The Merry-go-round concept is increasingly becoming a viable option when it comes to raising funds among those in the informal finance sector.

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This is dominant in informal financial institutions among rural women more so in Central Kenya where they use it to mobilize their own resources and finance their growth.

But even as this financial concept continues to gain traction among the widely unbanked rural women, one may want to ask themselves, apart from mobilizing funds and putting them in one basket before redistributing them to select group members, one or two or three at a time, do the benefits of this ancient method of financing surpass its drawback?

Methinks in the fast-changing economic times, the demerits of merry go round by a great margin far outweigh the merits for the following reasons.

1. No return on investment

Money invested in merry-go-round financial institution never earns any interest no matter how long it remains there before your turn to give the cash reaches. 

If you are lucky to be the first one to get the cash in the cycle, what you basically get is a loan from other members and you will remain indebted to them till every other member is serviced.

It is even worse if you are among the last members to be serviced, something that may take a few to several months. You will only get what you have invested for months with zero interest and this is if you are lucky enough to have no member serviced before you who has defaulted and ran away from the village.

2. Source of friction in many families

You have heard of stories where after say a female member is serviced or goes for a loan from this kind of chamas and is asked for loan security, enlists the husband's properties without his knowledge.

And when she is unable to pay, the Chama members want to come and sell the enlisted properties to recover their cash. 

You have never seen the commotion that ensues in the process as the man armed with a machete dares the irate women to try and enter his homestead.

3. Endless debts

To avoid scenarios like the one listed in number two above, some members resort to borrowing from 'John' to pay 'Peter' which keeps them in a state of debts throughout and at the end of it all you go back to nothing. 

So where is the logic here? Do you have different thoughts on this, feel free to email us on;  You could see your work published here for our over 6 Million monthly readers. 

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