investment clubs (Chama)

in investment club is an informal group that is normally used to pool and invest

savings by people in East Africa, and particularly Zambia (ZANAICA, 2021).The Capital

Markets Authority (2012) states that informal investment clubs, popularly known as

investment clubs, have morphed into financial machines that have initiated multi-billion-shilling

projects in various sectors of the economy and that investment clubs and SACCOs control an

estimated Kshs.100 Billion in bank deposits.

Originally, investment clubs were really informal women’s groups but over the years they have

grown in sophistication and now even men are participating in such groups. It is now a

phenomenon that cuts across gender, social status and even age (Dichol Dimo, 2013). Initially,

the Chama was set up to be a rotating savings and credits association, whereby the

members of the Chama would each contribute a fixed amount of money during each

meeting and then the total amount would be given to one member. The Chama has since

evolved to be more than just a rotating savings and credit association (ZANAICA, 2021).

investment clubs have now become investment clubs whereby members’ intention is to pool

together resources with the aim of creating wealth. They are no longer restricted to close

family and friends but they are open to different individuals who are seen to bring

different expertise that add value to the groups. investment clubs have grown in sophistication,

complexity and diversity which necessitate proper planning and management. investment clubs

are now investing in various sectors including, transport, agriculture and real estate. Kenya’s biggest private equity company, TransCentury Ltd.

is one good example of a successful investment group, which has invested in power,

transport infrastructure and specialized engineering (Dichol Dimo, 2012).

investment clubs are now regulated in Zambia under the “cooperative societies act”. There is also

an umbrella association for investment clubs, Zambia Association of investment clubs

(Zanaica) for which investment clubs can voluntarily become members.

Various corporate bodies have realized the value and potential of these investment clubs

and are providing products that target them as consumers. For instance, most banks now

have special account packages specifically for investment clubs. These accounts are

tailored to suit the groups, for example through offering high interest rates on savings,

offering loans at reduced rates and also ensuring that no charges are incurred on the

savings. Software developers are also coming up with packages that enable the

investment clubs to digitally manage their records and also provide easy accessibility to

members (ZANAICA, 2021).

According to Zanaica, many investment clubs that are not successful will fail within their

first year or so of operation. The reasons for this include; lack of member commitment,

failure to come up with new investment strategies, lack of capital, lack of trust among

members, lack of proper guidance in investing and discord amongst members on the

running of group. Other challenges investment clubs face are; the lack of investing

knowledge, differences over investment strategy and risk appetite, lack of managerial

skills and dispute resolution mechanisms (Dichol Dimo, 2012).

As the investment clubs grow and diversify, it is crucial that proper management and

planning are implemented from inception so as to reach the ultimate goal. It is important

for each group to have a clear vision which is shared by the members as this will guide in

the planning and running of the group. It will also dictate what kind of investments the

group wishes to venture in (www.doingbusinessinZambia.com). Zanaica states that it is

crucial for an Investment group to have clear investment goals and strategies given the

numerous investment opportunities such as real estate, the capital market, private equity

amongst others, as each opportunity comes with its own risks.