South Africa’s financially savvy youth are joining stokvels to meet long-term investment goals, including acquiring property, with the trend expected to grow, according to FNB.
Stokvel savings groups were traditionally formed by community members to meet basic needs such as groceries, as well as for emergencies, including burials.
In most instances, cash payouts are made for the Christmas period, but young people are now clubbing together to acquire assets.
South Africans may have a reputation for a poor savings culture, but stokvels have R50bn in circulation and 11-million members.
More young people who grew up with their parents involved in stokvel clubs are now working for their long-term needs.
Mfundo Mabaso, head of growth at FNB home and structured lending, said while long-term savings were challenging, young people were seeing the benefit of deferring spending.
What I’ve seen happening in property is that young people want to buy properties to rent out to other students. They know that in their community people need accommodation, and they can pool money together
— Mfundo Mabaso, head of growth at FNB home and structured lending
“When you put money away in January, by the time you distribute the money in December, it would have had 12 months to grow at 6%. Imagine the impact of the compound interest in five years,” he said.
He said the FNB collective buying product launched in 2021 to enable 12 people to jointly acquire properties was a game changer for stokvels, pointing to the disbursement of more than R1bn in home loans to groups.
“What I’ve seen happening in property is that young people want to buy properties to rent out to other students. They know that in their community people need accommodation, and they can pool money together,” Mabaso said.
Himal Parbhoo, CEO of the FNB cash investments department, said property investment was not the only long-term option for stokvels. “We are seeing that for buying a vehicle, or when they want to start a business ... it is easier to start a stokvel and collect money,” Parbhoo said.
The two executives were speaking this week in Umlazi Mega Mall in Durban, at FNB’s launch of an enhanced digital stokvel offering aimed at making banking easier for the group’s 120,000 stokvel clubs.
The product, which is aimed at making it safer for stokvels to do banking remotely, has sweeteners, including free ATM deposits and zero fees.
Also speaking at the event, Lytania Johnson, CEO at FNB‘s personal segment, said stokvels were about financial inclusion.
FNB’s product was aimed at growing the R50bn stokvel savings pool as stokvels bridged the gap in wealth creation. “Stokvels are built on trust because of the relationships of the members.
Our branch staff can go into the community to open for them. It saves stokvels from having to go in taxis, paying for it, and spending long hours in a queue just to open an account
— Himal Parbhoo, CEO of the FNB cash investments department
“A stokvel is like any business; you sometimes go through cycles, and when things go wrong is that trust that was there when you started this stokvel enough to carry [it through]?” he said, adding that the product would ensure transparency.
Parbhoo said that in addition to safety, the product reduced time spent on opening the account. “It took 90 minutes to open a stokvel in a branch, now it takes 10 minutes on this new digital offering. It means you can do banking on your app and easily at a branch.
“Our branch staff can go into the community to open for them. It saves stokvels from having to go in taxis, paying for it, and spending long hours in a queue just to open an account,” he said.
“We want to go grow the 120,000 stokvel clubs by going to where the people are instead of waiting for them to come to us. We want to ensure this journey is about enabling stokvels to do more — not just saving but also funerals and collective buying.”
Busi Skenjana, founder of Stokvel Academy, said the key was to view stokvels as businesses able to grow. “I always tell stokvels there is nothing wrong with buying food for R100,000 in a year when they cash out, but can’t they buy for R90,000 instead and save the difference
“There are stokvels who boast they have been buying groceries for each other for more than 10 years. Now imagine if they can look back and say ’10 years ago, we started an investment’. Where would they be after 10 years?”
Skenjana said she hoped more stokvels will look at long-term investments, especially with the income earned by the younger generation.
Business Times
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