By Nozizwe Vundla, Head of Sanlam Foundation

In the rapidly evolving African finance landscape, stokvels remain a powerful yet often overlooked force capable of driving financial inclusion and economic empowerment in Africa. For example, a 2024 Ipsos market study reveals that South Africa’s stokvel sector alone is worth R50 billion, comprising over 800 000 groups and 11 million members.

However, most of these savings societies still operate informally. There’s the potential for financial organisations to empower these traditional structures to evolve by bridging the gap between informal savings practices and formal financial systems to unlock new avenues for wealth creation and economic development.

This approach aligns closely with the broader trends highlighted in the 2024 Sanlam Environmental, Social, and Governance (ESG) Barometer. The Barometer, Unpacking Africa’s ESG Progress, underscores the social impact Africa can achieve by driving sustainable business practices. This is the vision behind the Sanlam Leruo Stokvel Programme, a Sanlam Foundation initiative with Zevoli Growth Partners as the implementing partner, that is committed to reimagining stokvels in the digital age.

From subsistence to wealth creation

The financial stokvel tradition has long existed in the heart of African communities. These informal savings groups have been a cornerstone of community finance, helping millions save for everything from household goods to burial expenses.

However, transforming this traditional stokvel model from a subsistence tool into wealth creation and community empowerment engines requires a multi-faceted approach:

  1. Formalisation and governance: Stokvels must establish clear constitutions and governance structures to protect members’ interests and position themselves to engage more effectively with formal financial institutions.
  2. Financial education: By demystifying complex concepts and introducing members to various savings and investment instruments and strategies, the financial sector can empower stokvels to make more informed decisions about their collective wealth.
  3. Digital integration: Empowering stokvels to embrace digital tools for record-keeping, payments, and investments can enhance transparency and open new growth opportunities while maintaining the inter-personal connections that make these groups so effective.
  4. Regulatory alignment: Guiding stokvels through the regulatory landscape ensures they can operate within legal frameworks, accessing formal financial services without losing their community-driven essence.

Creating a social impact beyond savings and investments

What’s particularly exciting about this evolution is the potential for stokvels to become agents of social change. Formalising and growing these groups can create a social impact beyond savings and investments to include broader community development initiatives.

For example, the Divine Brotherhood Stokvel, one of the Sanlam Leruo Programme’s inaugural members, now focuses on savings and investments in addition to addressing issues like gender-based violence and promoting healthy masculinity with boy children, through school outreach programmes. Since enrolling in the programme, this stokvel has:

  1. Updated its constitution, incorporating recommendations from the programme. The group’s governance structure now includes an Executive Board (formerly the Admin Committee) and an Ethics Committee, ensuring clear roles and responsibilities.
  2. Refined its investment strategy, diversifying its portfolio across equities, ETFs, and cash. It’s now exploring new options, including government bonds, demonstrating a more sophisticated approach to wealth creation.
  3. Become open to a broader range of financial opportunities. Members are now eager to engage further with Sanlam to explore more investment options.
  4. Maintained its registration with the National Stokvel Association of South Africa (NASASA) and will register with the National Credit Regulator (NCR), positioning itself for future growth and legitimacy.

The stokvel is not just focusing on its financial growth. The group wants to become a credit provider to small businesses, showcasing how empowered community groups can contribute to broader economic development.

A vision of women-led transformation

While the Divine Brotherhood exemplifies how traditional male-oriented stokvels can evolve, the Women Navigating the Future Network (WNFN) showcases the transformative power of women-led financial collectives. This group’s journey through the Sanlam Leruo Programme further demonstrates how financial empowerment catalyses broader social change.

Founded in 2016, this group’s evolution involved:

  • Membership growth: The stokvel now boasts over 1 700 members on its database.
  • Social media presence: An extensive online presence with thousands of followers across platforms, amplifying their message and reach.
  • Project expansion: It’s launched multiple cohorts of its stokvel programme, including a children’s stokvel, fostering financial literacy from a young age.
  • Community projects: The stokvel introduced the “One Family One Garden” agricultural community project to drive food security and sustainable agriculture.

These examples illustrate how financial sector interventions drive growth and foster positive social change. Replicating these efforts across the continent could see millions of community-based savings and investment groups integrated into the formal financial system, leveraging their collective power to invest in local businesses, fund education, and drive sustainable development. It’s a vision where the ‘S’ in ESG is not just a corporate consideration but a lived reality for millions.

The role of corporate leadership

Realising this vision requires a concerted effort from financial institutions, regulators, technology providers, and the stokvels. The financial sector can drive this transformation as more than just a business opportunity but as a crucial step towards building a more equitable and prosperous Africa.

The Sanlam Foundation has taken steps in this direction through initiatives like the Sanlam Leruo Programme, which aims to empower stokvels with the tools and knowledge they need to thrive in the modern economy. By harnessing the power of stokvels, Africa can create a ripple effect of financial empowerment that stretches across the continent, turning financial inclusion into a reality.

Click here to download the 2024 Sanlam ESG Barometer Report  https://sanlamesgbarometer.co.za/report-2024/

Click here to watch the 2024 Sanlam ESG Barometer Conference https://www.youtube.com/live/gL2TmbPfhqo