Investment clubs’ potential catches attention of firms

The soaring value of assets controlled by investment clubs is catching the attention of banks and insurance companies, who are setting up special accounts to serve them.

Popularly known as chamas, the groups, according to estimates by the Kenya Association of Investment Groups (KAIG), are believed to control up to Sh100 billion in assets, which is about 10 per cent of total deposits held by Kenyan banks.

Resolution Health East Africa Limited last week launched a product dubbed ‘Fortune Plan,’ which provides a health cover for members in an investment group and five per cent cash-back benefit to the investment club.

To be eligible one has to be in a group of five or more, which is registered under the Kenya Association Act.

The cash rebates are paid to the group after the annual cover period has lapsed and members will get both inpatient and outpatient cover of up to Sh2 million for premiums ranging from Sh15,000 to Sh35,000.

A number of banks have also been offering specific products to investment groups as they seek to grow their deposits.

They include Bank of Africa, which has a product called ‘Chama Account,’ Consolidated Bank has created a ‘Vuna Chama Account,’ Chase Bank operates ‘Wekeza’ and KCB’s is called ‘Tuungane Account.’

The special banks accounts come with incentives, including periodic educational events and networking opportunities between different groups in a bid to attract the investment groups.

Grow assets

Chase Bank that was the latest to launch a product targeting investment groups is also offering monthly book keeping services to the groups.

Vincent Lubia, head of liabilities at Chase Bank said during the launch of the Wekeza account that the lender is looking to investment clubs to grow its assets.

Bank of Africa, which also has a product called Chama account, attributed part of its growth in deposits to success of the account targeting investment groups.

In an earlier interview with Business Daily on the banks full year results for the period ended June this year, Kwame Ahadzi, managing director, said that the Chama account had seen strong uptake in the local market.

Tom Kiuna, head of marketing and product development said the bank had been offering Chama clinics where members get encouragement from successful groups.

The bank also brings in experts during the periodic educational events as value added services who educate members in areas such as bookkeeping and setting up company structures.

“The response was overwhelming. We had met the target within six months. Loan requests have also started coming in,” he said during the interview.

Grey area

Investment clubs are in most cases incorporated as welfare societies, self help groups or limited liability companies.

Their regulation is still a legal grey area, and many have gone under, costing Kenyans billions of shillings.

According to the Francis Nyenze of Task Force on pyramid schemes, Kenyans lost an estimated Sh34 billion to the unregulated schemes which collapsed in a wave in 2007 leaving members with no course for legal redress.

FinAccess 2009 Survey, a report that provides information on the access of financial services to Kenyans shows 26.8 per cent of the population sampled use informal financial service providers such as groups, individuals accumulating savings and credit associations and rotating savings and credit associations also know as merry go rounds.