Big banks target liquidity from informal savings clubs in South Africa


JOHANNESBURG, October 7 (Reuters) – Thandi Mkhabela’s money was slipping through his fingers.

Today, the 34-year-old mother of four is earning interest on her monthly savings, has paid off debts, and plans to expand her home in a township just outside Johannesburg, never having to deal with a bank.

The improvement in Mkhabela’s financial situation came after she formed a savings club in June 2020 with 16 other women. Each of them contributes between 100 Rand ($ 6.64) and 500 Rand per month, and the club, known as stokvel, offers three-month loans to members at the rate of 10% per month. At the end of the year, they split the pot.

“Every month we use money for… a lot of things that are not needed,” Mkhabela said, adding that without the support of the group she found it difficult not to spend all she had.

“It helped me because now I’m going to start building my house – I want a big one,” she continued.

Mkhabela’s is one of hundreds of thousands of stokvels that make up a largely informal market worth over $ 3 billion a year, according to estimates by the National Stokvel Association of South Africa (NASASA)

The major South African banks have wanted for years to introduce stokvels into the country’s traditional banking system.

They have stepped up their efforts as increasing competition, including from new FinTech companies, forces them to seek new ways to gain customers and exploit underserved parts of the market.

An entrenched preference for cash, mistrust of banks, and a lack of infrastructure in poorer communities have hampered past efforts to formalize stokvels.

Banks hope the changes spurred by COVID-19 – a forced shift to digital financial services – can help them overcome these traditional hurdles, and they have accelerated plans to take advantage of them.

The country’s four big banks currently capture only R12 billion of the R50 billion ($ 3.32 billion) stokvel market currently, Motlatsi Mkalala, head of consumer affairs and high net worth, told Reuters. at Standard Bank, presenting a huge growth opportunity.

Standard Bank, which already manages some stokvels through a more basic group savings account, is developing a new account with many user-friendly features for stokvels to earn more and aims to launch it in the last quarter of 2021.

Rival FirstRand’s retail division (FSRJ.J), FNB, launched a free account for stokvel customers earlier this year. Absa (ABGJ.J) is also looking to improve its stokvel product, its savings and investment manager Thami Cele told Reuters.

“We see it as an opportunity: we see them growing up, starting to interact with banks… and wanting to make long-term investments,” Cele said. “We are better equipped to respond to this.”


Stokvels, a word believed to have originated from 19th-century cattle auctions or cattle fairs, are an innovation of the country’s black population, who were excluded from the financial system under apartheid.

They are used to save for everything from funerals and groceries to vacations and cast iron pots. Young savers are also increasingly joining forces to invest in the stock market or buy real estate.

In the Mkhabela group, members who fail to repay their debts on time are given an additional month, but risk having their property repossessed. Members who do not save lose interest earned during this period.

But stokvels depend heavily on personal relationships and the trust, responsibility and peer pressure they cultivate.

Similar informal savings and loan associations are common around the world, from “village banks” in neighboring Malawi to “cundinas” in Mexico or “hui” in China.

Standard Bank’s new account for stokvels will offer different functionalities depending on the group’s savings goal. For grocery store stokvels, for example, the bank could provide easier ways to buy in bulk.

The bank also plans to offer discounts to retailers, funeral homes and other places where stokvels often approach with heaps of cash, in hopes of making a bulk purchase or asking for more. put money aside for the future.

Standard Bank is developing a network of partnerships with such organizations, which already covers 20,000 points of sale, to promote the new account and create a stokvel loyalty program.

He wants to double the balances he holds through his existing collective savings product, Mkalala said, without giving a figure for these.

Absa and FNB plan to offer stokvels investment solutions, said Cele and Raj Makanjee, managing director of retail banking and private banking at FNB. Absa hopes her efforts can help increase her share of savings and deposit market in South Africa to 25%, from around 21.5% within three to five years.

Meanwhile, Standard Bank and FNB are looking to replicate stokvel’s informal lending and could roll out similar programs in other markets in Africa. Mkalala said his bank is already planning such moves in places like Kenya.


Cashing in a stokvel offers multiple chances of making money. Targeting individual members with personal bank accounts, for example, would open up a world of sales opportunities.

“(It’s) the much bigger game from a cross-selling point of view… You can do a lot more with members,” Mkalala said.

The Stokvels also benefit, he said, including through better returns and increased security.

Stokvels have lost huge sums in isolated thefts, local media reported, while informality can increase vulnerability to fraudsters.

Some stokvels deposit money into personal bank accounts, but this can create problems accessing cash. If the account holder dies, for example, clubs must negotiate with the next of kin or the bank to access their funds, and they may fail – a scenario that some played out during the pandemic.

F Anton Krone, director of SaveAct, which helps set up savings clubs, switching to formal banking is not necessarily a better option and can lead to higher debts and other problems.

Andrew Lukhele, who chairs the NASASA stokvel association, said banks are asking for documents, a constitution – not necessary for all groups – and more rigidity in how the money can be used.

The benefits of Stokkels also go beyond pure finance. They provide a sense of community or moral support in difficult times through regular in-person meetings.

Bank executives said their products can cultivate the same qualities. Krone and Lukhele said they believe these elements might be lost in practice.

Some savers are also reluctant. Twitter users in Malawi criticized banks for trying to take advantage of village banks after ignoring their members for decades.

Mkhabela’s reasoning, however, is more practical:

“Bank accounts have too many fees, a lot of paperwork … We prefer to do it this way.”

($ 1 = Rand 15.0522)

Reporting by Emma Rumney Editing by Rachel Armstrong and Jane Merriman

Our Standards: Thomson Reuters Trust Principles.

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