’Tis the season for stokvel spending

Banks have recorded a rise in stokvel activity as more of the savings club schemes use formal savings products to invest money. 

Stokvels, whose members save money towards a certain goal — traditionally funeral funding or to buy groceries in bulk at the end of the year — are one of the oldest savings mechanisms in South Africa.

Over time, the focus of stokvels has broadened to include travel funding and make investments.

Standard Bank said it had seen growth of more than 15% over the past five years in deposits by stokvels. The stokvel industry had grown significantly and was now a R50bn enterprise. There was a dip in growth during Covid, but stokvels were resilient and continued to grow. 

The bank said in the past stokvel savings went mostly towards groceries, with the savings generally being withdrawn around November and December in time for Black Friday specials, and towards meeting funeral costs.

However, since the pandemic, “we’ve seen South Africans really using this platform to invest for the future, for school fees and even property stokvels”, the bank said.

“We used to see middle-aged women participating [but] in the past five years we’ve seen more younger customer groups, we’ve also seen an uptick of males playing a role here.”

Younger stokvel members under 35 mainly used the money for holidays, Standard Bank said.

Absa said there had been at least 15% year-on-year growth in stokvel accounts this year. “This indicates the increasing relevance of stokvels in promoting a savings culture, financial inclusion and community-driven economic activities,” said Tawanda Rumhuma, savings & investments executive at Absa.

He said stokvels were more than just savings groups. “They are a cherished tradition, a lifestyle of collective empowerment, that brings together friends, families and neighbours, fostering financial inclusion, disciplined saving habits.”

A study released in July by research firm African Response found that tailored stokvel bank accounts were less popular with stokvels than other options such as putting the money into an individual’s account, keeping the funds with a retailer or undertaker, buying cryptocurrency or even stashing the cash “under the mattress”. 

It said encouraging stokvels and savings groups to use the formal savings and investment market would help the stokvels themselves and give financial institutions a pathway to broaden their customer base. 

Although the four largest banks already offered 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”, the report said.

Absa has a range of stokvel products, including one for bulk groceries and a travel account for holiday-travel which the bank said offered “competitive” interest rates. 

FNB said it had recorded a rise of more than 15% in net stokvels deposits. It had introduced a digital stokvel account with no monthly fee in 2020 to help customers manage administration, contributions and withdrawals better. It said this had helped customers save more than R131m in withdrawal fees.

“We are seeing a trend of stokvel groups looking at various investments such as investing in shares, unit trusts, exchange traded funds, franchise businesses and others to generate wealth for the future generations,” said Cebile Magongo, growth specialist at FNB Retail Cash Investments.

At Standard Bank, stokvel members have the option to transfer their savings directly to Makro, which has benefited from stokvel spending for many years.

“While we are not a financial service provider, our Stokvel savings option offers a secure and fee-free alternative, helping members avoid the risks associated with carrying large sums of cash during shopping trips,” the bulk retailer said.

“We have observed a growing demand for key grocery items such as flour, toiletries and cleaning products.”

Stokvel members could divide their pooled money between themselves using voucher cards, Makro said.