Stokvels have been around in South Africa and Africa for many years. They are a good way for people to help motivate each other to save, and many stokvel or savings clubs are much like social clubs where members also help each other in ways other than with money.
Stokvels are invitation only clubs of twelve or more people serving as rotating credit unions or saving scheme in South Africa where members contribute fixed sums of money to a central fund on a weekly, fortnightly or monthly basis. The name “stokvel” originated from the term “stock fairs”, as the rotating cattle auctions of English settlers in the Eastern Cape during the early 19th century were known.
Regular stokvel meetings have become a social highlight in many communities. Stokvels generally have a constitution which dictates the size of the contributions, when the accumulated money is to be paid out and the roles and responsibilities of the members and each member contributes a certain amount each month. This can be anything from R50 to R1,000, depending on everyone’s income.
Each month, it is a different member’s turn to receive the money. So, if you belong to a stokvel with twelve members who each contribute R500 a month, then once a year you will receive a R6,000 payout.
Each month a different member receives the money in the fund, which was collected during that period. Defaults on contribution are quite rare as other members will know if you haven’t paid your contribution, and also because the regular meetings are a reminder of what you will gain when it is your turn.
Depending on the type of stokvels, the members can use the collected fund for their own use, for payment or investment purposes. It is estimated that one in every two black adult South Africans is a member of at least one of 89 000 stokvels. Black adult South Africans invest approximately R12 billion in stokvels a year.
You are motivated to save because the other members will know if you haven’t paid your contribution, and also because the regular meetings are a reminder of what you will gain when it is your turn. Know your rights when entering into a stokvel.
There are variations on the idea. Some stokvels save for Christmas; all the money each month goes into a savings account and at the end of the year everyone gets their share. If the members choose the right savings account they each benefit from the interest gained as well.
Other stokvels have many more members, and meet more often (twice a month or even weekly). Some stokvels operate more like Savings and Credit Cooperatives, where members ‘deposit’ money for saving and are able to take out loans at good interest.
The most important ingredient is trust: you have to know that each member will pay their contribution, especially that they will continue to do so after they’ve had their payout.
It’s may be a good idea to have a stokvel bank account, or to have everyone deposit their share directly into the account of the person who’s benefiting that month. It is not safe to bring large amounts of cash to meetings.
Some stockvels prefers to safe money for groceries at the end of the year. Groceries mainly assists prevents households from buying a large groceries at the end of the year. Meetings are conducted the same as the money scheme savings. Members decide on what type of groceries they will buy.
Traditionally, you have to be invited to join a stokvel, you can’t necessarily apply for membership. However, you and a group of friends can start your own stokvel.