By Marli Naidoo

Through the centuries people have tried various ways of saving money for specific purposes. At one stage hoarding money under your matrass was a safe and acceptable saving plan.

One of the current and most popular savings systems is the stokvel, or gooi-gooi. In basic terms everybody puts their contributions in the same kitty so that each one can derive benefit from it. A more formal description is that a group of people with a common bond form a group saving scheme where they can then support each other to achieve specific goals. A continuous capital pool is formed by members’ monthly contributions. A stokvel is therefore started for a specific purpose. The members of the stokvel share a common goal, for instance December groceries, a wedding, or investment in property or the share market.

The stokvel is not of South African origin. The first stokvel recorded in South Africa was a funeral scheme in 1932. According to current estimates by the National Stokvel Association of South Africa Nasasa) there are 810 000 stokvels, with almost 40% of South Africa’s adult population belonging to a stokvel. Every year these members contribute an estimated R50 billion to their stokvels.

How do you start a stokvel? First of all you will have to convince friends and family to do it with you. Make sure that you approach trustworthy individuals. A stokvel can consist of five members, or even a 100. Convene a founding meeting where you agree on the goal, the number of members and how much each person will contribute monthly.

Then you can begin to think about a name for your stokvel and draw up a constitution. Make sure that the stokvel constitution provides for the following:

How regularly and in what way money has to be collected every month

When, where and how regularly you will meet

How the money is to be invested

Under what circumstances withdrawals may be made

The process if a new member decides to join the club

What happens if a member neglects to make contributions or decides to leave the stokvel

What happens if a member dies?

There are various types of stokvel

Rotational stokvel clubs are the most basic form of stokvel, where members pool a fixed amount of money to a communal pool weekly, fortnightly or monthly. Members will receive the lump sum on a rotational basis and they are free to use the money for any purpose. Such contributions are usually made in cash, but various groups have begun to deposit funds in members’ bank accounts. Therefore, if you are 10 members each of whom contributes R1 000 to the stokvel monthly, each member will receive R9 000 when the time comes. You will contribute for nine months to the others’ withdrawals, and in the tenth month the mony will come your way. You will then work out who will draw when.

Grocery stokvels: In this type of stokvel members contribute a fixed amount towards purchasing groceries at the end of the year. They will then either buy together in bulk or they will spend their savings separately.

In savings clubs members regularly contribute a fixed amount to a communal pool and each member receives a lump sum equal to their monthly contribution at the end of a cycle, usually annually.

Funeral associations provide an informal but reliable form of insurance to help members and their families to cover the cost of funerals.

Investment clubs are established with a view to accessing opportunities that grow with their pooled funds. This can be in the form of interest from a bank account, buying shares, or the establishment of or participation in a business. The period for which the money is held in the investment differs from group to group.

Social clubs pool funds to arrange social activities. This entertainment can take place at every meeting of the group, or the group can save regularly for less regular social activities.

A loan stokvel saves money in a pool and uses it to lend money to members and submembers. These stokvels usually charge high interest rates for the sustainability and profitability of the group’s operating model.

A stokvel can also change with time. While some groups keep to the same modus operandi, others develop to include new functions as the bond between members strengthens.

Several banks in South Africa have special stokvel accounts where you can deposit money, avoid costs, receive interest, and even sometimes get coupons for discount on groceries.

The biggest advantage of a stokvel is that it is a community initiative, where people save together, support each other and help each other to save money every month. Could saving be nicer than this at all?

Sources

Hippo: https://www.hippo.co.za/news/stokvels-a-key-way-in-which-south-africans-save/

1Life: https://www.1life.co.za/blog/how-to-start-a-stokvel

NASASA: https://nasasa.co.za/about-stokvels/

Fairbridges Wertheim Becker Attorneys: https://www.fwbattorneys.co.za/stokvels-a-mechanism-of-informal-social-security/