A guide to creating and managing a successful stokvel

In South Africa, stokvels have long been a popular way for people to pool resources and support one another financially.

These informal savings, or investment, groups allow members to contribute a set amount of money regularly, and, in return, receive a lump sum at a later stage or when certain needs arise.

Read more: How to apply for a Sassa old age grant

According to the information on the National Stokvel Association of South Africa (NASASA) website, while stokvels can provide significant financial benefits, they come with their own set of challenges.

NASASA said members must operate with transparency, respect, and clear rules to avoid disputes and ensure the group’s long-term success.

Here are the dos and don’ts when participating in a stokvel:

The dos of stokvels

• Establish clear rules and agreements. Before starting a stokvel, it is essential to have clear rules in place. These should outline the purpose of the stokvel, how funds will be managed, the contribution amounts, and how the money will be distributed among members. Putting everything in writing and having all members sign an agreement will avoid confusion down the line.
• Choose trusted members. The success of a stokvel relies heavily on mutual trust. Make sure that all members are financially responsible and dependable. The last thing you want is to deal with a member who is late with payments or mismanages the funds.
• Keep accurate records. Proper record-keeping is vital for transparency. Keep track of every contribution, withdrawal, and financial transaction. A simple spreadsheet, or an app, can go a long way in ensuring that the group’s finances are organized and transparent.
• Set a regular meeting schedule. Regular meetings keep the group on track and give members a chance to review finances, resolve any issues, and stay focused on their goals. Discussing the stokvel’s progress in a group setting fosters a sense of accountability and unity.
• Build an emergency fund. Stokvels can sometimes be used to cover emergencies or unexpected expenses. It is advisable to have a portion of the funds set aside for such events. This can protect the group in times of need and ensure that members are not left financially stranded.
• Monitor investments carefully. If your stokvel decides to invest its funds, it is essential to choose investment options that match the group’s risk tolerance and financial goals. Stay informed about the investment landscape and regularly review how your money is growing.
• Respect withdrawal terms. All members must understand and follow the agreed-upon withdrawal terms. Violating these terms can create tension and misunderstandings within the group.

Also read: Stokvel withdrawal safety tips

The don’ts of stokvels

• Don’t borrow without agreement. While borrowing from a stokvel might seem like a convenient option, doing so without the group’s consent can lead to serious problems. If loans are allowed, there should be clear terms and a repayment schedule in place.
• Don’t keep members in the dark. Communication is key. Members should be kept informed about the status of the stokvel’s funds and any issues that arise. Lack of transparency can lead to distrust and eventual disbandment of the group.
• Don’t exclude new members without discussion. Adding new members to a stokvel can disrupt the balance of the group. Always discuss potential new members with the entire group before allowing someone to join. This ensures everyone is on the same page.
• Don’t spend the money carelessly. Avoid using the stokvel’s funds for personal or unnecessary expenses. The money should be used strictly for the agreed-upon purpose or in emergencies, if allowed by the group’s rules.
• Don’t ignore legal requirements. Stokvels are informal, but they must still adhere to certain legal requirements. Be aware of tax regulations and other relevant laws to ensure the group operates within the law and avoids penalties.
• Don’t let emotions influence financial decisions. Financial decisions should be objective and based on the best interest of the group. Personal relationships, or emotions, should not influence how the stokvel operates or makes decisions.
• Don’t allow one member to dominate. Stokvels should operate democratically, with all members having an equal say. Allowing one person to dominate decision-making can cause friction and lead to dissatisfaction within the group.

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