Chama Loan Interest Calculator
Enter the loan details below to see the full repayment schedule in KES. You can compare flat-rate and reducing-balance methods side by side — most chamas use flat rate, but reducing balance is fairer to borrowers.
Calculate repayments
Flat rate
KES 10,833
per month
Reducing balance
KES 10,833
first payment (decreases each month)
With reducing balance, the borrower saves KES 6,250 in interest compared to flat rate — 42% less.
| Month | Principal | Interest | Total payment | Balance |
|---|---|---|---|---|
| 1 | KES 8,333 | KES 2,500 | KES 10,833 | KES 41,667 |
| 2 | KES 8,333 | KES 2,500 | KES 10,833 | KES 33,333 |
| 3 | KES 8,333 | KES 2,500 | KES 10,833 | KES 25,000 |
| 4 | KES 8,333 | KES 2,500 | KES 10,833 | KES 16,667 |
| 5 | KES 8,333 | KES 2,500 | KES 10,833 | KES 8,333 |
| 6 | KES 8,333 | KES 2,500 | KES 10,833 | KES 0 |
Flat rate vs reducing balance — explained
Flat rate
Interest is calculated on the original principal for the full term, regardless of how much has been repaid. Every monthly payment is identical.
Monthly interest = Principal × rate
Most common in Kenyan chamas because it is simple to explain and easy to verify at a meeting.
Reducing balance
Interest is calculated on the outstanding balance each month. As the borrower repays principal, their interest charge falls.
Monthly interest = Remaining balance × rate
Fairer to borrowers, especially on longer-term loans. Preferred by SACCOs and banks.
Worked example: KES 50,000 at 5% for 6 months
| Method | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| Flat rate (5%/month) | KES 10,833 | KES 15,000 | KES 65,000 |
| Reducing balance (5%/month) | KES 10,833 → KES 8,750 | KES 8,750 | KES 58,750 |
On this loan, a borrower saves KES 6,250 with reducing balance — almost one monthly contribution.
Frequently asked questions
Which method must my chama use?
Neither is legally required. Your constitution should state which method applies. Many chamas start with flat rate (simpler to explain) and switch to reducing balance as they grow.
What is a fair interest rate for a chama?
Typical Kenyan chama rates are 5–10% per month flat rate, or 1–2% per month reducing balance. The interest earned goes back to members as a dividend at year-end — it is not profit for the group.
How are penalty charges handled?
Most chamas charge a flat late-payment fee (e.g. KES 200 per month) on top of the loan repayment. This should be in the constitution. In Chamabora, penalties are tracked separately and credited to the welfare fund.
Can my chama charge compound interest?
You can, but it is uncommon and can become difficult to explain to members. Flat rate or reducing balance on the original principal are both simpler and more trusted.
Let Chamabora track loans automatically
Repayment schedules are generated at disbursement. Each repayment is applied to penalty, then interest, then principal — automatically.
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