Module 1: Group Finance Foundations

How Chamas, Investment Groups and SACCOs Differ

Before you can keep good records for a group, you need to know what kind of group you are working with. A merry-go-round chama, an investment group that buys land, and a SACCO that takes deposits from hundreds of members all handle money, but they have different purposes, different legal positions and different record-keeping duties. If you treat a SACCO like a casual chama, you may break rules that protect members. If you treat a small chama like a bank, you will bury the treasurer in paperwork nobody reads. This lesson gives you a clear map of the main types so that every later lesson makes sense.

Chamas and merry-go-rounds

A chama is an informal or semi-formal savings group of people who know each other: colleagues, neighbours, church members or friends. The simplest form is the merry-go-round (rotating savings): every member contributes a fixed amount each period, and the whole pot goes to one member in turn until everyone has received it once. Many chamas also run a table banking model, where contributions are lent out to members at an agreed interest rate and the interest is shared at the end of a cycle.

From a bookkeeping point of view, a chama needs at least:

• A register of who has contributed what, and when.
• A record of every payout and loan, with the member's acknowledgement.
• A cash book or bank and mobile money record that agrees with the actual balance.

In Kenya many chamas register as self-help groups with the government department responsible for social development. Registration rules and the documents required change from time to time, so check the current process with the relevant county or national office before advising a group.

Investment groups

An investment group pools money to buy assets that grow in value or produce income, such as land, rental units, shares, a matatu or a business. The money stays invested for years, so the records must show each member's share of the assets, not just their contributions. Many investment groups eventually register as a limited company, a partnership or a cooperative so that they can hold title to land or open accounts in the group's name. Each of those legal forms brings its own filing duties.

The bookkeeping questions that matter most for an investment group are: what did each asset cost, what is it worth now, what income has it produced, and what share of the whole belongs to each member?

SACCOs

A SACCO (Savings and Credit Cooperative Society) is a member-owned cooperative registered under cooperative law. Members buy share capital, save deposits and borrow, usually several times their deposits. A SACCO is a formal organisation with a board, supervisory committee, by-laws, audited accounts and an annual general meeting.

In Kenya SACCOs are supervised by two main bodies:

• The Commissioner for Cooperative Development registers cooperatives and oversees cooperatives generally, including non-deposit-taking SACCOs.
• The Sacco Societies Regulatory Authority (SASRA) licenses and supervises SACCOs that carry out deposit-taking business and certain other categories defined in the law.

Which rules apply depends on the SACCO's category and size, and the rules on capital, liquidity, reporting and audits are updated over time. This course teaches the principles of good SACCO records. Always confirm the current requirements for a particular SACCO with SASRA and the Commissioner for Cooperatives.

A side-by-side comparison

Worked example: one group, three stages

Imani Women Group in Machakos started in 2019 as a merry-go-round of 15 members, each contributing KES 2,000 a month (hypothetical figures). The treasurer kept a notebook and every member checked the pot at each meeting. In 2021 the group added table banking, so the treasurer needed a loan register and had to track interest. In 2023 the members decided to buy a plot together, so they needed an asset register and a schedule showing each member's share. If the group grows further and starts taking savings from non-founding members, it may need to consider forming or joining a SACCO, which would bring formal regulation. The records grow with the group, and the treasurer should upgrade the system at each stage rather than stretching an old notebook.

Common mistakes to avoid

• Calling a group a SACCO when it is not registered as one. The word carries legal meaning.
• Mixing merry-go-round money and loan fund money in one undivided total, so nobody can tell what belongs where.
• Keeping investment group records that show contributions but not the value of the assets bought with them.
• Assuming the rules for a large deposit-taking SACCO apply to a small chama, or the reverse.