A stokvel is a traditional South African savings or investment society where members contribute money regularly, and the pooled funds are either distributed among members on a rotating basis or used for specific purposes, such as investments, community projects, or group purchases. Stokvels are a form of informal financial cooperation and are deeply rooted in South African culture, serving as a way for individuals to save, invest, and support one another financially.

Methods of Contribution

Stokvels operate on the principle of collective contribution, and the methods of contributing funds can vary depending on the type of stokvel and its rules. Common methods include:

1. Fixed Monthly Contributions:

• Members agree to contribute a fixed amount of money every month.
• The amount is predetermined and agreed upon by all members.
• This is the most common method and ensures consistency in the pool of funds.

2. Variable Contributions:

• Members contribute varying amounts based on their financial capacity at the time.
• This method is more flexible and accommodates members with irregular incomes.

3. Lump-Sum Contributions:

• Members contribute a large sum of money at once, often at the beginning of the stokvel cycle.
• This method is less common but may be used for specific purposes, such as starting a business or making a large purchase.

4. In-Kind Contributions:

• Instead of cash, members contribute goods or services that can be sold or used to generate income for the stokvel.
• For example, members might contribute groceries, livestock, or labor.

5. Rotating Contributions:

• In some stokvels, members take turns contributing larger amounts, often in line with when they will receive the payout.
• This method is common in rotational stokvels, where each member receives a payout in a predetermined order.

Use/Disbursement of Funds

The way funds are used or disbursed in a stokvel depends on its purpose and structure. Common methods include:

1. Rotational Payouts:

• Members receive the pooled funds on a rotating basis, often monthly or annually.
• The order of payouts is usually determined by agreement or lottery.
• This method is common in savings stokvels, where the primary goal is to provide members with access to a lump sum of money.

2. Lump-Sum Distribution:

• The funds are distributed equally among all members at the end of a specific period (e.g., annually).
• This method is often used in investment stokvels, where the goal is to grow the funds over time.

3. Specific Purpose Use:

Funds are used for a specific purpose agreed upon by the members, such as:

• Buying groceries in bulk (grocery stokvels).
• Purchasing property or assets (investment stokvels).
• Funding a community project or event (charity stokvels).

The funds are not distributed to members but are used collectively for the agreed purpose.

4. Emergency Fund:

• Some stokvels set aside a portion of the funds as an emergency reserve.
• Members can access this fund in times of financial need, such as for medical expenses or funerals.

5. Investment and Growth:

The pooled funds are invested in income-generating activities, such as:

• Starting a business.
• Purchasing shares or other financial instruments.
• Buying and selling goods for profit.

Profits are either reinvested or shared among members.

6. Social and Community Use:

Funds are used for social or community purposes, such as:

• Hosting events or parties.
• Supporting members in need (e.g., funeral costs, school fees).
• Donating to charitable causes.

Types of Stokvels and Their Contribution/Disbursement Methods

1. Savings Stokvel:

• Members contribute fixed amounts regularly.
• Funds are distributed on a rotational basis or as a lump sum at the end of the cycle.

2. Grocery Stokvel:

• Members contribute funds to purchase groceries in bulk.
• The groceries are distributed among members or sold at a profit.

3. Burial Stokvel:

• Members contribute funds to cover funeral expenses.
• Funds are disbursed to the family of a deceased member.

4. Investment Stokvel:

• Members pool funds to invest in businesses, property, or other income-generating ventures.
• Profits are shared among members or reinvested.

5. Rotational Stokvel:

• Members take turns receiving the pooled funds.
• Contributions are made regularly, and the order of payouts is predetermined.

6. Charity Stokvel:

• Funds are used for charitable purposes, such as helping the less fortunate or funding community projects.
• Members do not receive individual payouts.

Key Features of Stokvels

Trust and Accountability: Stokvels rely heavily on trust among members. A treasurer is often appointed to manage the funds and ensure transparency.

Flexibility: The rules and structure of a stokvel can be tailored to the needs of its members.

Social Bonding: Stokvels often serve as social networks, fostering a sense of community and mutual support.

Financial Inclusion: Stokvels provide access to financial resources for individuals who may not have access to formal banking services.

In summary, stokvels are a versatile and culturally significant financial tool in South Africa, offering various methods of contribution and disbursement to meet the diverse needs of their members.