Stokvels are a traditional savings scheme in South Africa where a group of people, usually twelve or more, contribute fixed sums of money to a central fund on a weekly, fortnightly, or monthly basis. The accumulated money is then paid out to a different member each month. Stokvels can serve various purposes, such as socializing, investment, or providing financial support for specific events like funerals or the purchase of groceries. They are estimated to have around 800,000 groups and half of South Africa’s adult population as members, with approximately R50 billion being invested in stokvels annually. Stokvels are regulated by the National Stokvel Association of South Africa (NASASA), a self-regulatory organization approved by the Prudential Authority. The organization was established in 1988 and is a registered Financial Co-operative
The origin of the term “stockfels”
The term “stockfels” is not a commonly used term in South Africa. However, the term “stokvel” is a traditional savings scheme in South Africa where a group of people, usually twelve or more, contribute fixed sums of money to a central fund on a weekly, fortnightly, or monthly basis. The accumulated money is then paid out to a different member each month. The name “stokvel” originates from the concept of “stock fairs,” as the rotating cattle auctions of English settlers in the Eastern Cape during the early 19th century were known
How have Stokfels evolved over time.
Stokvels have evolved over time in South Africa, adapting to changing economic and social conditions. Initially, the term “stokvel” originated from the nineteenth-century “stock fairs,” where farmers and agricultural workers engaged in economic negotiations, livestock bargaining, and socialization. Over the years, stokvels have remained popular, especially among Black communities, serving as a social institution, a means of survival, and a way to access financial services when formal banking was not readily available. With the end of apartheid and the development of the credit industry, one might have predicted the decline of stokvels; however, they have continued to thrive, with approximately 11 million South Africans, or about 40% of the adult population, being members of a stokvel. Stokvels have also embraced modern digital ways, with the development of apps like Stokfella, which have transformed traditional stokvels into modern investment and wealth-building platforms. The resilience and persistence of stokvels can be attributed to their economic, social, and cooperative nature, as well as their ability to meet the needs of their members, provide a social security network, and offer opportunities for wealth-building and investment. Therefore, stokvels have not only survived but have also adapted to modern economic and technological changes, playing a significant role in the economic transformation of South Africa.
The impact of stokvels on the South African economy
Stokvels have a significant impact on the South African economy. According to a study published in the Problems and Perspectives in Management journal, developing the stokvel industry could be key to poverty alleviation, reduction of unemployment, and broadening equitable access to the ownership of the economy and capital accumulation, thus improving the livelihoods and raising the standard of living
Stokvels have become a common self-help initiative, and they have expanded from burial stokvels to savings, investment, and high-budget stokvels. Stokvels have both economic and social functions, and they promote income security and social capital, which manifests itself through friendships and social networks. Stokvels are also an important source of income security for persons of limited means, and they provide opportunities for members to save, invest, and ultimately accumulate assets. Stokvels have continued to thrive, even with the development of the credit industry, and they have embraced modern digital ways, with the development of apps like Stokfella, which have transformed traditional stokvels into modern investment and wealth-building platforms. Therefore, stokvels have played a significant role in the economic transformation of South Africa, contributing to job creation, policy development, and the growth of the informal economy.
It is estimated that about 11 million South Africans, or approximately 40% of the adult population, are members of stokvels, with over 800,000 stokvel groups in the country. The stokvel industry is valued at over R50 billion per annum, and the number of South Africans belonging to stokvels is expected to increase, with a membership of 11.4 million in 2022. Stokvels have become increasingly popular and have evolved into modern savings and investment platforms, handling over R44 billion per year and filling gaps in the financial sector that formal financial institutions are still trying to fill.
How do stokvels benefit the south african economy?
Stokvels have a significant impact on the South African economy. It is estimated that about 11 million South Africans, or approximately 40% of the adult population, are members of stokvels, with over 800,000 stokvel groups in the country. The stokvel industry is valued at over R50 billion per annum, and the number of South Africans belonging to stokvels is expected to increase, with a membership of 11.4 million in 2022. Stokvels have become increasingly popular and have evolved into modern savings and investment platforms, handling over R44 billion per year and filling gaps in the financial sector that formal financial institutions are still trying to fill. Stokvels have a significant impact on the South African economy, contributing to job creation, policy development, and the growth of the informal economy. They also play a vital role in poverty alleviation, reduction of unemployment, and broadening equitable access to the ownership of the economy and capital accumulation, thus improving the livelihoods and raising the standard of living. Stokvels are a trusted, approachable, and sympathetic financial scheme that can help in emergency situations when money is needed quickly, as they are flexible and accommodating, making them attractive to South Africans.
Risks associated with investing in stokvels in south africa
The risks associated with investing in stokvels in South Africa include:
- Lack of Formal Regulation: Stokvels are not formally regulated or protected by financial regulatory bodies, which can expose members to potential fraud or mismanagement of funds.
- Limited Financial Protection: Unlike formal financial institutions, stokvels do not offer the same level of financial protection, such as deposit insurance, which can put members’ savings at risk.
- Social Pressure and Trust: The social nature of stokvels can lead to pressure to contribute more than one can afford, and the reliance on trust among members can be a risk factor if there are issues with transparency or integrity.
- Limited Investment Diversification: Stokvels may have limited investment options, which can lead to a lack of diversification and potentially higher investment risk.
- Operational Risks: Stokvels may face operational risks such as poor record-keeping, inadequate governance, and potential disputes among members.
While stokvels offer various benefits, potential investors should carefully consider these risks and ensure they are well-informed and have a clear understanding of the stokvel’s operations and financial management.
