MONEY CLINIC: How do I assess the economic value of stokvels? | Fin24
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MONEY CLINIC: How do I assess the economic value of stokvels?

Feb 05 2019 06:08

Have a money problem that needs solving? Fin24 can help! This month our focus is on savings and how to better manage your budget. Send your question to or find the Money Clinic box on the right of our homepage.

QUESTION: I want advice on how one can measure the economic value of stokvels. Thanks in advance for your help.

ANSWER: We assume that the reader means the financial benefits from a pooled savings instrument (contributions from all stokvel members) compared to saving or investing on your own in a more formal way.

To measure it, one should go and look at the costs and returns (capital growth, interest or income) of your stokvel and compare it to saving/investing or borrowing on your own (say buying a big asset like a house or car). Pooled money can have many advantages and put members of the pool in a position to buy things and assets, or even build up a property portfolio or business venture, that would be difficult for an individual to do. 

But as with all investment/savings clubs, joint business ventures or companies, it is not the joint effort that makes people have success, it is the people or members that make the joint venture successful. As well as the advice they get or follow. To really earn better returns and lower costs with the increased buying power and empowerment that a group effort can bring, a stokvel should be well organised, with clear goals and making use of well chosen formal savings/investment instruments. 

“It is imperative that members do their homework, be informed and ensure that their stokvel is efficiently structured and geared for growth,” Ntombi Tisani, head or marketing at Old Mutual Personal Finance and owner of her own consultancy told Fin24. That way they can be empowered to demand more from service providers, including education, advice and operating platforms.

John Manyike, head of financial education at Old Mutual, told Fin24 in an interview last year that many stokvels still perform the traditional role of a short term informal savings vehicle for consumer needs. “But you must have longer term more formal savings as well. Some stokvels invest in instruments that do not yield high returns for them. It is important to get in touch with a trusted financial advisor.”

Start with people you trust, make sure the savings are not eaten away by inflation and insist on good record-keeping as well as transparency and accountability.

Stokvel clubs need to change from a consumption mindset to an abundance or wealth-creation mindset to “increase their economic value”. Of course stokvels can also have more “nonfinancial benefits” like peer pressure to force you to save, the sense of community and socialising, the chance to learn and be “money-wise”, and providing a “windfall” that makes it easier to plan your finances. But more individualistic people might prefer to have more control and a sense of ownership of their own savings, investments and assets.  

stokvel  |  money clinic


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