In Kenya’s dynamic financial landscape, Chamas, informal savings and investment groups, have long been a pillar of community-based finance. From rural villages to urban centers, millions of Kenyans pool resources through Chamas to support personal goals, business ventures, and emergencies.
But as Chamas grow in membership, savings, and complexity, many begin to encounter challenges: lack of legal structure, limited access to large loans, internal disputes, and weak governance. Transitioning into a SACCO (Savings and Credit Cooperative Organization) can be a powerful way to scale operations, increase access to finance, and offer members greater protection.
Here’s what the journey from Chama to SACCO looks like, and what it takes to get there.
Step-by-Step Guide: From Chama to SACCO
1. Build Strong Internal Structures First
Before formalizing, a Chama must prove it can manage money, run meetings, and maintain transparency. Start by:
- Drafting a constitution
- Electing accountable officials (chairperson, treasurer, secretary)
- Keeping proper records and minutes
- Introducing basic financial controls (e.g., double signatures on withdrawals)
Consistent financial discipline is the foundation for SACCO readiness.
2. Educate Members on SACCO Principles
SACCOs run differently than Chamas. They follow cooperative principles:
- Democratic member control (“One member, one vote”)
- Member participation in decision-making
- Limited dividends, most profits are reinvested
- Hold sessions to help members understand what changes with a SACCO and what responsibilities they’ll take on.
3. Decide on the Type of SACCO
There are different categories, each with legal and regulatory implications:
- Non-deposit-taking SACCOs (BOSA): Simple, less regulated, for members only
- Deposit-taking SACCOs (FOSA): Heavily regulated by SASRA, can offer quasi-banking services like ATM cards, mobile apps, etc.
Start with BOSA if you’re small, then grow into FOSA.
4. Register the SACCO
Once ready, register under the Co-operative Societies Act:
- Minimum 10 members
- Each member must contribute share capital (decided by group)
- Draft and submit by-laws
- Register with the County Director of Cooperatives
- Obtain a Certificate of Registration
This gives the SACCO legal identity and recognition by the Ministry of Cooperatives.
5. Open a SACCO Bank Account
With registration, the SACCO can now:
- Open an account in its own name
- Collect deposits and disburse loans officially
- Apply for funding, grants, or even micro-insurance for members
6. Adopt Financial Systems & Technology
Manual bookkeeping might work for a Chama, but a SACCO needs structured systems. Invest in:
- Digital accounting software
- Member contribution tracking tools
- Mobile platforms (e.g., USSD, SMS) for deposits and loan repayments
- Audit-ready financial reporting systems
This improves transparency, reduces fraud, and builds trust.
7. Comply with Regulation
Once your SACCO grows and starts taking deposits from the public or more members, you may be required to:
- Register with SASRA (especially for Deposit-Taking SACCOs)
- Submit annual reports and audited financial statements
- Abide by prudential guidelines (liquidity ratios, capital adequacy, etc.)
The good news? With compliance comes access to more opportunities and investor confidence.
Every group moves at its own pace, it’s better to grow slowly and sustainably than rush into formalization unprepared.
Common Mistakes to Avoid
- Rushing registration without building internal trust and leadership
- Lack of member education, leading to confusion or resistance
- Over-promising loans without proper financial buffers
- Misusing SACCO funds for personal gain a fast way to lose credibility and members
Success Factors for Transitioning
- Committed, trained leadership
- Clear communication with members
- Transparent record keeping
- Willingness to learn from existing SACCOs
- Partnering with technology providers or cooperatives agencies like fibo360.
Chamas are powerful. They bring people together, build savings habits, and create trust. But when they begin to outgrow their informal structure, transitioning to a SACCO can unlock new doors, formal financing, legal protection, access to larger investments, and a greater voice in the economic space.
Transitioning isn’t easy, it requires effort, education, and patience. But with the right foundation, your Chama can evolve into a fully-fledged SACCO that serves not only current members but future generations as well.