for saving, lending and borrowing money have been around for the longest time. These groups exist because they fill a gap that the formal systems have failed to offer, namely, easy access to finance.

In Kenya, stable jobs are scarce. 77% of the population is estimated to be employed in the informal sector, and half of them are women. The World Bank says 35.6% of Kenyans lived on $1.90 or less between 2015 and 2016.

This backdrop forms an important basis for the emergence of chamas and the need they fill among Kenyans.


The 41%

Only 32% of Kenyans have formal bank accounts.

While only 32% of Kenyans have traditional bank accounts, chamas are used by 41 percent of the population, according to Financial Sector Deepening, Kenya (FSD Kenya)These groups are rooted in community relations and are highly dependent on trust. As a result, memberships are generally open through recommendations from existing members.

According to one chama member:

“For women, social capital is the biggest and most important asset that they can leverage, and they have maximized that asset to get access to credit.”

The ease of access to chama loans is also a contributing factor to their popularity. Banks in Kenya are difficult for low-income people. According to one chama member, bank procedures such as having a guarantor for loans or a payslip generally make formal credit to those in the informal sector unavailable and unappealing. Mistrust of banks for the uneducated is also high.

In contrast, chamas offer less of a hustle when accessing loans. In addition, such chamas offer both financial and social support to members. It is no surprise therefore that a lot of the chama members are friends, family, neighbors, or work associates.


The Culture of ‘Making Money Work”

Chamas do not believe in money sitting idle. As a result, the weekly meetings will always have loans being received and, just as fast, disbursed to members for the money to be put to ‘work.’

As a result, all members who are personally introduced and vouched for by other members must have their own businesses.

A chama woman at her place of business (Pic courtesy of AlJazeera)

While 13 percent of chama members have lost their money as a result of this approach, the positives far outweigh such losses, according to members.

The number of chama group names containing references to visions of development is notable as well. Names like Chama Wezadada, Jikuze Women Group, Wanawake Maendeleo among other names.

According to FSD Kenya:

“It is these visions and understandings of development more broadly that make chamas appealing and the fact that groups provide a space where members can build relationships and develop a strong sense of identity and belonging.”


A Case for a Crypto Chama

The Zarafu Savings Group is the first Chama registered to offer Crypto Savings to its Members

With all of the above that make chamas particularly appealing, it would therefore mean that a crypto chama, as has been proposed by the crypto community in Kenya, would embody the same vision and approach that offer a sense of identity for it to work.

Such a chama would therefore have these key features of a typical chama:

  • Rooted in community relations – members are introduced and vouched by other members
  • Weekly meetings – meant to disburse and save money and build a sense of togetherness
  • Members are required to run a business or have a source of livelihood.
  • Foster a strong sense of identity and belonging – members learn from others, share experiences, and advice can be sought and given.
  • High degree of responsiveness and flexibility to members.

Ultimately, a good group is seen to promote the underlying values of collective organisation and embody relationships and significant social value that go beyond financial management, something that formal services are not able to offer.