Group Schemes vs Banks

FEATURE

STOKVELS

GROUP SCHEMES VS BANKS

SAVING MONEY CAN BE A DIFFICULT TASK, BUT GROUP SCHEMES AND STOKVELS ENCOURAGE DEDICATION TO THIS IMPORTANT TASKmerely for its simplicity and safe keeping. Banking money can be better By Andrew Lukhele The tendency in the townships and rural than keeping money under the mattress. South Africa’s savings rate remains low and it is even lower at household level. According to the South African Savings Institute (SASI), areas is for individuals who lack the discipline to save alone to join stokvel groups, burial societies or social clubs. The group phenomenon promotes peer In fact, the now-defunct Perm Building Society’s Club Account enjoyed support because of the following simple features: as many South Africans remain outside the job market, and others are overly indebted, the challenge to put aside something for a rainy day grows even bigger for ordinary citizens. Inevitably the formal sector is likely to lose its pressure which generally ensures that the default rate among members is minimal or non-existent. The banks have capitalised on the trust factor of these groups by forming The account was to be book-based; in other words; no plastic cards. A savings book can be taken to meetings and all the members shown how much money was in the account; clientele, as individuals turn to the informal sector for social capital. The burgeoning research within the country reveals that stokvels group savings schemes tailor-made for stokvels. For example, today Absa and Nedbank have products such as the Club Account, Standard Bank has the Society Scheme while the Stokvel Account • An account was to be provided for the club and they decided how many members and who should be authorised to sign for withdrawals, are enjoying a substantial number belongs to FNB. • There were to be no charges debited of members and continue to play a against the account, supporting role in the lives of many It must be noted that sometimes stokvel South Africans. members embrace a bank’s product • A better-than-average rate of interest

was to be paid, and the rate was to rise as the balance on the account increased,

• No minimum balance was to be imposed. After distribution of the savings among members at the end of the year, the account was to remain open so that the club could start saving again in the new year without having to open a new account.

Today, as individual banks compete for the stokvel market, various benefits are offered as incentives to stokvel members. For example, at some stage the Absa’s Club Account offered the following benefits: • No bank charges for accounts with a minimum balance of R10 000.

• Monthly lucky draws on accounts with balances of R10 000 and over.

• Free R2 000 Accidental Death Cover for each of the group’s 10 nominated members, etc.

While some groups may be attracted by these “benefits”, others still express concern regarding the low interest rates and bank charges of these institutions. The lack of loan facilities to grow black businesses remains a key issue. This explains why stokvel members are saving their money in an opposite manner to which the financial services industry wants them to. In other words, stokvels are not making banks rich yet! This explains why in October 2010, Fikile Kuhlase, Senior Manager - SocioEconomic Growth and Development at The Banking Association of South Africa wrote to the National Stokvels Association of South Africa (NASASA). She expressed her organisation’s wish to commission a consultancy of “What support stokvels require from banks”. Unfortunately, nothing came out of this exercise because our view was that a thorough study was very important and if the Banking Association of South Africa is serious about this, they should invest resources on this survey. The importance of group schemes is also recognised by the government. During his National Treasury Budget Speech 2014, former Finance Minister Pravin Gordhan said:”Legislation to allow for tax-exempt savings accounts would proceed this year to encourage household savings. Complementing this tax reform, a new top-up retail savings bond would be introduced by the National Treasury this year, allowing for regular deposits into a government retail bond. It would also be accessible to community savings groups, such as stokvels”.

This was a very important announcement, especially given that, for many years, retail savings bonds were specially created for individuals and could not be bought by group schemes, social clubs, trusts, investment organisations, companies, stokvels or any other juristic persons - only natural persons could purchase them. This is a victory for NASASA. In 2012, NASASA and some stokvel leaders held a series of meetings with the National Treasury, lobbying for the creation of tax-free, government-backed, retail bonds that would be made available in affordable amounts to stokvel groups, burial societies and other informal savings schemes, where monies raised are targeted to the communities of savers themselves. This will ensure that even the poor are able to invest.

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