Stokvels: a hidden economy where women play a critical role
This Women’s month we celebrate the extraordinary role women play in South Africa.
In approximately 40% percent of South African households, women are responsible for managing the family budget, household expenses and planning and saving for the future. This also explains the massive growth and popularity of Stokvels throughout the years. The South African stokvel sector is massive and caters towards significant financial resources. According to African Response in 2019, stokvels are big business, comprising of nearly 11.6 million people belonging to over 552 046 stokvels collectively valued at R49,5-billion.
“Stokvels create a community for women and an opportunity for them to save, invest and learn valuable life lessons from each other. If well equipped with the right financial skills and education, these society schemes have an opportunity to mushroom into great investments, which empower the members. It creates a solid foundation when planning for education, unexpected expences, investing in a home or planning for a family like a wedding or a death in the family,” says Tshiamo Molanda, Standard Bank Personal and Business Banking Head of Client solutions, Everyday Banking.
Stokvels are a powerful tool in the fight against poverty and are particularly helpful in uplifting women and breaking the cycle of financial dependency.
Types of stokvels
There are various reasons why people initiate or join a stokvel or society schemes. The whole premise around Society schemes is to save or invest as a group to leverage the compounding interest on the funds. Below are some of the popular stokvels that South Africans make use of:
Savings stokvels - In a savings stokvel, a fixed amount agreed upon by the members is added into a common account. The members decide on the terms e.g. saving from beginning to end of the year in an account or a rotation of fund payouts where members alternate to receive a predetermined lump sum.
Property stokvels - These have recently gained popularity among high-income earners as well as younger savers and aspiring investors who realise the power of pooling funds for investment. Many have calculated that stokvels can be used to enhance investments in property and other asset classes that may have not been possible to achieve individually.
Burial stokvels - The goal of a burial stokvel/society scheme is to act in the same way as a funeral policy that pays out immediately to help members cover funeral costs in the event that they lose a loved one. The funds are pooled together and released when required by one of the members. \
The gap
Members tend to focus on short-term goals and fail to invest for the long term. If managed responsibly, stokvels can be a great way to protect finances and create generational wealth. An example of the potential that lies in stokvels and the powerful role that women can play, is the Young Women in Business Network. This innovative group of women have used the stokvel model to their advantage by rotating credit and embarking on a savings scheme to register as a cooperative financial institution.
“It is definitely possible to turn stokvels into vehicles that create wealth in the long term. The community spirit and sense of empowerment have the potential to transform people’s financial future, but this can only be achieved through financial education and empowerment of members,” concludes, Tshiamo.
Stokvels pool resources, allowing investors to punch above their weight when it comes to saving and investing. However, a well run Stokvel needs a strong constitution with clear and discernible rules. Its advised that an investor contacts their financial institution to advise on the appropriate vehicle and rules when deciding to open and manage a Stokvel.