Week ended 25th August 2014
SUCCESSFUL INVESTMENT CLUBS/ CHAMAS
“Unity is a vision; it must have been part of the process of learning to see”~ Henry Adams
It is the desire of many individuals to be part of a successful chama. Investment clubs have been part of the lives of many Kenyans ue to their pursuit of the collective spirit of Harambee. This is an ideology which recognizes the power of organized groups in contributing towards the financial empowerment of the individual. Unfortunately, many people have been disillusioned by bad experiences where some individuals have taken advantage of the usually informal arrangements to steal from other members. Bad management of investments and funds has also led to losses for others. However, it is clear that with the right structure, i.e. one in which there is accountability, focus and vision, chamas can greatly improve the financial status of their members.
Many young Kenyans have been inspired by the story of the TransCentury Group which began as a chama of 29 individuals. This has widened the vision of many young professionals who are now forming chamas with the aim of undertaking aggressive investments rather than just joining a merry go round to help them get through the month. Young investors can model their groups after TransCentury by taking into consideration the following factors:-
Constitution of the Group
The original TransCentury was made up of individuals who were not only friends but were successful careerwise. Some of the members were experts on the Kenyan securities market and managed the group’s investments. Upcoming chamas should thus leverage on the expertise of their members to ensure the mission is accomplished. This gives the team the chance to implement the power of networking. New members should be vetted to see what they can add to the group instead of being admitted solely on the basis of friendship.
The original TransCentury group members had to make an investment of a million Kenya shillings. To invest such an amount in any undertaking means that not only do you believe in it, but that you are motivated to take an active interest in it. Many chamas fold because members usually lose interest in meeting and consulting on club business after a while. Although not all members can afford seed capital of a million shillings, the regular contribution should be of an amount significant enough to ensure all members care about its management.
The group had a sound legal structure from the onset which ensured that the individual interests of all the stakeholders were taken into account. While this may have been difficult in the past due to the bureaucracy involved in registering investment clubs, things have now become easier. Kenyans can now leverage on the new ‘Huduma’ government service centers which have eased the process and made it convenient. Beyond the registration documents, the chama should set rules to guide the conduct of members. There should be no ambiguity so as to avoid excuses when terms of this agreement are implemented in the future.
While the original TransCentury investments were in the Nairobi Securities Exchange, this did not stop them from venturing to take advantage of other opportunities as it progressed over time. This involved directly investing in undervalued firms with good growth prospects. Young chamas can also reinvent themselves via regular fact-based strategic planning sessions which would enable them to make the most of upcoming opportunities presented by the dynamic economic climate in the Country.
Hiring professional fund managers often becomes essential as the fund grows. Successful chamas have solved this by either hiring an outsider or entrusting their investment management to a member with the requisite qualifications who would have to leave their day job in return for compensation by the group. This only makes sense if the group’s assets are significant (millions of shillings). Young chamas with smaller assets may take advantage of professional fund managers by investing their funds in unit trusts. This would ensure they get the best return on their investments taking into consideration their limited time, investment experience and resources.