Investment groups or chamas are created to empower individuals and improve their livelihoods. Many chamas always visualize being the next big thing. However, either most chamas collapse within 2 years, or the members become disgruntled because their goals are not being met. So, what are some of the reasons chamas fail?
- Lack of a Clear Investment Objective
Before forming a chama, members should have a clear strategy in mind as well as an investment plan. Failure to have a clear objective for the Chama will guarantee the failure of the investment group. Different members will come up with differing investment options that will ultimately lead to disagreements and eventually the chama will fail.
- Rushing into Investments
Research and due diligence are very important before venturing into any investment. Investing in a product that you don’t understand will lead to disappointments and the group can lose their money through Ponzi schemes. The investment group should be very wary of getting rich quick schemes.
- Not Investing Time in the Chama
Treat your chama like a business. Do you only check in on business once in 6 months? No, so why should you do that to your Chama?
- No Rules
The first order of business for any investment group is to clearly set operating guidelines. Inter alia minimum amount of investment, the deadline of contributions, exit plan for the members who would want out of the group at any one time are just some of the issues that should be foreseen and there needs to be a guiding framework on how to approach such situations. Without clear guidelines, some members might not give timely contributions or may skip making their contributions which will lead to the death of the group.
In conclusion, any chama can be the next ‘Tran century’ but you have to treat the group as a business. For the group to grow, every member must be willing to do the work. A Chama is all about teamwork and teamwork keeps the Chama stable.