South Africans seem to have a unique way of doing just about anything. From the way we associate sports with national identity, to our proudly South African sense of humour that allows us to laugh off woes like loadshedding, ours is a country of people who do things differently.
When it comes to handling money matters, the same applies. It’s not a country that’s renowned for its savings culture, but when South Africans do save, many make it a stokvel.
A stokvel is a savings scheme that is formed by a group of individuals who come together to pool their financial resources towards a common financial goal. Most stokvels operate on a rotational basis, where members of the scheme agree to make a fixed, regular contribution on a weekly, monthly or annual basis. At the end of the predefined period, each member takes a turn to receive the entire pot of collected funds.
While a long-standing tradition in South African communities, stokvels were only formalised during the late 1980s. Today, the National Stokvel Association of South Africa estimates that the local stokvel market is worth R50 billion[1], with more than 11 million members contributing to these kinds of schemes.
For Rapule Mahlangu, Head of Associations & Affinity Groups at Metropolitan, “stokvels are an ingrained part of South African history, not only because they provide communities with a sense of social cohesion, but because they provide people with an effective way of saving money. These kinds of informal schemes play a vital role in promoting important national objectives such as financial inclusion or bringing more people into the fold of economically active citizens.
The fascinating thing is that the traditional structure of stokvels has remained relatively unchanged over the years – as they say, ‘if it ain’t broke, don’t fix it.’ Thankfully however, technology has played a key role in making stokvels safer and more secure, broadening its appeal to younger members of society.”
Stokvels of the digital age
The history of stokvels goes way back into time, long before the advent of digital banking. Traditionally they have formed part of the cash-driven economy. This has involved relatively large sums of money changing hands, when members get their chance to cash in on the collective savings.
“What we’ve seen over the past few years, however, is a noticeable shift from cold, hard cash to electronic funds. Some innovative, digital entrepreneurs have jumped on this trend, creating apps to bridge the gap between old-school money management and new-school technology[2]. Not only has this introduced a more efficient way of pooling money and transferring funds, it’s also made the process much safer,” says Rapule.
Finance market players come to the party
Another development that’s taken shape over the last decade is the entrance of financial sector leaders into the stokvel space. As xx explains: “In the past, stokvel members had no means to protect themselves financially from risks such as the death of a stokvel member.
Financial institutions such as Metropolitan, offer a tailored product for members of a stokvel, burial society or religious group that share the same values and goals as a stokvel does, to maintain financial aid. In times of disruption, when a member of a stokvel passes away, their contribution can continue, alleviating stress and financial strain on the remaining members.”
A new generation of stokvel savers
A study conducted by market research specialist, Ipsos[3] also found a significant demographic shift in the kinds of people who participate in stokvels today, when compared to years gone by.
Typically, “we’ve associated stokvels with gogos and omakhulu who would use these kinds of schemes to pool money for groceries and household goods. But, over the last few years, we’ve seen younger generations of South Africans participate and use stokvels as a way to save up,” says Rapule.
Unlike their older counterparts, younger people have started a trend of using their stokvel funds for non-essential or discretionary spending on things like property, holidays, weddings and other investments.
As Rapule concludes: “it’s encouraging to see the coming together of generations under the banner of local tradition and in a way that promotes good financial habits. Even in tough economic times, banding together goes a long way.
And with the power of technology, we have an added layer of protection to enhance the accessibility of stokvels. As more financial services leaders see the value of these schemes, we can work together to bring this tradition to even more South Africans.”
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