In case you were planning on transforming your merry-go-round form of chama with your acquaintances into an investment, this article will take you through the step by step process of formalizing it legally.
What are self-help groups?
Self-help groups or simply chamas, are Kenyan colloquialism for investment groups, which have been, for the longest time, a sure path to financial freedom.
While a good many of them fizzle out before making any substantial gains, several others grow to become financial institutions of power, influence, and wealth.
Previously, chamas were considered a women’s affair, but this has evolved as we are now seeing more men engaging in self-help groups.
Analysts have observed that these groups enable persons from varying income brackets to face difficulties and opportunities as a group as opposed to individuals.
Chamas enable people to maintain and develop their resources by encouraging saving and making available lump sums which can be used for small scale investment or household needs- school fees and so on.
In this way, they make money ‘work’ because small amounts can be contributed and made available to everyone to use for welfare or investment needs.
Through this process, the funds become a collective asset rather than an individual one, so enabling upliftment of the community.
Advantages of registering a Self-help group
Here are the benefits of registering a chama in Kenya:
1. The Kenyan constitution will recognize it as a body; hence it can conduct various business activities under its name.
2. The self-help group can own assets on behalf of the participants. As such, the members feel a sense of security contributing their hard-earned cash to the chama.
3. Registering a chama helps the members be conversant with tax implications of their property dealings. This is especially true when the group intends to sell and distribute the cash among the associates.
Note: Members in a chama need to realize that they are jointly responsible for all debts and financial obligations of the group; hence, all need to agree with the intentions to take a loan.
Information required for registering a self-help group
These include;
The chama must have Articles of association and Memorandum of Association documents in place as these are vital requirements for registering a chama.
The objective of the company and the activities to be conducted by the business.
Full names. Your full names as displayed on your ID/Passport will be used on the application
Full names of the Directors if different from the shareholders.
Postal addresses. Email, telephone details of the shareholders, and directors.
Number of shares for each stakeholder
Copy of national ID/passport of the investors and directors. Photos – must have a clear background and show all your facial features, just like a passport photo.
A copy or KRA PIN certificate for all the members and directors.
You need to have ten members or more to register the chama group.
Your chama must have a constitution that guides its activities as well as membership directives including how to nominate officials.
The group should have by-laws or a constitution that guides its activities and dictates its membership including the officials. Ensure that your constitution clearly indicates your objectives.
A small fee of Ksh 1000 is needed to register the chama.
Every year the registered chama must file its annual returns by paying Ksh 100 to the registrar. Failure to submit the returns can result in deregistration of the chama.
The chama must give two weeks’ notice to the registrar whenever they need to change the names of the officials or office posts. Please note that this notice of change must be signed by at least three officials.
Also, if the chama wants to change its constitution or name, it must apply in writing to the registrar. This compliance must be signed by the chairperson, secretary, and treasurer. Additionally, a copy of the minutes verified by the three officials must be attached to the letter.
Every registered chama is required by law to hold an annual general meeting inviting all its participants.
Besides the yearly returns, your chama has to pay various fees from time to time such as change of officials, postal address, and application for constitution adjustment, request for change of officials, name search, and request for disbanding of the self-help group.
How to register a self help group in Kenya
Self-help groups can be registered with the Ministry of Gender, Children and Social Development in two main ways.
1. Registration as an association or as a Self Help Group
2. Certification as a Limited company or Partnership
At any time you need to formalize a chama as a limited company or partnership, the group has to perform a name search on eCitizen or at a nearby Huduma centre at the cost of Ksh 150.
In order to save time, one must submit at least three names at once in case any of the names are already taken by others.
When successful, the business name is reserved for 30 days during which the chama can then register the business name.
After this, all the requirements for registering a limited company or partnership apply.
