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With the increased cost of living in Kenya, it is quite understandable why many people still struggle with saving and investing. This is even truer given the new tax and statutory deduction regimes, like the Affordable Housing Levy and new tax bands. These have led to reduced disposable income, which has left many with fewer shillings to spend, save, and invest. 


Life is probably about to get harder, people; survival is a must.


Away from savings, hard times call for desperate measures, in this case, borrowings. This is one of the reasons why a large percentage of Kenyans, especially the youths, are wallowing in debt. 


From digital lenders and payday loans to credit cards, borrowing from friends and family, emergency loans from financial institutions like Saccos, and salary advances, among others. People are borrowing money more than they are saving and investing. It is quite possible to find one owing money to more than one creditor.


The cost of living, as well as high rates of unemployment, have contributed to this. It has also contributed to high rates of default. For instance, reports show that as of November 2022, that’s about a year to date, about 14M Kenyans were blacklisted for defaulting. 


Paying the defaulted loan does not mean you will get off the hook easily. Actually, the Credit Reference Bureaus still keep you on low credit radar with a low rating of up to 7 years! Yeah, you read that right. That shows how much trouble most of us are in. Being blacklisted by the CRBs means you might not have access to loans from banks and other lending agencies. And if you do, you will receive credit at higher interest rates. 


The good news is there are ways to borrow money at a lower interest rate than the banks, payday lenders, and mobile Apps are willing to give you. And that doesn’t include borrowing from your friends and family. 


There are also ways to save the little that you have, with fewer regulations and greater returns than the banks’ current accounts. 


Welcome to Table Banking, people! 


This might not be the first time you have heard about table banking. The question, though, is if you have done more than just hearing and thinking about it. Have you thought about implementing it with a couple of your friends or colleagues?


Don’t miss this related article! 6 Ways to Manage Money Amid More Taxes & High Inflation




What is Table Banking, and How Does it Work?

Table Banking is a community-based financial system that originated in Kenya, specifically designed to empower individuals with limited access to formal banking services, particularly women with low-income earnings. This model stands as a testament to the effectiveness of collective financial efforts in fostering economic resilience and independence.


The term “Table Banking” derives from the practice of members gathering around a table to pool their funds into a kitty members can access credit. It operates on the principles of trust, cooperation, and shared responsibility, creating a supportive environment for economic growth.


Here’s how it works:

  • Group formation – a group of individuals with similar financial goals come together to establish a table banking group. They define their common objectives, rules, and regulations through a collaboratively created constitution.
  • Regular meetings – members convene at predetermined intervals, usually weekly or bi-weekly, to contribute their individual savings to a central pool. These contributions, often starting with small, manageable amounts, progressively build the group’s collective financial resources.
  • Decision-making processes – decisions within table banking groups are made collectively through democratic processes. Each member has an equal voice in determining policies, approving loans, and making key financial decisions.
  • Loan mechanism – members can apply for loans from the pooled funds, presenting their business plans or justifications for borrowing. Decisions on loan approvals and interest rates are made democratically by the group, fostering transparency and accountability.
  • Loan repayment – borrowers diligently repay their loans with interest, replenishing the group’s funds and ensuring its sustainability. These repayments, along with new savings contributions, create a continuously revolving pool of capital accessible to other members seeking financial support.


Key Features and Principles of Table Banking

There are a few features and principles that describe table banking, including:

  • Accessibility – unlike traditional banking, table banking does not require stringent collateral or credit history checks, making it accessible to a broader demographic. It caters to those often excluded from formal financial systems, fostering financial inclusion and economic empowerment.
  • Affordability – table banking typically offers lower interest rates compared to conventional financial institutions. This affordability stems from reduced operational costs and the absence of intermediaries, making loans more accessible to members.
  • Community focus – traditional banks often lack the community-centric approach of table banking, which builds on mutual trust and shared community values. The focus on community-driven economic development sets Table Banking apart as a socially responsible financial model.


Table Banking vs Chamas vs Investment Clubs

The definition of table banking is mostly confused with that of Chamas– there is a fine thin line between the two. 


On the one hand, some Chamas operate on a Merry-go-round basis where all the money contributed is given to one member of the group every time they meet on a rotational basis. Some Chamas will even buy household items for their members with the savings. As I said, what happens with the member contributions will depend on the foundation of the Chama.


Table banking, on the other hand, involves members contributing a certain amount of money either monthly or weekly- depending on what members agree. Then, the group lends the funds to its members at a lower rate. The repayment terms are actually much friendlier than the traditional and recent borrowing vehicles, like digital lenders.


Do not confuse table banking with investment clubs, either. Investment clubs involve pooling funds together as a group for investment purposes such as buying pieces of land or transport vehicles. 


However, some table banking groups have grown or evolved into investment clubs. I know of a former colleague in a group that had initially started as a table banking group during their early career days but is now running an investment group worth millions of monies.


So, there’s no limit to how far your table banking group can go! 


How to Create a Table Banking Group 

Any successful table banking group has achieved its success by having concrete rules. And serious members. How can your table banking group get here? 


1. Gather Interested Individuals

Identify potential members within your community who share similar financial goals and limited access to traditional financial services. Organize an initial meeting to discuss the concept of table banking, its benefits, and potential challenges. Ensure participants understand the commitment involved, including regular attendance, timely contributions, and adherence to group regulations.




2. Establish Clear Objectives and Structure

Facilitate discussions to collectively define the group’s purpose, target participants, and expected duration. Determine the desired frequency of meetings, preferred contribution amounts, and loan repayment terms. Establish roles and responsibilities for key functions like record-keeping, treasurer duties, and loan evaluation processes.


3. Craft a Group Constitution

Collaboratively draft a document outlining the group’s rules, regulations, and decision-making procedures. Clearly define member roles, financial management practices, loan application and approval processes, and conflict resolution mechanisms. Ensure transparency by documenting financial transactions and making records accessible to all members.


Here are a few pointers to help you craft a comprehensive constitution;


How Often Will Members be Meeting and Contributing? 

Will it be on a weekly basis, after every two weeks, or on a monthly basis? Some groups have chosen to meet once or twice a year, but they have a virtual group on WhatsApp where they keep each other updated. 


Such an arrangement will be ideal for a group that is closely knitted together and has no trust issues amongst themselves.   


What Is The Monthly Contribution? 

The sooner you agree on this, the better for the group. However, the amount should be agreed upon by all members. It should also not leave members struggling to contribute. 


You can start with a small amount, like 100 shillings, and increase the contribution as you progress. Some groups have started with as low as KShs. 20! It all depends on the financial capabilities of the members. 


Set The Repayment Terms

Remember, table banking aims to offer lending and repayment terms that are better than those offered by traditional lending vehicles. Therefore, the lending rates and repayment terms have to be friendly.


 Some offer a 5% interest for 3-6 months, while others offer an annual interest rate of 8% – 10%. The rates can even be as low as 3%. It all depends on you as members as well as your abilities.


What Happens to the Interest Rate? 

When people are repaying what they have borrowed, they will pay back the principal amount and the interest rate. You need to agree on what happens to the interest rate. 


You can reinvest it in the group’s capital or distribute it among the members as bonus earnings. The choices are endless, really.




Where to Bank the Money

You are working towards a structure that is less strenuous and easy for everyone. Therefore, a joint account will be ideal. You can sign up with any bank, Sacco, or money market fund for that. Make sure the withdrawal mandates are well set. 


Of these options, money market funds and Saccos have become a great option for many groups. With Saccos, there’s access to higher credit for the group, especially if it has morphed into some sort of an investment group. With MMFs, the group’s extra funds can be earning interest. 


What Happens In Case a Member Defaults?

Defaulting can happen to any group. Life happens, and people face more hardships, leaving them with no choice but to default. Others might default just because. It might not happen, but you do not want to be caught off-guard when it does. 


Your group must decide and have it in the constitution in advance on what happens to defaulters.  



Will you admit other people in the future, or is it a closed group? If you will admit new members, what are the joining requirements?


Exit Policy

In case a member wants to leave the group, what will happen? Well, mostly, the policy will vary from group to group. 


First, agree on what happens to their capital towards the group. If the member has any unpaid debt, will it be deducted from their total contribution, or will they repay it back first? It all depends on what you, as members, agree on. 


How to Avoid Common Pitfalls and Challenges

While having an objective, a constitution and ground rules will go a long way, there are measures you can take to ensure your table banking group doesn’t collapse. Below are some of the strategies to implement; 


Effective Communication

Ensure that you foster open and transparent communication within the group. Clear communication minimizes misunderstandings and ensures that all members are informed and involved in decision-making.


Regular Financial Audits

Second, your table banking group should conduct regular financial audits to maintain transparency and accountability. Audits help identify any discrepancies or issues early on, allowing for timely corrective actions.


Adaptability to Change

Finally, be open to adapting strategies based on the group’s evolving needs and external factors. Flexibility enables the Table Banking group to navigate changing economic conditions successfully.


In Conclusion

That said, you can see table banking is not such a hard thing to do. Most of our parents are in these groups. But that does not mean you, as a youth, can’t be in one. Mobilize a number of people you trust and start a table banking group. By the time your group hits one year, you will have increased your capital and given each other a chance to save and lend at lower rates. 


You will also have access to quick cash in times of emergencies, which helps you avoid the tedious processes of getting a huge amount of loans from banks, payday lenders, digital lenders, and Saccos. Not forgetting the high interest rates.


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