A new financial service for the stokvel sector will provide members with greater financial inclusion and protection against scams. Photo: AP

A new financial service for the stokvel sector will provide members with greater financial inclusion and protection against scams.

Sanlam, together with the National Stokvel Association of South Africa (Nasasa), announced the launch last week of the Nasasa Financial Services, a brokerage catering to the financial services needs of the stokvel market.

The association is a self-regulatory organisation with a database and 125000 stokvel groups and reaches about 2.5million people.

Jacqui Rickson, chief executive for group benefits at Sanlam Developing Markets and board member of Nasasa Financial Services, said the peace-of-mind that each member of a stokvel will be protected in their time of need is invaluable. “For South African stokvels, this is an opportunity to formalise their existence without having to forego their traditions,” said Rickson.

Mizi Mtshali, chief executive of Nasasa Financial Services, said stokvels were powerful financial services providers in their own right and have the potential to help grow South Africa’s economy once they enter the more formalised sector through appropriate product offerings

Mtshali said there were more than 800000 stokvels in the country, generating about R50 billion a year.

Mtshali said these stokvels are quite exposed, especially to liquidity issues that may render them unable to discharge benefits to their members, and scams that promise to resolve such issues.

He said this results from a lack of accessible, relevant products that meet the needs of a more informal savings sector and as a result, some burial stokvels may not pay enough to cover funeral expenses in their entirety.

Mtshali said by offering broad-based financial services to members, Nasasa Financial Services would empower stokvels through greater socio-economic inclusion and security.

Rickson said the venture supported their client-centric focus by allowing financial inclusion to be extended to South Africans who are on the edge of the formalised insurance structures.

“Through this, we can help families recover financially following difficult, unexpected events,” she said.

Nasasa Financial Services will initially offer group-based funeral benefits, tailored to each individual type of stokvel.

Mtshali added that the research conducted during the build-up of the product launch saw the solution being entirely built by participating stokvels.

“Among the majority of South Africans, funeral insurance fulfils an unmistakable need. While many are excluded from the formal financial system, those who do interface with the sector largely feel inadequately services. Burial societies are formed as providers of such services and have developed systems around the real needs of their members. There are roughly 200000 active burial societies in South Africa, with the majority being self-underwritten,” he said.

Mtshali said that because such groups rely on their collective savings to discharge their benefit to members, they often face liquidity problems that may lead to their disbandment. “This brings about the need for an underwriter who will take on the risk on behalf of the group, as well as offer a set of products and services built around the group’s needs. Nasasa is tasked by its members to solve this problem, and we have identified Sanlam as the most suitable partner in this regard,” said Mtshali.

He said the venture would also facilitate job creation, which was key to socio-economic inclusion.

“For South Africans, this opportunity provides meaningful employment, particularly in the township economy. Not only is this a step towards financial inclusion, but a giant leap towards societal transformation,” said Mtshali.

Noluyolo Betela, client relationship manager at Allan Gray, said that being part of a savings club such as a stokvel was a great way for consumers to reach their financial goals.

“Traditionally, most savings clubs keep their members’ contributions in cash or deposit them into a bank account. The downside is that traditional bank accounts generally don’t earn enough interest to beat inflation and the value of your money decreases over time. Many stokvels are not aware that there are other options available in the form of investment products, like unit trusts which grow your money and get returns that beat inflation in the long run,” said Betela.

PERSONAL FINANCE