Stokvels a mirror of the communities they come from

For many years, stokvels have served as a helpful savings tool for our people.

However, due to them existing informally in the past, the industry’s regulatory aspect consists of some grey areas.

We spoke to Xolani Matthews, CEO of the National Stokvel Body of SA (NSBSA), about the evolution of stokvels, regulation of the stokvel industry as well as using stokvels to develop the black township economy.

Where and how did your stokvel journey begin?

I grew up in KwaZulu-Natal and my mother was always a stokvel person. Every now and then, she would ask me to join her stokvels and I would.

So at a very young age, I was a member of stokvels, even if at some point I was an extension of her membership. It got really enshrined in my mind that stokvels are a very good saving tool for us as black people.

How did the NSBSA come about?

We started in 2010. As a group of professionals, we wanted to start a stokvel where we could club our vehicles for insurance and we got partnership to do that.

And of course, we wanted to know if the scheme could be done such that we are not found wanting as having started an illegal scheme. We then started to investigate whether or not stokvels are legal.

Take us through the aspect of regulation and legalities where stokvels are concerned.

If I’m not mistaken, the first regulation that was issued for stokvels was in 1996. This was the Banks Act exemption, which really defined what a stokvel is in the legal sense.

That act has evolved over the years. The latest, which was also issued by the Reserve Bank, contained some changes. While it still defined what a stokvel is, it also gave conditions of what stokvels need to comply with in order to be legal.

Since registration is not compulsory for all stokvels, who exactly needs to register?

Stokvels with an aggregate amount of R100,000 and above, but clearly, when a stokvel starts in January, they will not have R100,000 because generally they start from a zero base.

And when they get to R100,000, it will probably be towards the end of the year and they will be about to replenish the funds.

From our side, this was definitely a misjudgment on the part of the regulators because it’s not practical to implement. But the positive side is that there is a regulation.

In recent years, we have seen stokvels become more innovative and dynamic. How does this affect the industry at large?

I think it’s a very good and a positive effect. As a black community, we still don’t play a big enough role when it comes to participating in our economy.

The innovation has a huge impact because now you have black people who are saying they want to use stokvels to acquire assets and businesses. And that’s what you’re going to be seeing probably happening in the next couple of decades.

Is it correct for us to label these innovations as ‘new’?

It’s not necessarily a new trend. If you look at the taxi industry and how the taxi owners used to acquire taxis when there was no financial institution interested in funding their vehicles, they used stokvels.

That’s how they acquired those commercial vehicles needed for their businesses.

When speaking of development and progress within the stokvel industry, what are some of the factors that need to be considered?

Stokvels are a mirror of the communities where they come from. For example, if the community where stokvel members come from is having issues with data or internet access, obviously they will have an issue with operating on digital platforms.

But also, one of the reasons why stokvels would still want to do things manually is the element of trust. When people contribute their R100 a month, they also want to see the other person physically doing the same. Then they know that everyone has contributed because they were physically there.

What also makes stokvels different and successful is the social element. There is that peer pressure when you know that you have to physically attend a meeting and you don’t have money to contribute. So when you try to introduce technology, it reduces all of those things.

Digital stokvels are on the rise. Does the act make provision for those?

The act does not really go as far as to define and accommodate a group of stokvels that have members who are in different places, or members who don’t really know each other or meet regularly like members of a traditional stokvel typically would.

What are some of the concerns that come with digital stokvels?

There is generally nothing wrong with digital stokvels. I think the ones we would be more worried about are ‘WhatsApp stokvels’. Those tend to be outside of the definition of what the stokvels are.

If you look at most of them, their structure is in a pyramid type of format. They also tend to rely heavily on recruitment.

How can stokvels be used to benefit or develop the black/township economy?

We’re already seeing some of this taking place. There are more stokvels wanting to come up with long-term benefits. Examples are property stokvels.

Generally, when you invest into property, you are going in long term. The same goes for buying a business through a stokvel.

So definitely, that’s what you will be seeing happening more and more, which is starting to really change the DNA of stokvels.