Should a stokvel be part of your savings and investment strategy?

Stokvel are a genuine vehicle for saving or investing for short and long-term goals. Many South Africans of all ages and income groups choose to save this way in order to be disciplined while achieving a collective financial goal.

Sifiso Nkosi, Stokvels and Group Savings Head at FNB Cash Investments, says “The awareness of using stokvels as a savings vehicle has evolved significantly amongst over the years. From the historic groceries and funeral stokvels, we now see the rise of property stokvels, which have allowed members to pay their bonds in record time – typically in ten years or less – and in some instances others acquire rental properties to generate a steady income for members. Holiday stokvels have made travelling locally or internationally possible, while investor stokvels are looking to various asset classes such as shares, unit trusts, exchange traded funds (ETFs) and other vehicles to generate wealth for future generations.”

Stokvels and Group Savings Head at FNB Cash Investments, Sifiso Nkosi.

According to Nkosi, stokvels fulfil some of the needs that individuals have for:

– A savings vehicle built on trust that drives accountability from the broader group.

– A platform to save from as little as R50, with the ability to borrow when in need. This is especially true for members who are not formally employed and get overlooked by financial institutions.

– A way to work towards financial goals, using community-based value systems that ensure the collective benefits from scale and growth in unison.

The trend of modern stokvels has gained momentum. Nkosi explains that “Modern stokvels are differentiated from their older counterparts, by what and how they choose to make use of the member contributions. This can range from saving or investing in property, buying one or a fleet of taxis, investing in shares, building a capital contribution toward a business, or even using stokvel payouts to supplement your retirement savings.

Samukelo Zwane, Head of Product at FNB Wealth and Investments, says, “We believe that creating a sustainable savings and investment culture amongst individuals or collective groups is important to help them achieve their short or long-term financial goals. Therefore, we are passionate in creating savings and investment solutions that will help solve the needs of our customers. We encourage people to ensure that they don’t put all their money in one basket, but their savings and investment strategy should be diversified so that they can achieve their set financial goals in a smart way.”

Some stokvel groups have managed to purchase franchises using a co-operative model, that allows members to be contributors as well as recipients of dividends generated by the businesses, they have invested in. In a few cases, others have incorporated to form trust or companies (Pty Ltd). The sacred principles of trust and accountability to the group remain unchanged, along with a decision-making by consensus approach.

“The future of stokvels will continue to evolve and be modernized as time goes by. We believe that this ongoing change in how people contribute a part of their hard-earned income in a stokvel will entice ‘new age’ potential members to consider group savings or investments as part of achieving their goals or wealth creation journey for their next generation,” concludes Nkosi.