With tens of billions of rands in circulation, stokvels have caught the eye of banks - and swindlers For Mthutu Lumatha, joining a community burial society about two decades ago was "non-negotiable".Lumatha, 50, a resident of Vosloorus, east of Johannesburg, speaks for Indaba Vibes, an umbrella body for 30 smaller burial societies that represent about 900 people under the chairmanship of Tsele Matsuma."You can get the money on the day your loved one dies, which is very important because you need to be able to secure a plot with the municipality as quickly as possible," said Lumatha.mini_story_image_hleft1"I hear stories of people having to delay funerals because they could not pay the money for the grave by the deadline, or running around like headless chickens trying to get donations or loans to bury their loved ones. Normally the undertaker tells us: 'Before you even pay me, you need to put money down for a burial plot.'"These burial societies are a central pillar of many stokvels - informal savings clubs that have rocketed in popularity in the past decade.Given that stokvels are largely unregulated, figures are sketchy. However, according to Old Mutual, there is about R45-billion plugged in to more than 100 000 stokvels, grocery and burial societies - a steep increase from the R12-billion the University of Cape Town estimated was invested in stokvels in 2003.With so much cash available, it is little wonder that slippery snake-oil salesmen have sprung up, eager to get their hands on some of it .In March this year, the first online stokvel called The Wealth Hub was launched to much hype on Facebook . Within three months, it claimed to have more than 20 000 members . It promised that members could, by putting in cash through a series of levels, progress up the chain to a stage where they could be paid R156 000.After this newspaper raised concerns that the business model appeared to resemble that of a pyramid scheme , it "restructured", and a new entity calling itself Africa Wealth Hub emerged. Members continue to complain about not being paid.Neither FirstRand nor Standard Bank would comment on allegations by The Wealth Hub members that banks were refusing to take deposits for the scheme's bank account.block_quotes_start "Stokvels are not just a savings vehicle, [they are] a community gathering. It's often a large social event with a large cookout where members gather once a week or once a month to socialise block_quotes_endHowever, many of the members appear to have moved to Kipi Investments, a stokvel operated by Chris Walker - the man behind the notorious Defencex scheme, which was closed by the Reserve Bank in 2013 for breaking the law.Defencex appears to have conned nearly 200 000 South Africans, most of them poor, by taking in R800-million on the promise of a 2% return a day.More than a decade ago, Miracle 2000, led by Sibusiso Radebe, also swindled R30-million from investors before Radebe was found guilty of fraud.Gerald Mwandiambira, acting CEO of the South African Savings Institute, says such fly-by-night operations proliferate when times get tough and people look for quick answers."When the economy slows, like it has done, we tend to see an increase of schemes calling themselves stokvels, but which are really nothing other than pyramid schemes," he said."They play on people's suffering and the warm, comforting feeling that comes from belonging to a community. People are falling for the scams because they are facing hardship and they are so desperate they are willing to take risks for unrealistic returns."True stokvels such as Lumatha's, however, are above board and have been operating for years.This is how it works all over South Africa: groups, from spaza shop traders to shebeen owners, collect money, which is then invested in different ways.The Boksburg Vosloorus Food & Beverage Association is one example. It was formed in 2009 by 20 hawkers to help them get to grips with the bylaws they had to work under, and also as a lobby group that could make representation to bodies such as the Gauteng Liquor Forum.The members began contributing money to be invested - and each week, one of the members gets paid out.Today, the Boksburg group is 105 strong and thriving. Each member puts in R500 every week, and one of them gets to take home R52 500. There is also a savings account to which members can contribute. It collects about R35 000 annually."We were having a very hard time," said Neo Khoaripe, a member of the association. "Most of the members were being raided by the police because they were not compliant and a Vosloorus policeman advised us to form an association so that we had some muscle."It has become more than just a savings and lobbying club. Trading companies in the Vosloorus area now use the association to market new products.The Old Mutual Savings and Investment Monitor shows that 45% of black households belong to at least one stokvel - flying in the face of the government's perpetual complaint that there is not a widespread savings culture in South Africa. There is - it is just that these savings are not part of the banking system.People in all income groups put money into stokvels. People who earn R40 000 or more a month typically contribute an average of about R1 279 per month; those who earn less than R6 000 typically contribute about R405 per month.People contribute about R158 a month to burial societies.The big banks are trying to get their heads around how to tap into this market, but the sense of community and the social aspect of these clubs are impossible to reproduce.full_story_image_hleft2sub_head_start Banks don't get stokvels, stokvels don't get banks sub_head_end"Stokvels are not just a savings vehicle, [they are] a community gathering. It's often a large social event with a large cookout where members gather once a week or once a month to socialise," said Mwandiambira.Lumatha and Khoaripe's stokvels both put thousands of rands aside for the function. Lumatha's burial society budgets for R30 000 to splash out on a monthly event.Old Mutual's Lynette Nicholson says the stagnant economy has led to a steady rise in the number of stokvel members, partly because of the rise of overindebted public servants."We found a lot of indebtedness in the public sector, and with it increased involvement in stokvels. We have no data to support this, but we believe that they are turning to stokvels to access funds, both to ensure some form of saving but also because many of these stokvels are lenders of last resort who will provide funds to people who might have bad debt records or who are seen as risky options."..