Banks to capitalise on the ‘hidden economy’ of stokvels’

Updated on 30 July 2014

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Banks to capitalise on the 'hidden economy' of stokvels'

The banking industry has long underrated the impact of the stokvel market and how the sector can be assisted in maximising its potential as viable investment vehicles.

This view was shared by many of the panelists and audience at a media round table discussion on the role of stokvels in South Africa on Wednesday.

Stokvels are invitation savings schemes, where members regularly contribute on an agreed amount from which they receive a once-off lump sum. The sum can cover the costs of burials, groceries, investments and holiday celebrations, or to save.

“The more the nation saves, the more it can invest and create generational wealth”

Context of stokvels

Mamapudi Nkgadima, Managing Director at a market research company, African Response, said stokvels are now evolving the banking needed to understand how to form partnerships with them.

“It is important to understand the context why people save the way they do,” she said. “Some stokvels are small others are huge, depending on the objective of the members or their LSM bracket.”

Nkgadima was explaining that their findings have revealed that stokvels were either a collective savings, or social in nature, or just for entertainment.

Stokvels should not remain static for the simple reason of consumption but they should move to helping its members and the broader economy,” she said.

Nkgadima said 24% of adult population belong to a stokvel, equating to over 8.5 million members whose collective savings come to an estimated R25 billion. However less than half of stokvels have stokvel accounts with banks, an impediment for growth of the sector, added Nkgadima.

The banking sector

Poovi Pillay, Head of Segment at Nedbank, concurred that up until now, the banking industry’s approach to stokvels has previously been top-down. He said banks have a duty to be partners with, and enablers of stokvels to grow the economy through mutually benefiting ways.

“But now we need to understand people at community level, their needs and how they want to save their money,” said Pillay. We acknowledge that we have a lot to learn in and we are looking for answers”.

Pillay said banks have the opportunity to empower members with important governance tools and measures, expert investment advice and education. He said an example was Nedbank’s initiative to provide access to finance is in the Eastern Cape where stokvels are encouraged to save for a certain period, after which the bank would offer them loans three times the amount saved for starting businesses.

“The more the nation saves, the more it can invest and create generational wealth,” he said.

“Formal businesses tend to see stokvels as a marketing tool rather than a product itself”


National Stokvel Associations of SA CEO, Andile Mazwai, says the regulation industry is there to protect stokvels rather than exploit them. He says stokvels are a social contract that enables access to funding for ordinary members of society who would not necessarily receive it as individuals.

“Even in the simplest of forms, stokvels are a form of investment.”

But Mazwai had a word or two for banks. He said there was a shadow between the banks and ordinary people, which in turn creates the “second economy” (i.e. stokvels) for people needing to save, and banks have been failing to capitalize on this.

“It is time for businesses to treat stokvels for what they are. Formal businesses tend to see stokvels as a marketing tool rather than a product itself,” he said.

“At least some minimum amount of formalisation in the industry is needed. If you leave a stokvel too informal, that puts a cap on their potential to progress,” he says.

Mazwai added that though they advocate for regulation, they would not go further than that and be adjudicators even though the industry is fraught with fraudsters.

“It’d be a mistake to be adjudicators because we trust our criminal justice system. Our duty, at least, is to support financial literacy.”

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