However, these hugely valuable resources can easily become vulnerable, and their correct management is vital to their protection.

Rapid growth amongst South Africans

Stokvels, which date as far back as the 1800’s, are by no means a new concept in the arena of financial saving techniques. However, this seemingly unusual yet highly effective practice has recently seen a rapidly growing interest among South Africans, with its popularity largely accredited to mass disillusionment with the current state of our banking systems.

African Response released statistics in 2014 which indicate there is up to R25 billion saved within an estimated 421 000 stokvels across the country. However, these hugely valuable resources can easily become vulnerable, and their correct management is vital to their protection.

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 However, these hugely valuable resources can easily become vulnerable, and their correct management is vital to their protection.

Consumer confidence in banks is decreasing  

According to Wikus Olivier, debt counsellor at DebtSafe, the ongoing increase in people exploring new avenues of saving, such as stokvel membership, can be accredited in part to the decreasing consumer confidence in large banking organisations following continued consumer debt debacles.

“Factors such as mismanagement of lending processes and the lack of provisions in place to protect consumers from financial losses have seen more and more individuals exploring alternative methods of saving their money, where they feel more in control,” says Olivier.

What is a stokvel?

As a traditional, non-commercial form of collective saving schemes, stokvels comprise twelve or more members who pool regular monetary contributions, in exchange for each taking a turn of receiving a once-off payment. Lump sums of cash collected from different types of stokvels can be used to fund anything from shopping to burials, depending on the needs of the member.

Financial empowerment vs financial education

However, although many South Africans are finding financial empowerment through stokvel membership, Olivier warns that a lack of financial education is proving to be an issue in the optimised management of the sometimes huge sums of money involved.

Olivier warns that a lack of financial education is proving to be an issue in the optimised management of the sometimes huge sums of money involved.

“We are seeing stokvels in place that amount to millions, but those in charge have very little knowledge of how to properly manage, protect and grow this important asset to the best interest of all members,” he says.

Cash is used rather than EFTs 

“Another issue with a limited knowledge of financial education is that very often, especially during holidays and the festive season, large amounts of cash are dealt with rather than using safer methods of transferring money, such as electronic fund transfers (EFTs),” says Olivier.

He explains that considering the number of people involved in stokvel arrangements, coupled with the fact that the allocating of lump sums of cash is often carried out in an informal, social setting, means many stokvel members become the targets of crime. “It is crucial for stokvel members to observe discretion regarding the amounts of cash available and details around financial arrangements,” he says.

Potential for stokvels in SA continues to increase  

With that in mind, Olivier goes on to say that the potential for stokvels in South Africa is massive, and if the correct procedures are followed, successfully saving through a stokvel can be an ideal finance management solution for many South Africans.

Stokvels are also unique for their capacity to motivate people to save through joined community involvement. “There is a kind of ‘peer pressure’ that comes along with taking part in a stokvel, as other paying group members will expect you to do the same,” says Olivier.

“Stokvels are beneficial in a number of ways – they have massive potential to earn better returns than commercial saving methods, and they encourage a savings culture in communities. It is no wonder then that the system is growing in attractiveness to consumers who feel they are taken advantage of by confusing bank processes and very high fees, which have left many consumers unnecessarily over indebted,” he concludes.