Stokvels savings pools offer people the opportunity to save their money for a common purpose and play a substantial role in the South African economy. According to a study done by The University of Cape Town done in 2003, approximately 9% of the adult population in South Africa belonged to a stokvel. Further research conducted in 2007 by Old Mutual showed that savings circulating outside of the formal financial sector had grown substantially to over R33 billion over the last ten years with stokvels accounting for the majority of that money.
It was for this reason that organisations such as the National Stokvels Association of South Africa and the Stokvel Company arose as they felt that there was a need for certain stokvels to organise themselves in a more formal manner in order to safeguard their money as well as build it substantially.
If you are still unsure of what exactly a stokvel savings pool is, then Andrew Lukhele of the National Stokvels Association of South Africa defines them as follows: “A type of credit union, or communal buying group, in which a group of people enter in to an agreement to contribute a fixed amount of money to a common pool weekly, fortnightly, or monthly, to be drawn in rotation according to the rules of the particular stokvel.”
Now you may be wondering why these people pool their money like this, rather than saving their money individually. Well these stokvels were originally created in order to pay for funerals for members of the stokvels. However there are a number of different categories that are now in play in South African communities.
According to Wits Business School, the following stokvel categories include the following:
- The contributions stokvel: Considered to be a traditional savings scheme whereby members of the stokvel contribute a fixed amount to the pool either weekly, fortnightly, or monthly. In this type of stokvel, each member will get paid out the total amount on a rotational basis for them to use however they pleased.
- The basic stokvel: This stokvel differs from the contributions stokvel in that it can also function as a savings scheme that was only paid out for a specific event such as a death or marriage.
- The grocery stokvel: This is a stokvel that collects coupons that members received from supermarkets thoughout the year and that are distributed at the end of the savings period of the stokvel.
- The purchasing stokvel: Here a pool of money is collected in order to purchase big items that can be used by the group in order to generate an income.
- The family stokvel: As the name suggests, this a stokvel where the money comes from the individuals within a certain family. This money is usually spent on purchasing homes and vehicles.
- The investment stokvel: This kind of stokvel is used specifically to build interest. Members can contribute as much as they want and then when the investment is paid out, each member will get a percentage based on the money initially contributed.
- The party stokvel: In the cases of parties or entertainment events, these kinds of stokvels will charge an entrance fee or something of that nature and then at the end of the event, the members will share the profits.
- The borrowing stokvel: This is similar to that of a microlender whereby the stokvel gives out loans to members and submembers from its pool money. The interest rates for loans from the pool however can be extremely high.
As you can see, there are a number of stokvels that people can join and although these traditionally began in poor black communities in South Africa, they have now started to crop up in urban areas too.