Johannesburg - Stokvels, the traditional community-based saving schemes, are going upmarket as different income segments embrace the concepts that many have held dear for generations.
This is according to Riaan Appelgrein, the senior manager for customer financial solutions at Standard Bank, who says more and more people adopting the principle of community savings are doing so for purposes other than what was the accepted norm some years ago.
Read: Banking on billions in stokvels
“Whether higher earners and professional people are taking to the concept of group saving because of the tightening economy that is digging into even their pockets or because they find it great to benefit from a lump sum payout so that they can meet major obligations has yet to be researched,” he says.
Stokvels are growing in popularity as a savings vehicle, despite official statistics indicating South Africa has a very low savings rate.
Andile Mazwai, the chief executive of the National Association of Stokvels of SA (Nassa), has said: “As a number of individuals we are about 11.5 million individuals, who participate in stokvels and in terms of rands and cents it is about R45 billion, which is collected in any given year, and that is typically the same amount of money which is saved in any given year.”
According to Nassa, stokvel members are both males at 42 percent and females at 57.4 percent, and almost 80 percent of stokvel members are between the ages of 25 and 49.
Groups, such as burial societies, may have 50 members, while investment and grocery groups tend to have between 10 and 20 members.
Appelgrein says: “What is obvious is that savings and investment clubs are now becoming more and more common. At Standard Bank, we see stokvels being formed to help members participate in various investment vehicles, including property and the JSE.”
He says contributions are determined by what people can afford. However, once committed, members are determined to contribute without fail.
“After all, having a number of like-minded individuals with a common objective ensures that you are part of a significant monthly contribution into an investment.”
Appelgrein says there is no doubt that many of the new stokvels being registered are, as tradition dictates, being used to apply the time-honoured principle of helping handle major family and financial needs. These include pocket-draining projects, such as paying school and university fees.
“Then, of course, other savvy stokvel members are using their rotational payments to make a dent in their personal debt. Even if you are paying off a car on a monthly basis, it is great every so often to pay several thousand rands into the account at once and reduce the balance and interest owed. Putting extra money into a bond has the same impact.
“The benefits are great, as not only is the balance on the loan reduced, but paying in advance means you can shave significant amounts off the total interest bill on a house and reduce the life of a bond by several years.”
Appelgrein says stokvels are a great way to avoid temptation and force yourself to save as you make a monthly monetary obligation to a group that must be fulfilled.
He says it is hard to just withdraw from a stokvel, when all members are your friends, and stokvels are easy to set up. Banks have special accounts for group schemes. Members nominate chairpersons and treasurers from within membership.
Appelgrein says members know that the people looking after their hard-earned cash can be trusted, and everybody is working towards a common objective, which is safeguarded by a stokvel’s constitution, making the achievement of purpose fun and a topic of friendly conversation.
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