Sometimes it’s easier to start exercising with a gym buddy and stokvels are similar. They allow you to save money in a group. If you find it difficult to put money away each month, stokvels may be the perfect way to get you started. What is a stokvel and how do they work?
Stokvels have been around for a long time now and they’re uniquely South African. The term “stokvel” goes back to the 19th century when English settlers described their auctions as “stock fairs”. During these fairs, farmers and labourers would sometimes pitch in together to purchase livestock.
In 1932 the very first stokvel was recorded, since then we’ve come a long way.
It has been recorded that R44 billion is saved annually in stokvels across South Africa. According to Thobela Mfeti, more than 11 million South Africans are members of a stokvel.
How does a stokvel work
A stokvel is a savings pool where a group of individuals contribute an agreed-upon monthly amount. The group have full control of how they would like to use that money. Two common methods are to pay out monthly or annually. The group can make monthly pay-outs, or they could keep investing their savings and get a sump sum at the end of the year.
The funds in the stokvel offer each member in the group an equal and fair benefit. So if your group decides to include $10 each month per member, and the group has 5 people. That $50 is up for grabs equally to everyone.
The main purpose of a stokvel is to have a financial support system.
Being a member of a stokvel is voluntary, and usually, members are introduced to the stokvel on a personal recommendation. Which makes it easier for these stokvels to have an informal agreement.
It’s not uncommon to find stokvel groups with their contracts in place. This helps form structure and security for all members of the stokvel.
Different types of stokvel
In South Africa there are different of stokvel options you choose from, but the main investment vehicles include savings stokvel, property stokvel, funeral cover stokvel and investment stokvel.
Savings stokvel
The savings stokvel is widely used among South Africans. The primary purpose of a savings stokvel is to save as much money as possible as a group. The members decide on a cycle when the funds should be released.
Each stokvel uses its money differently. However, saving stokvels are commonly used to purchase groceries in bulk or to help fund household expenses.
Property stokvel
A property stokvel makes property investment more accessible to those who would like to get in the game but can’t afford to purchase a property.
Property investors get together and pool in their finances to invest in a particular property or purchase land for commercial, industrial or residential development.
Funeral cover stokvel
According to Sally MatukuI and Edwell Kaseke, burial stokvels are known to provide material and non-material support to families in the event of a death.
Funeral cover stokvels became popular when workers migrated to the gold mines to secure a better future.
During this time families could not afford the costs of funerals. In particular, families could not afford to transport the body to the rural areas where cultural traditions and customs took place.
This led to mineworkers forming burial stokvels among themselves.
Investment stokvel
Stokvel investments accumulate their gains from stokvel investment options.
Members of an investment stokvel contribute to the stokvel on a monthly basis and allow their capital to accumulate in business ventures.
The future of stokvels
Stokvel groups that have been around for more than 5 years are more likely to get adventurous with their investments. Groups that have been around for longer have a stronger bond among members, which allows them to take more risk and explore new investment opportunities.
According to Business Insider SA, stokvel groups that have been around for longer tend to form multi-purpose stokvels.
However the future of stokvels is in a global online community of members each contributing with a goal of achieving the financial well being of all members.
The American Dollar Club is the first platform that enables a global community of members to join a stokvel and earn up to $10,000 after 8 weeks of membership.
One simply has to join the club and recruit 10 people to join the club. Click here to join
American Dollar Club 