How merry-go-round groups are spinning members to success

A trader at Makumbusho, Latifa is among thousands of people whose livelihoods highly depend on merry-go-round savings groups known as Mchezo in Swahili.

Many describe these groups as a saviour, without which they would not be able to save money.

Apart from instilling financial discipline among members, these groups also serve as a social safety net. Members also support one another in good and bad times.

Talk to anyone, and they will likely tell you they are either members of several savings groups or have participated in one before.

These groups are made up mostly of friends or people living or working in the same area, who join forces for saving purposes.

Members contribute equal amounts weekly, biweekly, or monthly, depending on their preference, and take turns receiving the accumulated funds.

"A friend introduced me to the group in 2021. At the time, I wasn’t sure I was going to get the money I had contributed because I had seen people lose their money in such groups before. I am glad I took the risk, for I’m now sure of becoming a homeowner once the construction of my house in Chanika is complete," shares Latifa, who is currently living in a rented room.

Members of Latifa’s group contribute Sh2000 daily for five days, after which a member receives Sh500,000.

Despite the fact that more men today participate in these savings schemes, the majority of members are women, who rely on them for capital to start or finance a business and other living expenses.

Juma Kadonee,25, is also is a beneficiary of the group in Mwananyamala. Juma used to work at a barbershop before he opened his own after saving money through the group.

"I used to save Sh2000 daily from the money I earned at the barbershop. I used the money I received in two rounds to open this salon. It’s something I would encourage others to do, but they must be careful when choosing the groups to join," he cautions.

Juma is right. Not all the groups can be trusted. Sometimes some members default, causing other members to lose their money.To avoid this, some people make sure they are among the first members to receive the money as a shield from such mishaps.

"Every time someone approaches me to join their group, I usually accept on condition that I either be number one, two, or three on the list, so I can be among the first members to receive payouts," says Sarah Mwandu, who has been a victim.

She once lost her money in a group of 20 people after some members failed to make the daily Sh10,000 contributions. “We could not report it anywhere because we were doing it informally," shares Sarah.

Shanti Shariff, the treasurer of the Mwananyamala group, says her group has measures in place to avoid such risks. First of all, the group admits members they are sure can afford the Sh2,000 daily contribution.

"We also ensure we have the new members’ important information, such as where they live, work, or conduct their businesses. In case we have doubts, we usually put their names at the bottom of the list, so they would be the last to receive their money," Shanti shares.

The 29-year-old businesswoman admits that the savings groups have been beneficial to many. "What people don’t know is that, through these groups, we are able to run our lives without much stress. Most people are surprised to see men participate in these groups, but these men know the benefits of being members," says Shanti, whose husband is a member of her group.

She says that although a lot of people don’t have faith in savings clubs, her experience proves otherwise.

"I have witnessed members of my group move from one stage to another. There are those who bought their first Bodaboda using the money they saved through the group; others have bought land; and others have used the money as capital to start their own businesses," she notes.

Savings groups have been present for years, not only in Tanzania but also in many other African countries under different names. These groups are the answer for those who can’t access loans from lending institutions such as banks.

Prof Abel Kinyondo, an economist from the University of Dar es Salaam, says these savings groups are important to the community.

"Ideally, these groups are important in today's society because the model lifts members out of poverty. Different countries around the world are practising this. The Grameen Bank in Bangladesh, for example, started as a savings group before becoming a bank," he explains.

Prof Kinyondo says in these groups, members are provided with a simpler process when borrowing and saving their money.

"Not everyone has the aptitude to go to the bank and be given a loan; this is because not all people have a permanent job and valuable assets, so many people come to these groups because it doesn’t require them to do a lot of processes," says Prof Kinyondo.

But his concern is that not all savings groups have members or leaders who are trained in financial management.

To be successful, Prof Kinyondo says these groups must consider consulting highly knowledgeable people to provide them with knowledge about financial management and entrepreneurship while also providing them with details about the difference between assets and liabilities.

“Some members don’t even know what to do with their money, yet if these people are provided with training, it will be a successful savings group that people will benefit from," he clarifies.

Although the law requires these savings groups to be registered, many, if not all, are not registered due to the formalities that are expensive to follow.

The professor says banks need to work closely with these groups so as to provide them with low-interest loans that are easily accessible. He says the government should establish why so many people rush to these groups in order to be able to help them.

Apart from saving money, some groups also cover social issues such as celebrations, sickness, and death.

The Familia ya Amani (peaceful family) savings group in Kawe, for instance, supports members in times of need. Members can also borrow money occasionally.

"We have a total of 30 members, all women entrepreneurs. We contribute Sh15,000 mid-month and another Sh15,000 at the end of the month. This means two people receive Sh450,000 each every month," says Mama Bora, the group leader.

Every Thursday, each member contributes Sh3,000, and after six months, members agree on how the money collected should be spent.

"We either borrow the money or use it to buy things like clothes or kitchen utensils, depending on members’ preferences," explains Mama Bora.

"We also support one another in good and bad times. When one loses a relative, for example, we contribute Sh5,000 each, Sh20,000 for weddings and other celebrations, and Sh3,000 for sickness," clarifies Mama Bora.

Although the money saved through these schemes has helped many in different ways, Mama Bora says one of the biggest challenges in her group is when a member relocates to another area. “That’s why we prefer dealing with people with permanent residences," she says.