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Cape Town - Stokvels are still an immensely popular way of saving for many South Africans, but the new trend is to put money away for investment and creating wealth rather than saving up for funerals and groceries.
“Stokvels are no longer the domain of people in need of a collective pot for burials and groceries but provide a way to learn about and jointly invest money with the aim of creating wealth and security for its members,” states an African Response group report published in Finweek.
While old-school stokvels are still the most popular, including pooled savings, burial societies and grocery stokvels, “investment stokvels” are gaining traction among higher income groups.
An estimated 5% of stokvels are invested in the stock market or in entrepreneurial activities, with 30% of their members in the LSM 9 to 10 groups. The average contribution to investment stokvels is between R300 and R500 a month.
Ziyanda Mbutuma, a government employee, is one such example of the new generation belonging to a stokvel, which she formed last year with her colleagues.
Saving to survive festive spending
“We started the group last year in January and we saved until November. We contribute not less than R300, but members are allowed to contribute more. The purpose was to assist people to save money for December month as this is a very busy month for us and we spend a lot, so that extra money is always helpful.
"Sometimes if you did not save through the year you end up taking loans to survive the festive spending. It also helps you not to touch your salary for all the Christmas expenses such as groceries and you can also buy school uniforms and stationery for the new school year,” says Mbutuma.
To keep members committed and disciplined, Mbutuma says members pay an extra R30 if their contributions are past the due date. She believes this keeps the members committed to saving and reaping the rewards by the end of the year.
Reports show that South Africans are in fact saving, but just not the Western way and that’s where stokvels come in. The African Response report shows that over 11.4 million people belong to an estimated 811 830 stokvels.
Elizabeth Lwanga-Naziri of the South African Savings Institute says: “South Africans are saving informally and these savings might not be captured in the broader national accounts, especially if the stokvels are not registered with the National Stokvels Association of South Africa.
"Most of the credit, for both stokvel members and other consumers, is recorded with the lender and credit bureaus. It is therefore easier to say that South Africans are borrowing more than they are saving. There is still a great challenge though in measuring the effect of stokvels on improving South Africa’s low savings rate.
"The government is working at addressing this, and this comes against a backdrop of anecdotal research that shows that the value of the stokvel industry is up R45bn,” says Lwanga-Naziri.
Traditionally, a stokvel involves members contributing an equal amount every month, with a payout of the monthly collective savings to one member at a time.
Lwanga-Naziri says stokvels are here to stay. “Two out of three South Africans belong to a stokvel. This number cuts across all LSMs one to 10. Registered members are up to 12 million and about 800 registered stokvels."
Banks get in on the act
Banks have also jumped on the bandwagon to take advantage of the stokvel market by offering accounts that cater for group banking.
Traditionally, stokvel money was physically collected and distributed among group members, but now members deposit their contributions into a bank account.
Says Lwanga-Naziri: “Banks do offer stokvel accounts; however, the figures in terms of the proportion of stokvel accounts held by banks is fuzzy, hence independent research with the stokvels themselves is being undertaken to establish this.
"This means that banks can tap into this pool of funds and extend these funds to potential investors. It is a good thing for the banking sector if more stokvel group savings products are made available."
When it comes to traditional stokvels versus banking, Lwanga-Naziri says there are pros and cons with each method, under the current financial sector framework.
"Traditional mechanisms are good for short-term savings, but can be risky in terms of safekeeping since the funds are usually kept in the custodian of a treasurer. This mechanism might not allow for high value investments.
"Formal banking mitigates some of these risks, but minus proper consumer education might not provide value for investment. We acknowledge that some stokvels will remain voluntarily excluded and this should be appreciated.”
- Fin24
Consider yourself a savings hero? Or just have something on your mind? Add your voice to our Savings Issue:
* Write a guest post
* Share a personal story
* Ask the experts
“Stokvels are no longer the domain of people in need of a collective pot for burials and groceries but provide a way to learn about and jointly invest money with the aim of creating wealth and security for its members,” states an African Response group report published in Finweek.
While old-school stokvels are still the most popular, including pooled savings, burial societies and grocery stokvels, “investment stokvels” are gaining traction among higher income groups.
An estimated 5% of stokvels are invested in the stock market or in entrepreneurial activities, with 30% of their members in the LSM 9 to 10 groups. The average contribution to investment stokvels is between R300 and R500 a month.
Ziyanda Mbutuma, a government employee, is one such example of the new generation belonging to a stokvel, which she formed last year with her colleagues.
Saving to survive festive spending
“We started the group last year in January and we saved until November. We contribute not less than R300, but members are allowed to contribute more. The purpose was to assist people to save money for December month as this is a very busy month for us and we spend a lot, so that extra money is always helpful.
"Sometimes if you did not save through the year you end up taking loans to survive the festive spending. It also helps you not to touch your salary for all the Christmas expenses such as groceries and you can also buy school uniforms and stationery for the new school year,” says Mbutuma.
To keep members committed and disciplined, Mbutuma says members pay an extra R30 if their contributions are past the due date. She believes this keeps the members committed to saving and reaping the rewards by the end of the year.
Reports show that South Africans are in fact saving, but just not the Western way and that’s where stokvels come in. The African Response report shows that over 11.4 million people belong to an estimated 811 830 stokvels.
Elizabeth Lwanga-Naziri of the South African Savings Institute says: “South Africans are saving informally and these savings might not be captured in the broader national accounts, especially if the stokvels are not registered with the National Stokvels Association of South Africa.
"Most of the credit, for both stokvel members and other consumers, is recorded with the lender and credit bureaus. It is therefore easier to say that South Africans are borrowing more than they are saving. There is still a great challenge though in measuring the effect of stokvels on improving South Africa’s low savings rate.
"The government is working at addressing this, and this comes against a backdrop of anecdotal research that shows that the value of the stokvel industry is up R45bn,” says Lwanga-Naziri.
Traditionally, a stokvel involves members contributing an equal amount every month, with a payout of the monthly collective savings to one member at a time.
Lwanga-Naziri says stokvels are here to stay. “Two out of three South Africans belong to a stokvel. This number cuts across all LSMs one to 10. Registered members are up to 12 million and about 800 registered stokvels."
Banks get in on the act
Banks have also jumped on the bandwagon to take advantage of the stokvel market by offering accounts that cater for group banking.
Traditionally, stokvel money was physically collected and distributed among group members, but now members deposit their contributions into a bank account.
Says Lwanga-Naziri: “Banks do offer stokvel accounts; however, the figures in terms of the proportion of stokvel accounts held by banks is fuzzy, hence independent research with the stokvels themselves is being undertaken to establish this.
"This means that banks can tap into this pool of funds and extend these funds to potential investors. It is a good thing for the banking sector if more stokvel group savings products are made available."
When it comes to traditional stokvels versus banking, Lwanga-Naziri says there are pros and cons with each method, under the current financial sector framework.
"Traditional mechanisms are good for short-term savings, but can be risky in terms of safekeeping since the funds are usually kept in the custodian of a treasurer. This mechanism might not allow for high value investments.
"Formal banking mitigates some of these risks, but minus proper consumer education might not provide value for investment. We acknowledge that some stokvels will remain voluntarily excluded and this should be appreciated.”
- Fin24
Consider yourself a savings hero? Or just have something on your mind? Add your voice to our Savings Issue:
* Write a guest post
* Share a personal story
* Ask the experts
