How to start and run a chama: a practical guide
Everything you need to start a chama — merry-go-round, investment and welfare chamas, officials, constitution, records and avoiding the common ways chamas fall apart.
A chama (Swahili for "group") is a savings and investment circle, most associated with Kenya but found across East Africa. Millions of people belong to one. Some are five friends doing a monthly merry-go-round; others are formal investment clubs owning land and businesses.
The three kinds of chama
| Type | What it does | Good for |
|---|---|---|
| Merry-go-round | Everyone contributes; each round one member takes the pot | Getting lump sums for school fees, stock, rent |
| Investment | Contributions are pooled and invested (land, shares, a business) | Building shared wealth over years |
| Welfare | A fund that pays members during bereavement, illness or emergencies | Security and support |
Many chamas mix them: a monthly merry-go-round, plus a slice of each contribution into a shared investment or welfare pot.
Starting a chama in six steps
1. Choose members carefully
The strongest chamas are made of people who already trust each other — colleagues, school mates, church members. Ten to twenty is a practical size.
2. Agree the purpose
Write one sentence everyone agrees on: "We save KES 2,000 a month, rotate KES 10,000 of it, and invest the rest in land." A shared purpose makes later decisions easier.
3. Elect officials
At minimum a chairperson, secretary and treasurer. Larger chamas add a loans or credit committee and an auditor. Our guide to treasurers and committees explains each role and how to separate duties.
4. Write a constitution
Cover contributions, meetings, penalties for late payment, how money can be spent, how officials are elected, and what happens when someone leaves. Use our group fund constitution template as a starting point.
5. Set up money handling
Use a group bank or mobile money account with two or more signatories. Avoid holding cash with one person.
6. Keep records from day one
Contributions, payouts, loans and decisions. Records shared with every member are the best protection against misunderstandings — see spreadsheets vs software for group records.
Why chamas fail — and how to avoid it
- Unclear rules → write the constitution before the first contribution.
- One person controls the money → dual signatories and shared records.
- Loans without limits → set clear lending rules and a credit committee.
- Members stop paying → agreed penalties and a process for exits; see when a member doesn't pay.
- No audit → an annual review by someone outside the committee; use our annual audit checklist.
A sample monthly chama meeting
- Opening and apologies
- Contributions received this month (treasurer)
- Merry-go-round payout for this month
- Loan applications and repayments (credit committee)
- Investment update
- Welfare matters
- Any other business and next meeting date
Keep it to an hour. Anything needing detailed discussion goes to a committee, which reports back next month.
Running the merry-go-round part
For the rotation, keep it simple and transparent: a recorded random draw for the order, one shared calendar, and reminders before each contribution date. You can plan the rotation for free and share it with the group in a minute. When your chama is ready for loans, shares and welfare in one place, AwaFund is built for exactly that.
Frequently asked questions
What are the main types of chama?
Most chamas are one of three types, or a mix — merry-go-round chamas that rotate a pot, investment chamas that pool money to buy assets, and welfare chamas that support members in emergencies.
Who should be the treasurer of a chama?
Someone trusted, organised and comfortable with numbers — but no single person should control the money alone. Require two signatories for withdrawals and share records with all members.
Do chamas need to register?
Many small chamas operate informally, but registration requirements vary. If your chama will open a bank account, hold significant assets or take on many members, check the current rules where you live.
This guide is general information to help groups organise themselves. It isn't financial, tax or legal advice — rules for savings groups differ by country, so check with a qualified adviser for your situation.