Nairobi News

While conducting their research at the university, three friends Titus Marenye, Njogu Kinyanjui and Samuel Njuguna, discovered a huge savings and investment gap in the country that did not sit well with them.

Data from the Kenya National Bureau of Statistics (KNBS) revealed that about 13.9 million Kenyans, a majority of whom were operating in the informal economy, had no form of savings plan.

Meanwhile, data from financial consultancy firm EFG Hermes revealed that while the continental average of those engaged in saving was 17 per cent in 2020, only about 13 per cent of the Kenyan population was engaged in saving.

Part of this was attributed to the fact that most of the available savings and investment products in the country had high initial investment requirements that locked out Kenyans, most of whom operate in the informal economy, where earnings average below Sh50,000.

As a consequence, many Kenyans continued to rely on predatory mobile loans to sustain their businesses, livelihoods and handle emergencies.

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Towards the end of 2020, the three friends approached an angel investor to support them with the financial resources they would require to build an application dubbed Chumz, that would enable users to invest with as low as five shillings.

Once the prototype was ready, in early 2022, they secured an operating license from the Capital Markets Authority (CMA), to allow them to channel funds deposited by investors to a licensed fund manager who would generate returns on the fund and thereafter distribute the interests to individual clients.

The platform would use behavioural psychology to guide clients on when and how to save and invest. When a user gets a discount on a purchase for instance, the app prompts the user to invest the money they have received as a discount, instead of spending it elsewhere.

“For example, if cooking oil was going for Sh500 but a customer finds it is on discount for Sh400, they can save the Sh100 difference,” said Njuguna, co-founder of Chumz.

The same would apply to when users negotiate for lower prices. They could save the difference between the marked price and the negotiated price.

“Psychology wise this makes sense because the user had planned to spend the money anyway,” said Njuguna.

The app sends alerts to users when they are in places where they are likely to overspend, such as on outings. It has a group functionality for merry go rounds (chamas), that sends an alert once one member makes a deposit, to encourage other members to follow suit.

“A user in a pub for instance can get an alert which will help him or her to avoid over indulging in consumerism. We also send reminders at strategic times during the month to encourage users to save and invest so that they can make the most out of their income,” said Kinyanjui, co-founder of Chumz.

About two years since they started operating, the Chumz team has managed to onboard more than 150, 000 retail users to the platform, which is available for download on playstore and Appstore. Some of these are people who have never thought of investing, as they were not even able to save.

“We have a user called Maina, a shoe designer based in Ngara, who has been saving Sh50 every day. He tells us the returns he has been getting are what have enabled him to buy tools of trade such as leather fabrics, which he would always purchase using mobile loans,” says Kinyanjui.

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Marenye, the other co-founder of Chumz, says while the milestones they have achieved are noteworthy, the journey has not been without its fair share of challenges.

For instance, getting people who have relied heavily on predatory mobile loans for quick cash to change spending habits, and instead focus on saving small amounts of money that could in the long run guarantee financial independence has been tough.

“A lot of people have been kept from investing due to complex financial jargon. We have had to create simplified financial literacy content and partner with entities that do financial literacy,” he says.

They have also tried to gamify the saving experience by challenging people to start saving small and increase the amount that they save weekly, over a 52-week span.

They are also conducting sensitisation campaigns, especially among parents, encouraging them to train their children on how to save, and teach them the benefits of delayed gratification.