Stokvels and savings clubs have long been a cornerstone of South Africa’s informal economy, playing a crucial role in fostering financial resilience among communities.
As these groups increasingly integrate into the formal savings and investment system, the question arises: how can financial institutions better serve this vibrant and vital segment?
Trends in Stokvels and Savings Groups
Imagine a sector holding over R50 billion in savings, largely untapped by traditional financial institutions. That’s the power of stokvels and savings groups in South Africa.
African Response estimates that more than R50 billion is saved or invested through these groups. This is a solid slice of South Africa’s collective investment management industry, which recorded nearly R3.5 trillion in assets under management by the end of 2023.
In July 2024, African Response conducted a survey using its MzansiVoice online panel
- 1,481 members of its MzansiVoice online panel
- 1,057 (71%) reported saving through a stokvel or savings group a
- in total they belong to 1992 stokvels / savings clubs collectively as they answered for up to 3 stokvels each.
New trend:
47% of the 626 panel members under the age of 35 said they are using the advisory services offered by banks and investment insurers to guide their groups’ financial decisions – a figure that can only grow if these institutions commit to better understanding their needs and pain points.
What’s more, this is a trend that has emerged in the past four years and high satisfaction with this service offers good news for the financial services market.
Savings methods:
Of the respondents saving or investing through a stokvel or savings group, 41% say they use a group bank account, a solid 59% say they do not.
Instead, they choose to:
- place the group’s funds in a member or treasurer’s account,
- keep funds with a retailer or undertaker,
- use an investment, trading, or cryptocurrency account,
- or even keep it as cash “under the mattress”.
The Social Power of Stokvels:
Although the four largest banks already offer accounts aimed at stokvels and savings groups, we suggest that they must continuously revise offerings in line with the evolving needs of this vibrant, vital, and growing savings and investment segment.
Solidarity that is found through these groups – and this gives these groups a social gravitas that no financial institution alone will ever gain.
Taking stokvels and savings groups and their members seriously by tailoring products and services to their needs will bring financial institutions’ business beyond the group. The social connections that tie these groups together are strong, and each group member is an individual with their aspirations.
Savings goals:
Even if a stokvel or savings group is, collectively, worth “just” R100 000, that figure represents a remarkable ability in each member to plan ahead and save for a variety of goals, including:
- Grocery / Household
- General Savings
- Funeral / Burial
- Education,
- Holidays and travel,
- Starting or growing a business,
- Upgrading or buying property.
For that, these groups deserve financial institutions’ enormous respect and a king’s welcome.
Unlocking the Potential
Onboarding stokvels and savings groups into the formal savings and investment market not only serves the interests of these communities but also offers financial institutions a pathway to broaden their customer base. Encouraging savings and investment among South Africans is crucial, and by integrating stokvels, we could more accurately report on the national savings rate, which stood at a low 0.5% in 2023.
Conclusion
The inclusion of stokvels and savings clubs in South Africa’s formal financial system presents a win-win opportunity.
By tailoring products and services to meet the unique needs of these groups, financial institutions can unlock a wealth of opportunities while empowering millions of South Africans to secure their financial futures.