A Stokvel is like a money-saving club where a bunch of folks agree to chip in a set amount of cash regularly, like every week, every two weeks, or every month. Stokvels are quite popular in South Africa. It’s called a rotating savings and credit association globally. Basically, it’s a group of people who come together for a fixed period to save money together. If you’re looking for an easy way to save and build financial security, a Stokvel might be a great option.
This money-saving concept isn’t limited to South Africa alone; people worldwide recognize it with various names. In East Africa, where Swahili is spoken, they call it Chama. In South America, people refer to it as Tandas, while in Pakistan, they name it Kameti. The West Indies uses Partnerhand, Mexico prefers Cundinas, and in Somalia, they opt for Ayuuto. In China, they use Hui, in the Middle East it’s Gam’eya, in South Korea, they have Kye, in Japan, it’s known as Tanomoshiko, and in Brazil, it goes by Pandeiros, just to name a few examples. These community savings groups represent a worldwide money-saving tradition that helps people achieve their financial goals.
Rotational Stokvels Clubs: are the most fundamental kind of stokvel, and they involve members contributing a predetermined sum of money to a communal fund on a weekly, fortnightly, or monthly basis. The lump sum would be distributed to the members on a rotating basis, and they would have complete discretion over how the money was spent once it was in their possession. Contributions of this kind are often made in the form of cash; however, a growing number of organisations are starting to make direct deposits of funds into the bank accounts of their members.
Grocery Stokvels: members often contribute a certain amount of money towards the purchase of groceries at the end of the year. The peak of the Stokvel Buying Season occurs between the beginning of November and the middle of December, and during this time, purchases are typically done at retail locations that cater to customers interested in making bulk purchases. Even though there are several stores that are designed specifically for Stokvel purchases, the majority of groups make their purchases via wholesale and cash-and-carry locations. Some organisations put these amounts away in a Stokvel Club Account, while others put them away directly with the shops, which record these contributions and then make the stock accessible for pickup during the purchase time.
Members of this type of Stokvel regularly contribute a predetermined sum of money to a communal pool. At the end of the cycle, which usually occurs annually, each member receives a lump sum equivalent to their monthly contributions. Savings Clubs represent one category of Stokvel. Typically, these funds are collected in cash and held in a Stokvel Club Account at a financial institution. The funds remain in this account until the end of the cycle, at which point they are withdrawn and distributed to members in cash. Many organizations prefer to operate this way, despite the security risk it poses, because most existing Stokvel Club accounts lack electronic money transfer capabilities.
Burial Societies: provide a non-traditional yet reliable form of insurance that helps members and their families manage the financial burden associated with funeral expenses. Moreover, burial societies furnish emotional and practical support to the family during the planning process, known as “izandla” or “helping hands.” Members of a standard Stokvel contribute a predetermined amount of money at specific intervals in exchange for predefined benefits. In most cases, Burial Societies offer plans that cover not only the primary group member but also their immediate and extended family. While the majority of groups self-underwrite, an increasing number of organizations are opting to collaborate with reputable insurance providers to minimize their risk.
Investment Clubs – Investment clubs are organisations that are formed with the purpose of gaining access to possibilities that will result in the growth of their combined wealth. This may take the form of interest from a bank account, the purchase of stocks, or the establishment of a business endeavour, in which the individual may also participate. The amount of time that the money is allowed to remain within the investment varies from person to person and group to group.
Social Clubs: are organisations where members combine their resources in order to plan and carry out various social activities. This form of entertainment may take place at each and every meeting of the organisation, or the group may choose to set aside money on a consistent basis for less frequent opportunities for social interaction.
Borrowing Stokvels are groups that save money into a pool and then utilise that pool to lend money to other members of the group as well as sub-members. In order to ensure the long-term viability and financial success of their business model, Borrowing Stokvels typically impose prohibitively high interest rates on their customers.
Stokvels with Multiple Roles: While some organizations persist in their traditional operations, others evolve over time, taking on additional roles as member connections strengthen. The Rotational Clubs, for example, will one day evolve into Savings Clubs. Both Grocery Clubs and Savings and Rotational Clubs have the potential to extend their services by offering loans and funeral services to their members. Social Clubs often transform into Burial Societies and Investment Clubs, and successful Burial Societies eventually invest their surplus funds. Investment Clubs, however, retain their status as social gathering places.
All kinds of Stokvels have something in common: they all have a social structure and a way to collect money. The money collected is used for similar purposes. The differences between them can be grouped into three categories: what they’re saving for, the things they do to make it happen and get the benefit, and the things they actually do during the process.