Stokvels are ‘economic ubuntu’ in action

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Ubuntu is a uniquely African concept that, for many, defines what it means to be South African. It is a word that exemplifies a philosophy of caring for the welfare of every individual in a community – an acknow­ledgement that ‘I am, because we are’. Ubuntu is a spirit that motivates people to work together for the benefit of all. We live in very exciting, yet challenging, times. We are all striving for a better future, where teamwork and ubuntu are essential. It should come as no surprise, then, that the stokvel phenomenon has become such a large part of our culture: a stokvel is economic ubuntu in action.
A stokvel is defined as a member-owned association in which a group of people enter into an agreement to contribute a fixed amount of money for a common interest, on a weekly, fortnightly or monthly basis. There are many terms to describe stokvels in South Africa, such as kuholisana or mokgodisano (isiZulu and Sesotho terms that mean ‘paying each other’), gooi-goois (an Afrikaans term meaning ‘pooling money’), social clubs, makgotlas or burial societies, and investment clubs, to name just a few.
The foundation of stokvel groups is trust among members, who are generally found in social circles of existing members. These include – but are not limited to – family, friends, neighbours, people with shared interests, and work colleagues or business associates. These days, even strangers can form a stokvel by recruiting online and on social media (using vetting methods).
Five main types of stokvels dominate the traditional saving-scheme arena: general savings stokvels, burial society stokvels, grocery stokvels, birthday stokvels and investment stokvels.
While these are the most popular types, stokvels play a diverse traditional, social and economic role in communities and can represent the only access to credit for people who might not necessarily qualify at formal financial institutions (because of their credit records or history, for example). This is known as a credit or lending stokvel – a type that tends to be merged with other stokvel types, as members and non-members can borrow from a grocery or savings stokvel, for example, depending on the rules set up by that particular stokvel type.
Access to credit and mini-loans is another key benefit that participants derive from participating in stokvels. Stokvels charge interest to borrowers, which help to increase savings. When the contributions and the interest charges are pooled, the stokvel has a considerable amount of money, which can be lent at reasonable interest rates to both members and non-members of the stokvel. In this type of stokvel, it is important that the participants make sure that their constitution is endorsed by the police and that, when outside borrowers refuse to repay the money, they invite the police to intervene. This type of stokvel operates as a credit association, and must, therefore, be compliant with the National Credit Regulator. The goal is for people to be able to borrow money at affordable interest rates, enabling members to meet their basic needs and improve their quality of life.
The world of stokvels is continually growing and evolving in South Africa. It is up to South Africans today to tap into this collective market to promote and take advantage of this industry’s wealth of opportunities.
Palesa Lengolo’s book, Stokvel, is published by Penguin Random House.

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