Are stokvels an effective instrument for income generation and wealth creation?
To provide policy solutions that will enable the country to take advantage of the opportunities that come with the key socioeconomic challenges that face the economy, ESEPARC plays a critical role in conducting and providing quality economic and public policy research to inform public and economic policy formulation, implementation, and decision making.
The process of conducting research includes consultative sessions, both internally and externally, to assist in gathering information, interrogating issues of interest, and using data to evaluate and monitor how far the country has come. These sessions also come in the form of weekly interactive in-house seminars hosted by the Centre every Friday.
Last Friday (January 25), Graduate Researcher Ntando Nkambule delivered a presentation on ‘Stokvels: An Instrument for Income Generation and Wealth Creation?’ which is in relation to a study he is currently working on. The objectives of Ntando’s study are to: find out if the primary purpose of forming stokvels is still followed; estimate the economic value of stokvels; and start a policy conversation on formalising informal savings and credit groups.
Ntando mentioned that while there are two types of stokvels; rotating credit and savings associations (ROCSAs) or accumulating credit and savings associations (ACSAs), both types are self-help community-based informal institutions that were created for purposes of addressing poverty in their respective communities.
A robust debate centred on whether these stokvels still serve the purposes for which they were created for, that is, to address the economic and social needs of their members. During the presentation, it came out that members join stokvels for various economic purposes such as acquiring working capital; purchasing assets, livestock, and food parcels; to fund education; venture into micro enterprises; and other financial emergencies, death or illnesses through quickly accessible cash.
On the social aspect, stokvels were described by Ntando as organisations that empower members while giving them a sense of belonging to the companionship, offering support in events such as funerals, strengthening solidarity among members, and giving members some prestige such as respect and idea recognition. Some of the issues that were identified for further interrogation include; what it means for the future of stokvels regarding formal financial institutions’ attempts to capitalise on the mobility of funds generated by these informal institutions within the economy, and how stokvels (as organised groups) can be a vehicle to achieve financial inclusion for the many unbanked people in the informal sector. Concerns were raised on whether or not formalising such institutions deviates from the core purpose of stokvels, which is based mainly on trust among the members. Another point of interrogation was if, and how, stokvels can be used as vehicles of development assistance in communities.