May is known as Workers Month - a month where we focus on issues affecting workers in the country. Last year this time we talked about understanding your payslip and ways around how you can save directly from your salary through your employer. This year we are focusing on Stokvels as another way that most South Africans are saving their money. Stokvels are defined by the National Stokvel Association of South Africa (Nasasa) as a type of credit union in which a group of people enter into an agreement to contribute a fixed amount of money to a common pool weekly, fortnightly or monthly for a purpose defined by the group. According to Nasasa, several types of Stokvels exist:
Rotational Stokvel Clubs
These are the most basic form of Stokvels, where members contribute a fixed amount of money to a common pool weekly, fortnightly or monthly. Members receive the lump sum on a rotational basis, and they are free to use the money for any purpose.
Grocery Stokvels
In this category of Stokvel, members typically contribute a fixed amount of money toward the purchasing of groceries at the end of the year. The Stokvel buying season peaks between the beginning of November and the middle of December, and purchases are made at outlets geared towards bulk purchases.
Savings Clubs
In this form of Stokvel, members contribute a fixed amount of money to a common pool at regular intervals, and each member receives a lump sum equal to their monthly contribution at the end of the cycle, usually annually.
Burial Societies
Burial Societies provide an informal but reliable form of insurance to help members and their families with the costs of funerals. Burial societies also provide practical support for the family during the preparation.
Investment Clubs
Investment Clubs are established with the view of accessing opportunities that may grow their pooled funds. This may be in the form of interest from a bank account, buying stocks or establishing or taking part in a business venture.
Social Clubs
These types of groups pool funds to arrange social activities. This entertainment may either take place at every meeting of the group, or the group may save regularly towards less regular social activities.
Borrowing Stokvels
Such groups save money into a pool and use it to loan money to members and sub-members. Borrowing Stokvels usually charge high interest rates for the sustainability and profitability of the groups operational model.
The Stokvel industry is said to be worth R50bn making it the second largest after the taxi industry. With this value attached to it, the industry has attracted the attention of several Financial Institutions which have come up with a number of solutions to assist the Stokvels to grow their money rapidly instead of the usual 32 days savings account or worse, storing the cash under the mattress. There have also been cases of fraudulent scams targeted at Stokvels and robberies especially during the cash in seasons at the end of the year. There have also been inroads by organisations such as Nasasa and many others to teach members of Stokvels about financial literacy.
This shows the power of Stokvels as another savings vehicle that can work for people in our country especially where it is difficult to save money individually. However, more and more companies like Liberty are also coming up with solutions to help people to save the little that they have. From as little as R200 a month, you can save money through the Liberty Investment Plan. Click here for more information.
Sources
Stokvels can create jobs and actual wealth opportunities
National Stokvel Association of South Africa