Lukhele provides guidance on the ABCs of stokvels

Andrew Lukhele, founder of the National Stokvels Association of SA (Nasasa) and author of Stokvels in South Africa, gives tips on the ABCs of stokvels.

How to form a stokvel

Warning: Please note that while some people may like the idea of forming a stokvel, others do not like being tied down to weekly, fortnightly or monthly meetings. Others do not like contributing money, which is a basic feature of a stokvel.

It’s best to be a member of a stokvel with members that you know well as reliable and trustworthy. It is therefore not advisable to join Whatsapp groups of members you have never met masquerading as stokvels.  

Drawing up rules 

The first thing to understand about a stokvel is that you can make up any rules that you want. You can even draw up your own stokvel constitution if you prefer. But, we found it is best to keep the rules simple and as few as possible. 

How many members?

Most entertainment stokvels limit their membership weekly cycles to 12 members or 52 members for burial societies. But remember, you can make any rules that suit you. You do not have to follow calendar cycles and you can meet at irregular intervals, if that is what suits you best.

How much to pay?

The heart of the stokvel is the regular contributions. It is the glue that binds the people together. It is the source of their commitment and essential to the success of the stokvel. This means that you must have the agreement and support of everyone about how much they pay every month and what is done with the money.

How to avoid pyramid schemes in stokvels 

Pyramids operate like this: A person invests X amount of money, and is promised at least a 300% yield on condition that he/she recruits at least three others to invest. When the three have invested, their money goes on to pay the first person, and the process goes on.

The danger lies on the fact that when the scheme runs out of new recruits, those who have not been paid lose everything. This is usually the moment the directors or management of the operation run away with the money.

A stokvel on the other hand is usually a small group of people who know one another and who contributed equal amounts of money on a regular basis to a pool. Each month, fortnight or week, the members get together to give money to one beneficiary, on a rotation basis, in the presence of others.

Handling money 

Stokvels are an important part of the South African savings culture. They educate people in the discipline of using money for mutual benefit because they require commitment. There is no such enforced discipline when personal savings are simply placed in a bank.

Advantages of stokvels

• Stokvels are trustworthy, approachable and sympathetic to the needs and difficulties of members; and
• Stokvels help in emergency situations when money is needed quickly because they are flexible and accommodating.

How to avoid stokvel robberies

• Arrange for the payout to be electronically transferred into each club member’s personal account;
• Stop making cash deposits on high-risk days like the Monday after month end;
• Ensure persons depositing or withdrawing cash are accompanied by other club members; and
• Arrange for members to deposit cash directly into the club’s account instead of collecting cash contributions.