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Your Guide to Starting a Stokvel in 2023
Mondo Admin / 24-01-2023 / Financial News
Annual stokvel payout season is as much a part of South African December culture as boxed biscuit assortments or family trips to a beach city. You might have watched in envy this past year-end as stokvel groups everywhere enjoyed the fruits of a year’s saving. If you’ve decided to join a stokvel in 2023, here’s your guide to the best practices.
What is a stokvel?
A stokvel is an informal money saving strategy in which a group of people agree to regularly contribute money to a shared fund. Typically, a set amount is contributed monthly, although the group may decide on any frequency that works for it. The stokvel group decides what the savings will be used for. Some groups pay out the accumulated funds at the end of the year, for example, for members to spend as they individually see fit. Other groups may choose to pay out funds on a rotational basis, such as birthday fund stokvels. Others may purchase and distribute groceries in bulk to its members in time for the festive season and new year. Some groups might choose to use them to purchase school uniforms and stationery for the following year, while others may be saving up for vacations or even major purchases such as a down-payment on a car or property. The scale and purpose of the stokvel are fully and completely at the group’s discretion.
An additional function of a stokvel is that it can act as an informal credit facility. Members may often be allowed to borrow money from the fund at lower interest rates than formal financial institutions. One other benefit of stokvels is that the group has stronger purchasing power and can leverage it for bulk buying discounts - especially for grocery-buying stokvels. Having a group of like-minded people to hold each other accountable for saving regularly makes it more likely that members will save and also reinforces social bonds as stokvels are built on trust.
While there are a number of positives, stokvels do come with certain risks. The informal nature of stokvels means that members have limited recourse if someone one in the group turns out to be unworthy of the group’s trust. The risk of fraud also exists. Unscrupulous people sometimes join stokvels with the intention to exploit weaknesses in the group’s systems to defraud it. This could result in financial loss for the entire group. A further risk is that members might borrow money from the shared fund and find themselves unable to pay it back. This is why, when joining a stokvel, it’s best to contribute only what you can afford.
Joining a stokvel
If you are considering joining a stokvel, a good place to begin is the National Stokvel Association of South Africa (NASASA) website to view their resources.
Starting a stokvel
The first step is to draw up a list of trustworthy candidates who you trust, and think might be keen to participate. Invite them to meet with you to discuss stokvel terms. Historically, stokvels have tended to be localised to one’s immediate community, such as people you know through religious meetings, neighbours, work colleagues friends and even trusted acquaintances. With modern technology, it is possible to run a stokvel to include even those who are geographically further away through the creative use of chat platforms and digital or mobile banking. Whatever the relationship, trust between members is the most important factor in a stokvel’s success.
Write the rules
It is essential that your stokvel have a written constitution. That way all members have clear, documented proof of the group’s agreement. There are draft constitutions you can search for online to help you get started.
The founding members of your new stokvel group will need to elect key officials to drive the stokvel’s activities - a chairperson, a secretary and a treasurer. This trio of leaders hold all members – including one another – accountable. The chairperson’s role is to prepare the meeting agendas, enforce the rules, seek out ways to constantly improve the group and sign off on withdrawals in together with the secretary and treasurer. The secretary’s role is to document the group’s activities through a register, take minutes and create other stokvel-related correspondence.
You should also include clauses about the requirements for membership, such as who may recruit, what due diligence measures are required, what needs to happen if there is to be a legitimate change in leadership, etc. There is usually a standard joining fee for new members. The constitution needs to outline its contribution structures with clearly stated amounts in terms of what the group agrees is fair. It is possible to set up payment options so that members pay what they can afford; in this instance, it is prudent to have a set minimum contribution.
It is worth outlining the group rules for how members may interact with each other as well as what the group’s boundaries are with regards to members using it for personal benefit besides the stated one. The constitution should also document what the agreed upon disciplinary measures are for members who show a lack of commitment and how many meetings a member is permitted to miss.
Protect the money
To minimise the risk of fraud, members need to think carefully about viable fail-safes regarding deposits and withdrawals of the group’s funds.
Several of the top banks in the country cater to stokvels by offering group bank accounts. These types of accounts often only allow withdrawals if all the signatories of the bank account sign off on the withdrawal. This lessens the risk of any one member being tempted to misappropriate or misuse the group’s savings. Stokvel bank accounts may also come bundled with other useful banking products or services for members such as funeral cover. It’s worth comparing the different benefits of the different banks to choose a banker that offers the best benefits for the group’s needs. It is advisable that stokvel members conduct their transactions digitally as much as possible - especially at payout time - to reduce the risk of falling prey to criminals.
Enjoy the rewards
In 2023, start saving with your stokvel group to work toward your common goals and watch your life change for the better! With good planning and discipline, you have the power to make your money work for you.
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