Key Highlights

• The money received is usually refunded in bits immediately after the recipient leaves the meeting venue and thus becomes something similar to debt repayment. 
• Whoever gets the contribution first in the month of January will begin repaying the debt from February until December.
• The vicious circle of Chamas is not something that can be overlooked.
• A savings account would have made the teacher number 1 120,000 richer by the end of the 12th month
  

While the contribution from a Chamas to a member may seem to be a lump sum earning from a pool of resources, it does not change the socio-economic status of the recipient. The money received is usually refunded in bits immediately after the recipient leaves the meeting venue and thus becomes something similar to debt repayment. Take for instance a group of 12 teachers who form a Chama and agree to contribute Ksh. 10,000 for every member and the money is given to one recipient every month.

In this case, whoever gets the contribution first in the month of January will begin repaying the debt from February until December. Evidently, the Ksh. 120,000 may not have any significant impact on the economic status of the teacher since there is no investment where such a small amount of money can be put to start earning profit enough to repay the 10,000 monthly contribution due to the other 11 members whose due should be paid from February to December.

The same fate befalls the teacher who happens to be the teacher who falls last in the list of recipients. One who is placed at the 12th position will also contribute 10,000 every month form January until November, only to start collecting his or her contribution to the past 11 months from these members by the end of the 12th month.

Technically, this teacher who is placed at position 12 will have invested 10,000 in the past 11 months but does not earn any profit after the 11 months because the 11 members will only give back what teacher number 12 had contributed to them.

Read: Chamas and Marry-Go-Rounds are not SustainableEconomic Projects for Self-Help Groups

The Vicious Circle

The vicious circle of Chamas is not something that can be overlooked. If our sisters and wives are not Enlighted at an early stage, they may be in groups that only serve the purpose of gossiping, bonding, and sharing ideas but have little effect when it comes to improving their socio-economic wellbeing.

Going by the example above, if the teacher number 12 would have invested his or her 10,000 monthly contributions to a savings account, then by the end of the 12th month when his or her turn to receive the money comes, the Ksh.120,000 contribution to members who received their due earlier would have earned interests.

For teacher number 1, it would not be just interests earned, but additional Ksh 120,000 savings in some account as opposed to the real situations presented in the Chama where teacher number 1 would have funded all the money he or she received in January to its rightful owners by December.

A savings account would have made the teacher number 1 120,000 richer by the end of the 12th month if he or she was contributing the same 10,000 to a savings account. However, the teacher’s contribution to Chama as teacher number 1 would leave him or her with nothing by the end of the 12th month.

Insert: An Illustration of how A savings Account grows wealth and spurs socio-economic growth of an individual (Photo courtesy, 2019)