EKUB Investment Clubs
In Africa, most of the investment clubs were started with an aim of helping members of the investment group as well as the community. They establish the club through the creation of rotating funds among the members. For instance, after the money is collected from individuals, the money is then lent out to a section of the members to help them in solving financial matters affecting them. Thereafter, after a certain agreed period, all the members converge and those who had received money previously return and another group is given thus creating a circular manner until the club is financially capable of financing the entire course. Through these circles, a certain interest is charged for finances taken by each constituent.
Ekub investment in Ethiopia
Ekub club was started among the neighbors and the workers with an objective of raising funds which can be used during emergencies such as death in Ethiopia. It is based on pre-established social ties. It is made up of people from the same workplace, trading, ethnic and school background. It accommodates people from all walks of life. For example, the shoe-makers, government officials and both the rich and the poor are all attributed as the sole members of the Ekub club. It started as an informal sector; however, later it developed into a formal financial institution (Abebe & Tsega, 2014). Eke was initiated 45 years ago. The club started with 20 to 35 members who were expected to contribute birr of 1 to 3 per person weekly. This happened in cycles and as soon as one round is terminated another one is started immediately. This helped in ensuring the continuity of the business and thus making members be constantly active. It is estimated that 85% of the amount collected is deposited in a bank to serve emergency services from the members.
Likewise, a new member is admitted in the Ekub after being approved to be known by at least five members in the association. The five members act as the guarantors of the new member so that in case they fail to pay their loans, the five members become eligible to make the payments. The associates always buy shares in the company. The amount ranges from five to 800 hundred birrs. This amount is used in offering loans with interest which is later converted into income used in the payment of the workers of the corporation (Tadesse & Kassie, 2017). Also, the Ekub has rudimentary insurance called iddir which serves as a kitty through which financial collection is made in case of death of the member of Ekub. Thereafter, the contribution is used in providing financial aid to the family of the deceased. Nonetheless, the association has another kitty of collecting funds called iqqub which is used in either establishing a new project or expanding an existing one.
Investment clubs in Africa have been growing exponentially over a period of time due to the existence of simple procedures required when one wants to become a member. People feel that financial organizations such as banks have a tiring and complex mode of entry. In addition, the clubs are viewed to offer loans at cheaper interest rates, therefore, drawing more subscribers. As a result, the funds collected from this customer’s aid in the running and development of the club. Similarly, people, especially in rural areas, do not have knowledge about developed financial investments and thus majority of them feels forming a club asset is the only option.
Abebe, Tsega Adego. (2014). Challenges and Prospects of Operated Micro and Small Enterprises: A Case Study of Eqquib, Ethiopia. The International Institute for Science, Technology and Education (IISTE.
Tadesse, G., & Kassie, G. T. (July 10, 2017). Measuring trust and commitment in collective actions. International Journal of Social Economics, 44, 7, 980-996.