NAIROBI, Kenya, April 29 – A few years ago, Samuel Njuguna and his colleagues started an enterprise that would guide people on how to save and invest their money.
By virtue of what they were offering, the entrepreneurs were optimistic that their business would quickly grow into the next big thing.
But a few months into the business, the entrepreneurs had not achieved most of their goals. They began to question themselves.
“Before you start a business, you have a lot of assumptions about how it is going to turn out. In this case, we realized that just because you tell people you are going to give them a certain return on their investment does not mean they will invest with you,” says Njuguna.
In a country where a majority of the working population earns no more than Sh50,000 a month, they for instance realized that the initial deposit requirement they had set up was too high, as is the case with most investment firms in Kenya.
To bridge this gap, Samuel opted to leverage on his background in computer science to develop an application that would enable anyone to save and invest with small amounts, as low as Sh5.
He partnered with Titus Kinyanjui, who had a background in finance, to handle the financial aspect of the platform, and Samuel Njogu as the lead designer.
With the aid of an angel investor, the trio began building Chumz, an application that would provide an affordable alternative for people to invest in.Read More: Kenyan Startup That Enables Anyone To Invest As Low as KSh 5 Through Their App
The first prototype was ready in 2020, and by early 2022, they had secured a license from the Capital Markets Authority (CMA) to operate.
“The idea was to help individuals who struggled with creating a savings and investment culture due to a lack of discipline and the high initial investment required by most investment channels,” says Njuguna.
Essentially, the platform channels the funds collected to a licensed fund manager who offers a return to the fund, and the interests are thereafter distributed to individual clients.
The platform also utilizes behavioral psychology to guide users on when to save and invest based on their spending habits.
“For instance, we have designed our platform to prompt users to save a portion of the money they receive on mobile money, and when they spend money on certain activities like dining out. Additionally, we send reminders at strategic times during the month to encourage our clients to save and invest so that they can make the most out of their income,” says Njuguna.
Njuguna says getting people to change spending habits that have sometimes pushed them to rely heavily on predatory mobile loans for quick cash, and instead focus on saving small amounts of money that could in the long run guarantee financial independence is not easy.
“Basic financial literacy is lacking and this has meant that we have had to create financial literacy content and partner with a number of entities that do financial literacy. We’ve also recognized that financial jargon has kept many retail investors from investing, and we’re breaking down this jargon to make it more accessible to everyone,” notes Njuguna.
He says these approaches have helped to bring even the people who have never saved or invested before to do so, and change the perception that investing is only set aside for a select few.
“For instance, a shoe designer in Ngara saved Sh50 daily and managed to purchase their work equipment. His biggest aha moment was that small savings could amount to something substantial,” notes Njuguna.
He says they have also recently noticed that some parents are using the Chumz app to teach their children about finance, explain how interest accumulates and the long-term effects of deferred gratification, as well as create future financial goals for their children.
Currently, Chumz has over 70,000 registered users. Compared to the continental average of 17 percent, Kenya’s average savings and investment rate is still low, with only about 13 percent of the population engaged in saving.
Samuel says they plan on enhancing the app to encourage saving and investing by making it a fun activity.
“We are working on achieving this by creating gamified experiences around saving and investment triggers tied to the clients’ lifestyle around money. We have also created financial calculators to guide clients on how to manage their funds on our website,” notes Njuguna.