South Africa's savings rate remains low and according to the South African Savings Institute (SASI), with many South Africans unemployed and others overly indebted, the challenge to put aside something for a rainy day grows tougher by the day.
This harsh reality has seen a growing trend where the formal sector is starting to lose its clientele with individuals turning to the informal sector for social capital. The tendency in the townships and rural areas is for individuals to join stokvel groups, burial societies or social clubs. The group phenomenon promotes peer pressure which generally ensures that the default rate among members is minimal or non-existent.
The banks have capitalised on this by creating group savings schemes tailor-made for stokvels: Absa and Nedbank have products such as the Club Account, Standard Bank has the Society Scheme while the Stokvel Account belongs to FNB.
Sometimes stokvel members embrace a bank’s product merely for its simplicity and safe keeping. The now-defunct Perm Building Society's Club Account enjoyed support because of the following simple features:
Saving money can be a difficult task, but group schemes and stokvels encourage dedication to this important task.
And, after distribution of the savings among members at the end of the year, the account was to remain open so that the club could start saving again in the new year.
Today, as individual banks compete for the stokvel market, various benefits are offered as incentives. For example, at some stage the Absa's Club Account offered the following benefits:
While some groups may be attracted by these "benefits", others still express concern regarding the bank charges and low interest rates.
This explains why stokvel members are saving their money in a manner opposite to which the financial services industry wants them to. In other words, stokvels are not making banks rich yet! This explains why in October 2010, Fikile Kuhlase, Senior Manager - Socio-Economic Growth and Development at The Banking Association of South Africa wrote to the National Stokvels Association of South Africa (NASASA). She expressed her organisation’s wish to commission a consultancy of “What support stokvels require from banks”. Unfortunately, nothing came out of this exercise because resources need to be invested in this survey.
The importance of group schemes is also recognised by government. During his National Treasury Budget Speech 2014, former Finance Minister Pravin Gordhan said: "Legislation to allow for tax-exempt savings accounts would proceed this year to encourage household savings. Complementing this tax reform, a new top-up retail savings bond would be introduced by the National Treasury this year, allowing for regular deposits into a government retail bond. It would also be accessible to community savings groups, such as stokvels".
This was a very important announcement, especially given that, for many years, retail savings bonds were specially created for individuals and only natural persons could purchase them.
This is a victory for NASASA. In 2012, NASASA and some stokvel leaders held a series of meetings with the National Treasury, lobbying for the creation of tax-free, government-backed, retail bonds that would be made available in affordable amounts to stokvel groups, burial societies and other informal savings schemes. This will ensure that even the poor are able to invest.