Chamas/Merry-Go-Rounds vs Table Banking
I learnt about Table banking over 3 years ago but took no interest in it. The information I had was that every member of the group is encouraged to borrow from the kitty but I really didn’t see the need to borrow, hence…. l later learnt that I could join a group just as a way of growing my savings…and who knows, one day I might just have an emergency and need to borrow some quick cash…well…I made a mental note to join at some point if I ever came across a serious and committed group.
Early last year, a friend invited me to their first meeting, where they were renewing their membership and increasing their monthly contribution from 3k to 10k. I tagged along but my intent was just to listen and learn more. After introductions, members, 12 of us were each asked to place their 10k contributions on the table. I found myself opening my wallet and removing some cash that was not meant to go into that kitty! Thereafter, the Chair asked members whether anyone had extra cash that they needed to save and all of us added different amounts – and then it was time to borrow. All other members borrowed according to their needs. 10% interest is paid upfront depending on amount borrowed. This interest plus any extra savings from members is put on the table and again borrowed, interest again paid upfront and borrowed and the cycle goes until no money is left on the table. We left – over 4 hrs later to meet again after one month with 10k each monthly contribution and extra savings and loan repayments. The kitty is still growing! Thumbs up to our Chair!
For the sake of those not in the know, allow me to expound a bit on what I have learnt since on Table Banking:
This is a group funding concept where members of a particular group meet either weekly or monthly, place their agreed savings on the table then borrow immediately either as long term or short term loans. Interest rates are very friendly and accessible compared to banks and other micro-financial institutions.
The group holds regular meetings where certain issues such as monthly contributions, loans paid out, penalties for late loan repayments, defaulters are discussed.
Difference and similarities:
-In Table banking, no collateral or security is required but members act as guarantors to each other’s loans. Table banking methodology can be quite helpful to most entrepreneurs looking to start a business.
-Banks, microfinances and Chamas take much longer to evaluate someone’s possessions to see if they qualify for the loans. Table banking on the other hand guarantees credit facilities to every member of the group. No one is denied opportunity to borrow but rather encouraged to so that the fund can grow.
-In Chamas, contributions are given to one or two members at any given time and this model keeps rotating until everyone receives the money. Others opt to contribute and save in the bank, but while it is secure, it earns very little interest.
-T /banking on the other hand helps members to form a kitty through contributions which they can borrow from.
Advantages of Table banking:
-Table banking gives members a sense of pride and interest earned from loans borrowed still goes back to the group’s kitty hence growth.
-Contributions can start from as low as 50/- and no need of collateral so anyone can join a group
-It’s a convenient banking option
-Table banking enables small groups to access bigger loans from other institutions willing to work with them.
-Table banking is not just for small investments or rural women groups as portrayed but for huge investments and the working class as well.
From my experience so far, I would encourage anyone in a Chama or Merry-Go-round to get into Table banking instead. After all you have already established an atmosphere of trust. Communication about the group expectations and achievements should be done as early as during formation.