Stokvels, a concept dating back to the 19th century is an opportunity for a group of people to pool and rotate funds amongst themselves to achieve a common goal. Stokvels takes different forms ranging from savings and investment clubs, burial societies and grocery clubs to name a few (Mazwi, 2015). For many households in Lesotho, grocery stokvels have been a way of life and continues to be so even today. Every year, households save for months with the goal of spending the money at the end of the year to buy groceries in bulk (hopefully at discounted prices) and share equally amongst the members. Stokvels have also evolved over the years where people with similar goals such as travel, shoes, cutlery and linen for example have come together to start saving money in order to achieve their goals.
According to Mazwi (2015), stokvels are a global phenomenal where many people across the world have been using these practices. Women in Bangladesh for example used stokvel practices to pool funds with the goal of building the successful Grameen bank. In South Africa, the National Association of Stokvels South Africa (NASSA) has over 810 000 registered stokvels, which are worth R49 billion of the South African Economy. This is a substantial amount of money!
Growing up in Mafeteng as a young child, December was always a very special month for me. It was special not only because my siblings and I received new clothes for Christmas, but also because every corner of the house was filled with a lot of groceries from my mother’s stokvel. Through my mother’s stokvel, some of our families’ financial commitments such as school fees and burial expenses were taken care of. Stokvels have for many years helped household reach their financial commitments by providing short -term loans at lower interest rates and helped build cohesion amongst communities. Having benefited from stokvels myself, I’ve joined a few clubs such as groceries, travel, savings and shoe clubs because I believe in the power that stokvels have (both financial and socially). But is it enough that we only pool funds for consumption, travel and shoes? Should we not use the power of stokvels to seek investment opportunities that can help to grow small businesses and shape our communities positively?
The challenge facing many of the stokvels in Lesotho in my opinion is lack of access to financial products, lack of formal registration and lack of scalability; which are inhibiting the potential impact these stokvels can have. Many stokvels use out dated methods to collect contributions from members and one member (usually the treasurer) is tasked with keeping the club’s money. Keeping unbanked cash also exposes the stokvel to risks such as theft, house break-ins and the interest income opportunity cost i.e. interest forfeited on the fund. Findings from a study by Molefe (2016) support my view, where her study found that members of Ikaheng, a co-operative society in the rural parts of Leribe did not have access to different financial services and below is a comment from the one of the members:
“Before we were trained we did not know any other financial products except the burial society that we have in the community where we contribute money when one of our members is bereaved. I think this is due to the distance of our village from the nearest town”.
The second challenge facing stokvels is that many operate informally, often without a constitution that governs how the stokvel is to operate. This often results in conflict that ends in the dissolution of the stokvel. Lastly, stokvels tend to stay small (which is very myopic), never realising the endless economic growth opportunities available because they only focus on achieving goals such as buying groceries. If stokvels account for R49bn of South Africa’s economy, should we not intentionally use them to tackle many of the socio-economic issues our country faces?
So what is the proposed way forward?
Stokvels should use financial products
The financial services industry in Lesotho (banks, insurance and asset management companies) has introduced innovative products to help stokvels better manage their money in a transparent, safe and secure way. The society accounts offered by financial services institutions allow stokvel members to make deposits in a convenient and hassle free manner. Members are now able to transfer their monthly contributions from their individual accounts to the stokvel account. This takes away the burden of carrying cash and reduces any risk associated with cash. The society accounts also enable the stokvel to earn interest on the positive balances and provide immediate access to the funds should there be a need. For more information about the society account suitable for your stokvel, please speak to your business banker or business development consultant about suitable options for your stokvel.
Stokvels should register formally
It is important for stokvels to have a constitution that clearly stipulates how the stokvel operates. Ideally, this constitution should be registered with the Law office or endorsed by a person of authority e.g. local chief or lawyer. The constitution will also form part of the documents the bank or insurance company will ask for when opening an account for the stokvel. Speak to your legal counsellor for advice on how to start a comprehensive constitution. It is also important for the stokvel to clearly define roles i.e. chairperson, treasurer and secretary and to vote these people in a fair and transparent manner. The stokvel must also appoint signatories to transact on the account and to act in best interests of the members. Signatories are a group of people authorised to initiate and approve transactions, each with different rights (segregation of duties is important).
Stokvels should think bigger
As earlier mentioned stokvels account for R49bn of the South African economy. Although there is no statistics readily available for Lesotho, stokvels also contribute significantly to our economy. I personally believe that stokvels have the power to impact Lesotho positively if organised in a structured way. I believe that we need to graduate from saving money only to consume it buying groceries, traveling or buying shoes at the end of the year. We should use the money collected from stokvels to acquire income generating assets such as property, starting business, investing in viable small business and using the money to create new opportunities for the youth.
How can we achieve this? A group of likeminded young professionals like myself have registered a society where we are using the contributions to look for investment opportunities in Lesotho that can help generate us income, while also helping viable small businesses scale up. There are many other creative opportunities available on how we can use stokvels to make impact. It is key for us a nation to think differently and use the pool of funds to really make a positive impact. How are you going to make impact?