Tapping into the power of stokvels as agents of social change

In the rapidly evolving African finance landscape, stokvels remain a powerful yet often overlooked force capable of driving financial inclusion and economic empowerment across the continent.

For example, a 2024 Ipsos market study reveals that SA's stokvel sector alone is worth R50bn, comprising more than 800,000 groups and 11-million members. 

Most of these savings societies still operate informally. However, there’s the potential for financial organisations to empower these traditional structures to evolve by bridging the gap between informal savings practices and formal financial systems to unlock new avenues for wealth creation and economic development. 

This approach aligns closely with the broader trends highlighted in the 2024 Sanlam ESG Barometer, researched by Krutham and presented in collaboration with Business Day.

Now in its second edition, this annual report examines evolving environmental, social and governance (ESG) dynamics and how listed companies in SA and Kenya are enhancing environmental and social outcomes through their operations.

In doing so, the Sanlam ESG Barometer underscores the social impact Africa can achieve by driving sustainable business practices. This ties in with the vision of the Sanlam Leruo Stokvel Programme, a Sanlam Foundation initiative implemented with Zevoli Growth Partners, which is committed to reimagining stokvels in the digital age.

From subsistence to wealth creation

The financial stokvel tradition has long existed in the heart of African communities. These informal savings groups have been a cornerstone of community finance, helping millions save for everything from household goods to burial expenses. 

However, transforming this traditional stokvel model from a subsistence tool into wealth creation and community empowerment engine requires a multifaceted approach: 

1. Formalisation and governance: Stokvels must establish clear constitutions and governance structures to protect members' interests and position themselves to engage more effectively with formal financial institutions.
   
   
2. Financial education: By demystifying complex concepts and introducing members to various savings and investment instruments and strategies, the financial sector can empower stokvels to make more informed decisions about their collective wealth.
   
   
3. Digital integration: Empowering stokvels to embrace digital tools for record-keeping, payments and investments can enhance transparency and open new growth opportunities while maintaining the interpersonal connections that make these groups so effective.
   
   
4. Regulatory alignment: Guiding stokvels through the regulatory landscape ensures they can operate within legal frameworks, accessing formal financial services without losing their community-driven essence.

Creating a social impact beyond savings and investments

What's particularly exciting about this evolution is the potential for stokvels to become agents of social change. Formalising and growing these groups can create a social impact beyond savings and investments to include broader community development initiatives.

Take the Divine Brotherhood Stokvel, one of the Sanlam Leruo Programme’s inaugural members, for example. 

Since enrolling in the programme, it has:

• Updated its constitution: Incorporating recommendations from the programme, the group’s governance structure now includes an executive board (formerly the admin committee) and an ethics committee, ensuring clear roles and responsibilities.
  
  
• Refined its investment strategy: The group's diversified its portfolio across equities, ETFs and cash. It’s also exploring new options including government bonds, demonstrating a more sophisticated approach to wealth creation.
  
  
• Become open to a broader range of financial opportunities: Members are now eager to engage further with Sanlam to explore more investment options.
  
  
• Positioned itself for future growth and legitimacy: It's maintained its registration with the National Stokvel Association of SA and plans to register with the National Credit Regulator.

The Divine Brotherhood Stokvel is now no longer just focusing on its own financial growth; it wants to become a credit provider to small businesses, showcasing how empowered community groups can contribute to broader economic development.

In addition, it uses school outreach programmes to address issues such as gender-based violence and promoting healthy masculinity.

A vision of women-led transformation

While the Divine Brotherhood exemplifies how traditional male-orientated stokvels can evolve, the Women Navigating the Future Network (WNFN) showcases the transformative power of women-led financial collectives.

This group's journey through the Sanlam Leruo Programme further demonstrates how financial empowerment catalyses broader social change.

Founded in 2016, this group’s evolution involved:

• Membership growth: The stokvel now boasts over 1,700 members on its database. 
  
  
• Social media presence: The group has an extensive online presence with thousands of followers across platforms, amplifying its message and reach.
  
  
• Project expansion: It’s launched multiple cohorts of its stokvel programme, including a children's stokvel fostering financial literacy from a young age.
  
  
• Community projects: The stokvel introduced the “One Family One Garden” agricultural community project to drive food security and sustainable agriculture.

These examples illustrate how financial sector interventions drive growth and foster positive social change.

Replicating these efforts across the continent could see millions of community-based savings and investment groups integrated into the formal financial system, leveraging their collective power to invest in local businesses, fund education and drive sustainable development.

It's a vision where the 'S' in ESG is not just a corporate consideration, but a lived reality for millions.

The role of corporate leadership

Realising this vision requires a concerted effort from financial institutions, regulators, technology providers and stokvels.

The financial sector can drive this transformation as more than just a business opportunity, but as a crucial step towards building a more equitable and prosperous Africa.

The Sanlam Foundation has taken steps in this direction through initiatives like the Sanlam Leruo Stokvel Programme, which aims to empower stokvels with the tools and knowledge they need to thrive in the modern economy.

By harnessing the power of stokvels, Africa can create a ripple effect of financial empowerment that stretches across the continent, turning financial inclusion into a reality. 

Click here to download the 2024 Sanlam ESG Barometer.

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• About the author: Nozizwe Vundla is the head of the Sanlam Foundation.

This article was sponsored by Sanlam.