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How to run a stokvel

A stokvel is a group of people who agree to pay a fixed amount into a common pot, regularly, and share it out by rules they set together. It works on trust, and trust lasts longer when the rules and the records are clear.

The main types of stokvel

• Rotating stokvel. Each month the whole pot goes to one member, in turn, until everyone has had a payout. Then the cycle starts again.
• Savings stokvel. Contributions are kept in a bank account through the year and shared out at the end, often in December, usually with any interest earned.
• Grocery stokvel. The group saves through the year and buys groceries in bulk at the end, then shares them out. Buying together can bring the price down.
• Burial society. Members pay in so that the society can help with funeral costs when a member or a family member dies. The rules set who is covered and how much is paid.
• Investment stokvel. The group pools money to invest together, for example in property or a business, rather than paying it straight out.

How a rotating payout works

The maths is simple: the payout is the number of members times the contribution. With 10 members paying R1 000 each month, one member receives R10 000 each month, and the cycle takes 10 months.

Everyone pays in R10 000 over the cycle and gets R10 000 back. Nobody gains money; what changes is when you get it. Early members get a lump sum sooner, like an interest-free loan from the group, and later members are saving. That is why the order matters, and why it should be decided fairly, for example by drawing names at the first meeting and writing the order down.

Running a stokvel fairly

1. Write a constitution

Agree the rules in writing at the start, and have every member sign. A good constitution covers:

• the name and purpose of the stokvel, and who the members are
• how much each member pays, by which date, and how (cash or into the bank account)
• how the payout order or the share-out is decided
• fines for late or missed payments, and what happens after repeated misses
• what happens if a member leaves, dies or cannot pay, especially in a rotating stokvel after they have already had their payout
• who the chairperson, treasurer and secretary are, how they are chosen and how decisions are voted on
• how disputes are settled and how the constitution can be changed

2. Keep records every month

Record every payment in and every payout, with the date and the amount, and share the records with all members at each meeting. Keep minutes of meetings so decisions are on paper. Good records protect the treasurer as much as the members.

3. Use a bank account in the stokvel's name

A group account in the stokvel's name, with more than one signatory, means no single person holds the money and every payment leaves a record. Several banks offer accounts made for stokvels; ask yours what documents it needs to open one. Avoid keeping the pot in a member's personal account.

4. Give each member a statement

At least every few months, give each member a statement: what they have paid, any fines, what they have received and what is still to come. It answers questions before they become arguments.

Be careful with promised returns

A stokvel run by its own members, with money in a bank account they can see, is very different from a scheme that promises to double your money. If someone outside the group offers high, guaranteed returns or asks you to recruit new members to get paid, be very cautious: that is how pyramid schemes work.

Stokvels can register with NASASA, the National Stokvel Association of South Africa.

General information to help you plan, not financial advice.