When Catherine Njoki started her online chamas, she was widely hailed as a saviour who had come to teach Kenyan women how to save their hard-earned cash. Her strategy was simple. She opened multiple savings groups on WhatsApp whose objectives touched on the common needs of the ordinary Kenyan woman. The groups ranged from travel, home appliances, and assets Chamas to the ordinary merry-go-rounds. By 2021, Catherine, who is more popularly known as Kate wa Gladys, was running about 100 Chamas groups on WhatsApp.
“The aim is to empower and show people that it is possible to enjoy these things...You do not have to be very rich, everyone is on their own lane and at their own pace,” she said. She covered everybody. All women were welcome regardless of how much they earned or were willing to contribute. She had groups that required contributions of Sh100,000 every month and others that only required Sh1,000 contributions. She had a Sh1 million car Chama and a Christmas Chapo Chama.
“The majority of members who joined these groups were strangers who didn’t know each other. Most of them had never met Kate wa Gladys outside of her Facebook timeline and WhatsApp groups,” says Rhina Namsia, the founder and chief executive officer of The Acemt Consulting, a training and consultancy company that provides financial planning and investment advisory.
Then in mid-2022, the fairytale screeched to a disastrous halt. Members started coming out accusing Kate wa Gladys of scamming them. They had contributed millions of money in the Chamas but were not being paid when their turn to receive their money. One complaint turned into hundreds of complaints. In August 2022, Kate wa Gladys came out to explain why members were not receiving their cash. She alleged that a few members had fallen behind on payments but she was doing everything to ensure they settled their debts.
In a video dated August 17, 2022, she claimed that one of the members had defaulted in such a huge way that it was becoming nearly impossible to recover the money. “A second defaulter who was my friend started struggling with payments. She had borrowed Sh1 million from one of the table banking groups. When she requested if she could take an additional Sh500,000, I pleaded with members to allow her take the money. Now she is in default,” Kate wa Gladys claimed.
On August 18, 2022, Kate wa Gladys alleged that one of the members known as Teresa Muchiri had taken Sh2,859,850 million from 19 of her WhatsApp groups. However, her defense was rubbished by her followers who accused her of staging fake members to fleece unsuspecting contributors. At one point, it was alleged that women in her groups might have lost up to Sh10 million. Kate wa Gladys was also alleged to have been operating using pseudo names in some of her groups to create the illusion of popularity and dupe members into coughing more money.
After complaints, she was arrested and arraigned in court. She is out on a Sh800,000 bond, pending a hearing on February 2, 2023.
With a following of 80,000 people, Kate wa Gladys might have been the most popular online Chama organiser. But she was not the only one. Despite hundreds of women losing their money in her groups, more women are joining new groups that are being launched and hosted by new administrators.
According to Nairobi-based marketing consultant Joshua Muchiri, online Chamas create the illusion of trust, safety, and benefits. They portray the picture of a thriving group that already has people who are contributing and reaping dividends.
“For example, someone who wants to lure people to contribute Sh500 every Monday may start by putting up an advert for Sh5,000. She will declare that the group needs only eight people to fill up. An hour later, she will make another post and state that only four spaces remain. Eventually she will declare that the group has filled up. All the while, no one will have signed up,” he says. Joshua cites that this is a form of bait and switch. “In the advertisement posts, the founder might comment using pseudo accounts praising the Chama,” he says.
The Chama founder will later come out and say that she is forming a second group of Sh500 due to public demand. Here, she will declare that only 20 people will be eligible to join. “The targeted people will feel that this is an amount they can afford. They will read review posts of the people claiming to be ‘members’ of the Sh5,000 group and their confidence and trust will rise. The first Sh5,000 group will become successful bait for the second group of Sh500,” he says. This is how Kate wa Gladys started her multiple groups. She admitted that people would ask her to start groups with a smaller contribution range that they could afford.
According to Muchiri, marketing of Chamas has played into the hands of technology. As at January 2022, there were an estimated 11.7 million social media users in Kenya. As at August 2022, GlobalStats estimated that 63 per cent of social media users were on Facebook.
“Social media has become the place where people interact and share ideas. This interaction comes with the pressure to conform,” he says. “Everybody wants to fit in and this pressure informs decisions such as starting a business that was shared online, joining an investment product that a popular online user is a part of, buying plots, and even forming and joining online Chamas.”
As the Saturday Magazine found out, there are multiple social media Chamas that women are joining daily.
Pauline Kinja is the founder of one of these groups. A spot check on her Facebook wall shows that she runs multiple Chamas on WhatsApp. She also has an App where member contributions are collected and sent to the slotted members. “Kuna ya Sh5150 every 20th that wants only 4 people… Please join and pay. Grab a slot,” she advertised this week.
“Kuna Chama ya school fees 520 daily that needs only five people. They are 25, looking for 5 people to do 30 days a month. Everyday member gets only 15,000,” she also advertised this week.
According to a list of WhatsApp Groups that Kinja posted on her timeline, some of the online chamas that she runs include; Group 1: Sh220 per week for 16 weeks, Group 2: Sh550 per week for 16 weeks, Group 3: Sh1,050 per week for 16 weeks, Group 4: Sh550 every Monday, Group 5: Sh1,050 every Monday, Group 6: Sh2,070 every Monday for home upgrade, Group 7: Sh3,150 every 5th of the month, Group 8: Sh5,150 every 5th of the month, Group 9: Sh10,200 every 5th of the month.
According to Namsia, joining online merry-go-round WhatsApp groups is the equivalent of devaluing your money. “The natural merry-go-around method exposes your money to inflation. It offers no interest value. With WhatsApp Chamas, you expose your money to both inflation and charges,” she says.
For instance, if the Chama contribution is Sh500 per week, you will be required to send Sh500 plus an administration fee. If you are in a Chama of 20 members, you will pay Sh11,000 but will receive Sh10,000 as the remainder will go to the Chama administrator managing member contribution. You might lose more money if you are charged transaction fees when sending your contributions or withdrawing what has already been sent to you as dues.
Eunice Njoki was a member of an online Chama. She joined the Chama in January 2022 and was required to be sending contributions of Sh3,100 monthly. “I contributed for eight months. Sh3,000 was the contribution while Sh100 was the administration fee,” she says.
By the time she got her money back, Njoki had paid Sh800 in administration fee. If she had contributed for a full year, Njoki would have paid out Sh37,200 and gotten back Sh36,000. In contrast, says Namsia, if she had saved the same amount of money in a Sacco earning dividends at a rate of 10 percent, her savings would stand at Sh40,920 in 12 months.
But it is not this depreciation of her funds that bothered her. Njoki claims that she nearly lost her money. “I interacted with it on social media platforms and would see the founder start Chamas every now and then. People seemed interested and there were no complaints about them,” she said. “I would later come to learn that she deleted any comments that raised suspicions and blocked people on social media for calling her out.”
When Njoki joined the online Chama she was asked to join a WhatsApp group for coordination and communication. “The founder’s presence was visible when collecting the installments. However, she was not as forthcoming when it came to sending money to the contributors,” alleges Njoki.
“People would beg for their money, sometimes the other group ‘Admins’ would remind her of pending payments. She would promise to pay and immediately develop a convenient case of amnesia,” Njoki claims. She added that if a recipient called her out on Facebook, she would delete the comment, block them and ask them on WhatsApp to pay the remaining months and leave the group.
“I experienced this first hand after waiting and asking for my money, two weeks post payday. I had followed up but she would never respond. I had only received partial payments with no explanations,” said Njoki.
Njoki says that she only got her money back when she started making her complaints openly on the founder’s Facebook page and WhatsApp group.
According to sociologist Nathan Gachoka, the offline Chamas are an attempt at carrying on the tradition of village women groups. “Women Chamas have been in existence since the era of barter trade when women formed village groups to exchange goods. These groups graduated into merry-go-rounds and later table-banking Chamas,” he says. Whereas previous Chamas were held together by the social fabric, Gachoka says that modern Chamas have adopted a form of anonymity.
“Previously, people formed Chamas with people they knew well and people who were within their social class and social circles. Technology and the anonymity that comes with social media have torn this apart. You can now form a social media Chama with people you have never met in your life. This has elevated the level of risk,” he says.
Kinja admits that she doesn’t have the wherewithal to compensate for members who default. “Just like a normal ordinary Chama, there is nothing much I can do to force a defaulter to pay other than urge them to honour their obligations,” she says.
Kinja says to help solve the default issue she introduced an App in April 2022. Since then, our default rate is currently at below one percent,” she says. When the Saturday Magazine asked her about security of the finances she receives through her App, Kinja said that the Chamas are largely founded on goodwill.
“We have multiple Chamas. We ask people to only join the Chamas they are sure they can afford in order to minimise defaults. If a default is not too much, I give the defaulter time to settle their dues. However, if a lot of money is involved, I would consider going to the police. My role is largely administration. I provide the platform for the Chamas, but it is up to the joining member to ensure they are faithful with payments,” Kinja defends.
There is a gap in the regulation of informal Chamas. Whereas Chamas that are formulated as self-help groups can be registered with the government under the Ministry of Gender, Children and Social Development, the majority of informal Chamas are neither registered nor fashioned like self-help groups. “The lack of government regulation is a major downside. It makes it hard for a member to recover any money that is defaulted or lost,” says Namsia.
There is also a psychological drive behind this. According to psychologist consultant Ken Munyua, women are more trust other women. “Women relate easily with Chamas. So when they see a woman running a series of online Chamas that appear to be successful, they will easily join,” he says.
Munyua adds that this can be an advantage when the Chama is well regulated and licensed and registered. But it can also be a disadvantage when the end game is to con.
Namsia adds that lack of personal financial education is a major contributor. “The Kate wa Gladys group had members who were contributing hundreds of thousands. This shows that the problem is not money. The problem is poor information on safer methods of managing personal finance,” she says. “For instance, not too many women are aware that merry-go-rounds don’t create any wealth. Other investment vehicles such as bonds, money market funds, and even Sacco’s are a safer haven than these Chamas.”
Ironically, there are also women who know about these investment alternatives but who will still go the Chama route. Gachoka says that this is because over and above wealth creation, these Chamas are perceived as a form of social interaction and social belonging,” he says. Moreover, social creates competition, with comparisons which create FOMO (Fear of Missing Out), among many women.
Gachoka adds that the ease of use that comes with Chamas is the other factor that makes them more enticing to women. “There are no formalities to joining a Chama. If you wanted to open a Sacco or bank account, you will need to travel to a physical branch and present your ID, KRA Pin, have a referral, and sign a host of documents. You may also be asked to present your biometrics. With Chamas, the only requirement is to send your name and cash,” says Gachoka. “Many people detest the hassle and the glare of the authority on their finances. Online Chamas in this regard are hassle-free,” he adds.
According to Banice Mbuki Mburu, a Board Director at Kimisitu Sacco, agrees. She says that the low information on the benefits of joining a Sacco, the informalities of Chamas, and a poor saving culture are the primary reasons why many women are preferring Chamas to Saccos. “People tend to think that Saccos are complicated due to the process involved in joining. But what most don’t know is that this process is necessary in safeguarding your money and giving you the capacity to build around your capital,” she says.
For example, Banice says that if you have Sh50,000 share capital with Kimisitu, you will earn 15 percent at the end of the year in contrast to a Chama that will not offer you any interest for the money you contribute. “If you are in a Chama, you can never use your contributions as a guarantor to secure a loan from a bank or Sacco. But your FOSA statement can be adequate to give you a loan, which means that the minimum monthly contribution you make to your Sacco empowers you to access funding,” she says.
Banice adds that with Kenyans saving at a rate of just seven percent, most people get comfortable with the merry-go-round type of passing money around, which isn’t really saving.
