Keywords

African Stokvel Model, Cohesive Society, Financial Independence, Indigenous Enterprise, Informal Credit.

Introduction

Stokvel is South Africa’s version of Rotative Savings and Credit Associations (ROSCAs) or/and Accumulating Savings and Credit Associations (ACSAs) an initiative wherein group of individuals who share the same vision contribute to informal savings and credit associations for their mutual benefit (Hossein, 2017; Van Wyk, 2017; Kok & Lebusa, 2018). This initiative is not unique to South Africa as the practice is ongoing in many other African countries and beyond. In Nigeria, for instance, there are several versions of these informal credit initiatives like stokve, however, Esusu is the most commonly known (Moses et al., 2015). The same initiative is termed Susu in Ghana (Dare & Okeya, 2017) and Chama in Kenya (Sile & Bett, 2015). Even though the names differ, the practices, norms and objectives are similar across African societies.

To date, there is no generally agreed period when the term ‘stokvel’ emerged in South Africa, likewise the practices, however, scholars have contested that it is the equivalent to “stock fairs” – a concept coined by English-speaking settler farmers in the early 19th century (Lukhele, 1990). In that era, “stock fairs” were platforms through which the English settlers auctioned off their cattle (Irving, 2005). While income generation was the key, individuals, especially the black farmers and labourers often meet through these “stock fairs” to socialize, interact, exchanged ideas and gambled as part of the livestock business affairs. This practice started in the Eastern Cape, a province in South Africa, however, the advent and surge in gold activities in Johannesburg which attracted people into the city escalated stokvel practices (Lukhele, 1990).

Stokvel practices in rural areas of South Africa originate from the grassroots bottom-up demand of the marginalized and poor for alternative financial services (Dare & Okeya, 2017). Matuku & Kaseke, 2014; 504 maintain that “Contemporary South Africa is characterized by extreme poverty, high levels of inequality and unemployment”- forcing many to rely on self-help community-based initiatives, such as stokvel as part of survival strategies. In addition to these socio-economic challenges, access to the formal banking services remains a huge constraint in most rural areas of the country. These services are relatively expensive and considered inaccessible to the vulnerable, when compared to stokvel (Mungiru & Njeru, 2015; Sile & Bett, 2015). In the urban areas where formal credit services are dominant, many individuals do not meet their access criteria nor can they afford the cost (Hossein, 2017), yet, there is a need to save and invest even the little people have to earn a living, especially, for entrepreneurs and business owners in the informal economy. One of the challenges of entrepreneurs in the informal economy is access to finance, and with practices such as stokvel, finance can be available to entrepreneurs in the informal economy (Herrington & Coduras, 2019). Against this background, the marginalized often opt for stokvel for financial freedom and to meet their informal economy engagement. This explains reasons there are high stokvel involvements of low-income groups, especially in the rural areas.

Traditional stokvel practices are often anchored on income generation, however, its environments promote kinship ties amongst individuals, helping towards a cohesive society (Mungiru & Njeru, 2015). According to van Wyk (2017) stokvel is a “lived experience and an identity” toward economic empowerment and social cohesion. It is recognized as a platform where people feel part of a community, thus, getting involved in a stokvel enables individuals, especially, rural women to be identified with a specific social group and provide them with opportunity to have financial resources for trade. The initiative helps them to meet in physical spaces, to interact, socialize and celebrate their identities; this is reiterated by Thabethe, Magezi, and Nyuswa (2012) that stokvel creates platforms that lead to social interaction and increases leisure times for individuals. In Africa, this koinonia is pivotal to social networking, trustbuilding and solidarity in times of economic and social crises (Moodley, 2008; Mwangi, 2013; Sile & Bett, 2015). The socialization that comes with stokvel brings a sense of belonging and enable individuals to bond organically to their groups through social identities (Arko- Achemfuor, 2012); it is regarded as a “DNA of township” that helps African people to construct a cohesive society (Mabovula, 2011). In accordance with these facts, the role of stokvel in the socio-economic development of African communities cannot be overemphasized.

This supportive role of providing a socially-networked environment and measures for collective economic growth are justification for the significant surge of stokvel practices in South Africa, despite, its lack of recognition (NASASA, 2016; Mulaudzi, 2017; Kok & Lebusa, 2018). Even though the narrative underpinning stokvel participation is anchored on marginalized women in rural areas, its practices have been widely embraced by both genders, different age and income groups, as well as individuals in urban societies. There exist over 820, 000 registered stokvels in the country with a combined membership of about 11.4 million people, handling over R44 billion annually (Mulaudzi, 2017). About 23% of the country’s population are involved in one or more stokvel enterprise, with women being predominant (Kok & Lebusa, 2018); about 67% of rural households in the country are involved in at least one stokvel (Matuku & Kaseke, 2014). In fact, it is suspected that these numbers could be under-representing the picture.

With stokvel being transformed from rural-based, women-oriented initiative to a common practice by many individuals across societies in South Africa and beyond, a proper model that can ensure successful replication and practices is needed; this is the missing link in the literature, even though a lot has been researched about the initiative. It can be contested that this gap is among the reasons stokvel lacks standardization and global recognition. This study aims to provide a step-by-step process to establish a successful traditional rotative stokvel enterprise in South Africa, thereby, creating an international model for traditional saving associations in Africa. A rotational stokvel is an ancient indigenous African informal practice that describes traditional means of cooperation in its societies, in which individuals regularly contribute an agreed premium from which they receive a lump sum payment at a time (Luthuli, 2017; Mulaudzi, 2017; Bophela, 2018).

Key proposition in this study is that traditional savings associations, like stokvel can be a source of financial strength for entrepreneurial growth and performance in Africa. While the study is anchored on traditional stokvels in South Africa, the findings can be tested in other African countries to come with an African-based model for a traditional informal rotative saving/investment system for entrepreneurial growth. The next section explains the methods adopted for the study. It also contains a brief description of the study area. Lastly, the result and discussion of findings were jointly presented before the conclusion and key recommendations of the study.

Methodology

This study was conducted in Thulamela, a local municipality in the Vhembe District of Limpopo Province in South Africa. This is in the northern part of the country and shares a boundary with Botswana, Mozambique and Zimbabwe. Thulamela has a considerable number of learning institutions, government establishments, shopping malls, tourist attraction sites, however, some of its areas are still marginalized and deficient in basic infrastructure (Chauke et al., 2013). In this Municipality, people still struggle to access basic services such as banks, and hospitals. Poverty and unemployment are other burning challenges observed in these rural communities, not only in this area but in the country at large (Statistics South Africa, 2014; van Wyk, 2017; Sulla & Zikhali, 2018). As a result of these challenges, people explore stokvel opportunities as a resource for financial freedom and forming a cohesive society (James, 2015). This narrative is consistent with Storchi’s (2018) picture of South Africa’s present economic situation, especially, of severe unemployment, rising inequality and high levels of indebtedness in the world; these are forcing many people to rely on the informal economy for survival. Often, a significant proportion of the poor and vulnerable people struggle to access and/or afford safe and convenient financial services in the country.

Seven villages, namely, Dididi, Dumasi, Ha-Lambani, Maraxwe, Muledane, Shayandima and Sibasa were purposefully sampled for this study. The choice was based on the presence of stokvel activities in these villages, their distribution in the local municipality and level of development. Some of the participating villages are rural, while others are extremely rural. In these areas, the majority of the households receive social grants, like child and pension grants. From these grant, many people can engage in stokvel activities without having to rely on other means of income. Unemployment is a huge challenge, thus, many people, in thses communities are involved in various forms of economic survival activities, such as farming, selling and other forms of small businesses to generate income.

A snowball sampling technique was followed to identify 47 traditional rotative stokvel leaders across the sampled villages for in-dept interviews which were performed using a semistructured questionnaire shows in Table 1. Snowball sampling was ideal because it is an informed instrument which picks participants and revolves to pick others identified by the previous participant (Newman, 2018). Given that participants were not known, it enabled one to pick a sample by collecting data from one participant to another until the point where data saturation was reached. Thematic analysis was then harnessed for data analysis.

Table 1 COMPOSITION OF THE PARTICIPANTS
Village	Sample	Gender		Employment Status					Marital status
		F	M	Emp	Ent	Frm	Stn	Un	Md	Sg	Oth
Dididi	4	4			1	2		1	2	1	1
Dumasi	5	4	1		1	1		3	1	1	3
Ha-Lambani	7	5	2	1	1	2	1	2	1	2	4
Maraxwe	7	7		1	2	3		1	2	2	3
Muledane	9	7	2	2	1	2	1	2	3	2	4
Shayandima	6	5	1	1	2	1	1	1	1	2	3
Sibasa	9	6	3	3	3	1	2	1	4	2	3
Total	47	38	9	8	11	12	5	11	14	12	21

As depicted in Table 1, various groups initiate traditional rotative stokvel in the villages, although, it is predominant amongst females, farmers and entrepreneurs. This is consistent with studies earlier performed, which prove that women are more involved in stokvel as compare to men (Donalson et al., 2013). Lukhele (1990) justifies the high involvement of women in stokvel activities to rural-urban migration in 1930. A vast majority of women migrated to join their husbands working in the mines in cities and towns. Many could not secure a job, hence, some got involved in piece jobs with little earnings. This challenge resulted in a high level of poverty and unemployment amongst the women in the country (Buijs, 2002). Recent research has shown that most women employed in the informal economy earn low incomes, relatively lower than what is expected to maintain a family (Matuku & Kaseke, 2014). These challenges, coupled with a household burden and black tax issues, meant that many women supplement their income through other means, like stokvels. This is one justification why stokvel is predominantly practised by women.

A considerable involvement of farmers and entrepreneurs is because the majority of this category of individuals earn daily income and have no access to formal banking services; in this situation, stokvels become an ideal means of saving money. As mentioned earlier, most of the unemployed individuals in the study area benefit from child or pension grants; a proportion of which is saved. The cost of travelling to areas where the banks are and charges associated with formal banking, as well as other logistics required, however, make them resort to stokvels. According to Buijs (2008); Matuku and Kaseke (2014) stokvel is a means of promoting the informal banking system in a way that it provides the same functions that commercial banks provide in a more convenient and cost-effective means.

Brief Description of Types of Traditional Rotative Stokvels in the Study Area

Through in-depth interviews with participants, it was revealed that there are several traditional rotative stokvel packages in the area (shows in Table 2). These include - budget stokvels, farming stokvel, building stokvel, property stokvel, grocery stokvel and funeral stokvel. All these traditional rorative stokvel structures are of interest in this study.

Table 2 TYPES OF TRADITIONAL ROTATIVE STOKVELS IN THE STUDY AREA
Type	Comment
Budget stokvels	A group of individuals with common goals agree on an amount of money to be paid at a time and that makes up a lump sum for one member.
Farming stokvel	A group of farmers agree to take turns and collectively work on each other’s farm at a time.
Building stokvel	In this context, except for building materials which are bought, the committee of friends with different building skills join efforts to build each other’s house, one at a time.
Property stokvel	People take turns, contribute a certain amount each month to buy house appliances like electronics, kitchen utensils and furniture for each other.
Grocery stokvel	This form is strictly for food items. A little portion of income is contributed which is given to one member to get a large stock of items for the family. It rotates till every member is covered.
Funeral stokvel	People in society contribute a certain amount to a pool that helps them cover part of the funeral expenses of their relatives. Wedding and birthday stokvels also take a similar dimension, however, they are not as common as funeral stokvels.

Scholars have also alluded to the existence of various stokvel practices. Buijis (2008) sees stokvels as typically community-based self-help associations which help people not only to generate income but attend to other needs, like burial needs. “The group is always there for each member during times of trouble, such as when a family member passes away or money is needed for emergencies such as children’s school fees” (van Wyk, 2017). Verhoef (2002) explained the concept of monthly contributions made to sort out family issues and buy “bulk groceries from wholesalers” which is distribution among members. This is closely related to the point of Matuku & Kaseke (2014) who identify high-budget stokvels established to promote savings and investments. People involved in high-budget stokvels contribute substantially to a pool with hopes of getting a lump sum to maintain a high standing in society. Often, the lump sum is used for household demands, although the authors argued that “high-budget stokvels are not for the poor or persons of limited means”; it is contestable whether people with very little income also get involved. Stokvels, generally, regardless of nature can be operated amongst the rich class, likewise among the poor, however, with different targets.

Van Stel et al. (2005) emphasize on investment stokvels wherein members contribute a proportion for a business to generate income and share the profit. Verhoef (2001) mentioned jazz or party stokvels often staged to generate business start-up capital for a member. This form of stokvel may not be very common in rural areas.

Results

Through in-depth interviews, four re-occurring themes were arrived at - the formation process of the stokvels, operational plan, financial management, and disciplinary measures put in place to maintain order. These themes and their related steps are presented in Table 3 and discussed below.

Table 3 SETTING UP A SUCCESSFUL A TRADITIONAL ROTATIVE STOKVEL
Steps	Attributes
Formation Process	A tradition rotative stokvel ideas start with an individual who then shares with one or two close people to develop the idea.
	Enrolment of people into the group is based on recommendation from those who developed the idea.
	More people can be involved using networks of the enrolled members.
	Involvement is based on trust, as well as social and economic class.
	Each member is known to at least another.
	Entry into a traditional stokvel is free, so does exit.
Setting Operation Standards	A meeting is organized with all members to map out an operational plan.
	The venue of the first meeting (usually a physical platform) is based on the discretion of the initiator of the idea.
	Subsequent meetings are rotated amongst members’ residences or place of choice.
	Group administrators, like chairperson secretary and treasurer are elected based on a person’s trustworthiness and social standing in society.
	Members’ biographical information and contacts are documented for use in case of any eventuality.
Financial Management	All financial transactions are recorded in a ledger.
	Amount to be contributed is collected by members.
	Group Chairperson is responsible for the administration of finances.
	Balloting system is used to determine the payout of a lump sum.
	Exceptions are made for people with pressing need to get the lump sum first.
	Income generation benefits both the iniator of the group and contributors.
Dealing with Defaulters	Lateness to meetings, absenteeism, fights and theft are offences and attracts fines.
	Failure to contribute an agreed amount for others after receiving a lump sum is an offence.
	Refusal to comply with fines and other payment terms are dealt with using traditional leaders.
	Defaulters are frowned at, shamed and discriminated against in the society.

Formation Process of Traditional Rotative Stokvel Enterprise

A traditional rotative stokvel group begins with a sole-idea of a need for development. The conceiver involves another, usually a close friend, relative or colleague to plan the process of materializing the idea. A well-developed plan based on the idea is then sold to close networks to get them to join. The composition of the group is through the recruitment of more members through existing members.

“We only involve known people in our group to avoid problems. Each member picks someone close to them to join rather than opening the group for everyone to come. It makes things easier for us”(Male; Student; Singl).

This narrative is consistent with Dare & Okeya (2017), who stressed that the enrolment of new members is based on personal recognition and recommendation of an existing member. This an ideal way of enrolling known and trusted people, such that the possibility of involving problematic individuals is minimized. The formation of a rotative stokvel takes the form of a pyramid wherein the sole initiator involves close contact, then continue to pick more individuals from their close networks, such as from their churches, friends, colleagues, family members and secret societies. According to Mungiru & Njeru (2015), trust, cultural lines, shared norms, social ties, as well as bond, are pivotal attributes often harnessed to sustain the ideology of informal savings/investment enterprises. Moodley (2008) asserts that trustworthiness is the key in minimizing defaults on contributions and maintaining the secrets behind stokvel success stories.

“…me and my husband are the founders of the stokvel. We spoke about it and felt the need that we wanted to help each other, and then I shared the idea with some of my colleagues who were very interested to be part of it.” “…We then scheduled a meeting, met, discuss and agreed on terms to roll out. We started with a five-man committee and saw the need to expand. So, each member was obliged to introduce five trusted people through their network who can meet our financial terms. Membership is completely free; we only agree on the amount each member should contribute…” (Female; Employed; Married).

The composition of a traditional rotative stokvel and group size is determined by the goal. Each group, according to van Wyk (2017) “is characterized by a constitution which directs members’ roles and responsibilities in relation to the size of the monetary contributions made.” It is influenced by people’s lived experiences and in trying to make a living in an area. Opinions of members are deliberated to decide appropriate class and nature of individuals to involve, as well as the dimension of the stokvel.

“…it is a group of thirty, it can be less or more but it is always preferable to have a considerable number for administrative purposes. The lesser the number, the easier it is to manage. Sometimes, large numbers can be problematic…” “Many people were interested to join our group, so we created subgroups of 10 members each to avoid chaos. However, these groups are still in the same stokvel umbrella, govern by the same regulations and operational plan but have different meeting periods.” “All the groups join efforts when events such as funeral and marriage occur. “We all celebrate our end of year party together…” (Male; Entrepreneur; Married).

As explained earlier, other than income generation, there are other reasons for a traditional rotative stokvel. A female head of household narrates:

“…we are a group of five people; rather than money we use labour approach to assist each other. All of us are farmers, so we schedule to assist each other with farm work. Aside from the fact that it makes work easier and faster, we enjoy good company. We are more or fewer friends. It was this same method we used to build our houses. The only thing we bought was building materials. The entire building was erected using our hands…” (Female; Farmer; Single).

“…I belong to stokvel group in my street, we contribute a certain amount monthly to buy home appliances for our members…” (F; Un; Md). “…we have a village stokvel wherein every household contribute R20 every first Sunday of the month. When a village member dies, the family is supported with a certain amount…” (Male; Unemployed; Married).

Based on the participants’ narrative, a traditional rotative stokvel is a voluntary funding society of individuals with informal business practice. Income generation initiatives benefit both the contributors and initiator of a particular stokvel.

Setting Operation Standards of Traditional Rotative Stokvel Enterprise

Traditional rotative stokvel operations differ from group to group. Terms of operations are defined by members during their first group meetings. Having agreed on the membership size, once-off premium, meeting cycles, time, venue and other logistics will also be agreed upon. Often, meetings are rotated amongst members. The group may decide either to cater for logistics like refreshments, rent chairs and tables for the meeting, otherwise, it is the responsibility of the host.

“As the initiator, I scheduled the first meeting in my compound. It is sort of induction to roll out the stokvel. Both the people I shared the idea with and the contacts they recommended through their networks attended. It is more or less meet-and-greet setting to familiarise. I bought soft drinks and snack; we share, having met briefly to explain what the idea is all about to everyone. …you know, people are eager to hear from the horse’s mouth…” (Female; Entrenpreneur; Single).

Stokvel groups have their own rules and purposes, but the common denominator is trust between all the parties involved and a strong sense of mutual responsibility (Luthuli, 2017; Koenane, 2019). Members meet to agree on norms and regulations that should govern their operations, such as a penalty for lateness and disciplinary measures for other forms of disorder.

“…after introduction and a warm welcome to everyone, we then engage in the mandate of the idea and the plan we have designed. Everyone’s opinion at this stage is welcome to improve the plan. At this point, anyone not interested in the idea may exit; we can always get a replacement immediately from our contacts, otherwise, continue with the active members…”(Female; Entrepreneur; Single).

“The moment our intentions are clear and jointly supported by all members, we are set for elections same time to nominate group representatives such as chairperson, the treasurer, secretary and provosts. Although, this is only necessary for larger groups like *** (a group of 22 members) that require serious checks and balances…”. There may not be a need for a cabinet. For instance, there is another stokvel group (***) in am investing with, we are on six friends. We know each other well from the inside. So the protocol is less, only one of us volunteered to keep our records…”(Male; Farmer; Married).

“…In a large group where not everyone is known by all members, a document may be prepared to take into account names, addresses, contact details and in some cases the guarantor. We also outline our terms of operation in the document as agreed by all members of the group. It serves as our working tool and at the same time, a contract that binds all members into the group…” (Female; Employed; Single).

In a rotative stokvel, balloting is used to determine those that should access lump sum before others. It enables the group to overcome any rift that might arise as members contest to be on top of the list to receive the money, however, sometimes exceptions are made for people in serious financial crises.

“…In my group, immediately after the first meeting to roll out the stokvel, members are allowed to propose when it will be most appropriate to get a lump sum or even borrow from the group. Should there be a conflict of interest, we then go for balloting where members pick a number where they can be placed…” “It is allowed to exchange positions with other group members, as one may decide to be the last in the payroll based on their financial need or plan to invest their money…”(Female; Entrepreneur; Married).

Contributions in each stokvel group vary. People consent to contribute agreed efforts or sum of money regularly into a pool, for a reason (Matuku & Kaseke, 2014; Sile & Bett, 2015). There is an instance where group members meet to contribute an agreed amount that makes a lump sum for one individual. Another example is that a certain per cent is deducted from the lump sum for investment purposes to generate income for the group. Some groups prefer an additional fixed amount (fee) for investments and logistics.

“We meet once in two weeks to contribute a premium of R1000 each. Out of which, 90% of it is given to one person as a lump sum. The remaining 10% coupled with other money we generate from defaulters is reserved for borrowing to generate income. The profit is shared amongst us…” (Female; Entrepreneur; Single).

“…each will contribute R3000 at a time to make a lump sum for one member, and R200 for refreshment…” Then we contribute additional R2000 monthly for investments. So, I pop out R5200 every month for the stokvel. It pays a lot because the one-off lump sum is huge enough to secure a property. Besides, we make a lot of profit from our investments. It is also helping us to generate extra cash from our basic salary…”(Male; Employed; Married).

“My sister-in-law introduced me to a group wherein every member pays R600 a month. It is for a year and we are 12 members. So, each gets about R7200. However, the R200 is a contribution for the end of year party for the group. We use it to cook and buy drinks. Then invite our friends and family to enjoy with us” (Female; Employed; Married).

We have two standards in my group. Firstly, the one we contribute as a lump sum which is taken by one of use. The second one is a fixed amount we just pay monthly to borrow and raise interest which we all share at the end of the year. The one for borrowing is in two forms: borrowing at 20% interest rate as an outsider and that of 10% for members of the group. A member is only allowed to borrow once in a year, except in situations where other members are not interested...” (Male; Farmer; Single).

Financial Management in Traditional Rotative Stokvel Enterprise

Traditional rotative stokvel groups keep records of activities, especially a leger that enables the recording of day-to-day transactions. The group treasurer and financial secretary are responsible for collecting money and recording transactions while the group chairperson (usually the initiator of the idea or prominent/trusted individual in the group) saves, manages and disburses the money, however, under the close watch of other members.

“…the first thing we do is to constitute a cabinet that will pilot the affairs of the group. It is important to elect a decent person otherwise suffer lootings and misappropriation of funds. We do background check of the people we should entrust our money to. Firstly, they must have a stable means of income, sometimes we recommend someone with a family and physical properties. This helps us in getting hold of them should they misbehave and disappear. We also consider their creditworthiness and their good standing in the society...” “a leader of any stokvel group should be a reliable, responsible and trusted fellow…” (Female; Employed; Single).

These views have been reiterated by Matuku & Kaseke (2014) and van Wyk (2017) that a successful stokvel is anchored on trustworthiness. This can be achieved by enrolling known people and electing a trusted chairperson, secretary, and treasurer who run the day-to-day affairs of the group. Reliable records of each transaction should be maintained by the secretary and treasurer.

The chairpersons are responsible for the administration of funds and held accountable for any losses, thus, precautionary measures, such as safe places are often used to secure contributions handed over to them; such palces are preferably in a formal bank or secret places in their house.

“…for security reasons, I always deposit remnants of contributions made, soon after the meeting. “…our form of stokvel deals with a large sum of amount. Sometimes, investment premium put together could sum up R46,000. It is a large sum to be kept in the house...” (Female; Entrepreneur; Single).

“…only R6,000 is generated after the lump sum. This money is borrowing and other logistics associated with the group. I can easily throw that in my box and lock or ask my husband to hide that in the storeroom…” (Female; Entrepreneur; Married).

People in charge of money administration are security conscious and mindful of possible organize attacks that may result in loss of money. Concerns were raised about people arranging with thieves to visit and ransack Chairpersons’ houses soon after a meeting is held. This leaves suspicions that some group members may be involved in planning the thefts.

“…We are about 25 people in my group and our stokvel premium is in two places – that which is paid as a lump sum and the other which is the contribution for investments to share in the long run. The size of the group was too large for me to manage at the same time. So, I created five subgroups and appoint deputies to oversee the collection of money. In this, only five people can meet at a time in a different location to contribute the money. The deputies then arrange to meet with me to consolidate records and hand over the money to me which is taken to the bank. However, we (the 25 members) meet periodically to discuss general issues and way forward for the group…”(Female; Employed; Married).

Dealing with Defaulters in Traditional Rotative Stokvel Enterprise

As earlier mentioned, group members collectively make laws that govern their stokvel operation. There are fines for offences, such as lateness, absenteeism, theft, fight and other forms of misbehaviour. Aside from the fact that this helps in maintaining discipline and orderliness amongst members, it is also a means for income generation as the money raised is invested to generate profit, which is shared amongst members.

“…We agreed that lateness to a meeting is R20 and failure to attend without a valid excuse will be R50. In a situation where there is an event of a member like a wedding or funeral, we normally contribute R200 each to support. Aside from the financial commitments, we also assist the family with arrangements and organizing process of the event. We support each other in times of need. It can happen to anyone, anytime; no one knows. If any member fails to be part of the organizing process or attend the event, he/she will pay additional R100 find…” (Male; Farmer; Married).

“Only group members who do not have a questionable record will be considered in the dividends we share at the end of the year which is generated from our investments. Those members that have met the target will calculate the interest you have generated plus your subscriptions and pay them back. Contributions of people who have attempted to rub the group will be ceased. That’s how it works…” (Female; Unemployed; Single).

Dialogues are a common means of rift resolution. Defaulters, especially those who have breached payment terms and group regulations, are engaged in discourse. In this context, the group sends a delegation to the defaulter to enquire what had caused the breach in the compliance. In a genuine cases, defaulters may be given a period of grace to comply.

“…Sometimes people default due to reason beyond their control. People commit and run away without paying the finds, borrow money from the stokvel or get a lump sum and fail to make subsequent contributions to other members. We solve such issues amicably by engaging with the person through the guarantor and agree on when they can redeem the debt...” (Male; Student; Single).

“…To avoid problems in the community, it is best to comply with the terms of the group. If you are owing, explain your issues to the group and beg for a period of grace. They will understand and take things easy with you pending when you can raise the money and pay. If you are stubborn, then you will be forced to pay…” (Male; Farmer; Maried).

The defaulter’s close relatives may be involved in subsequent efforts to recover a debt. This narrative is consistent with van Wyk (2017) that breaching stokvel agreement on contributions and/or loan repayments is managed through social pressure. Such measures are explored when several attempts to make things right with the defaulter had proved unsuccessful. As a last resort, they are threatened to be mishandled by traditional societies where there is a group in the community that disciplines people. A group may also attempt to make a public pronouncement about the act which may earn the defaulter a societal stigma and social exclusion. This comes with abuses, shaming and discrimination. The traditional council of a community is the last resort, hence, a defaulter who has proved stubborn can be summoned to a chief’s palace. In many instances, they are given conditions under which to pay, otherwise some of their properties will be confiscated by the group.

“…should they misbehave, they will be shamed and stigmatized in the community society…” “…we even take them to our chief. No one escapes this…” “…having being shamed and summoned to the traditional council for default, no one will ever accept to involve in stokvel activities with you again. It depends on trust and how you treat your case. As far as I know, that lady someone has defaulted, I will not join a group with that person again…” (Female; Farmer; Single).

Some stokvel groups, especially, those with large number of members, mostly those practised amongst colleagues in government establishments are registered as a cooperative and each member has to consent to certain obligations. This enables the use of legal measures such as the police and courts to resolve disputes. This is an ideal measures, given that this form of stokvel groups are diverse; most colleagues are from different cultural backgrounds and live in different locations which makes the application of customary laws impossible.

“…no one would dent his/her image in a place of work over stokvel money. It will be made known to everyone around you, it is a big slap to your face. To avoid drama [breach of terms], we register our group. Every member has to complete membership and agrees to legal terms for any form of default…” (Female; Employed; Married).

Thomas (2015) mentioned that even though terms and regulations in a typical traditional informal credit system are often unwritten, the defaulter is usually frowned upon and receives penalties. Traditional measures such as social sanctions that may amount to shame and relying on the influences of kinsmen are often harnessed to force compliance (Mwangi, 2013; Thomas, 2015). People involved in a traditional stokvel do not want to deviate from the norm since the nature of punishment often used would damage their reputation and social standing (van Wyk, 2017). As a result, individuals tend to keep in mind the dos and don’ts. This argument is consistent with Moodley (2008) who reiterated that good reputations earned by remitting due contributions and keeping reliable financial records are key secrets behind stokvel successes.

Discussion of Findings

Traditional practices have been discovered to drive social and economic development and while Africa has an abundance of indigenous practices which have been ignored to embrace western ideologies, the continent struggles for entrepreneurial success and establishing her own identity. Key among indigenous practices in Africa is the stokvel rotative saving and credit associations. Associations which can be formed in accordance with the goals which members want to achieve is practised in South Africa and it has contributed immensely to social cohesion and improvement in the livelihood of rural dwellers in South Africa. The success of the associations has attracted numerous studies which have focused on the impacts, practices and challenges with little or no attention to the processes involved in setting up a successful traditional stokvel. This study fills this gap left by previous research which would provide the processe of setting up similar enterprises in other parts of Africa. We posit in this study that traditional credit and savings associations like stokvel in Africa will contribute to entrepreneurship development and performance in Africa.

Formation process was the first theme identified in this study; we discovered that rotative savings ideas start with an individual who shares it with one or two close friends for development, after which other trusted friends and relatives are enrolled. Enrollment in the savings association is usually based on trust and recommendation. The first point of action for setting up a standard rotative savings association is, therefore, the formation process and these findings was supported by Mungiru & Njeru (2015) who assert that trust, cultural lines, shared norms, social ties, as well as bond, are pivotal attributes often harnessed to sustain the ideology of informal savings/investment enterprises. Also, Moodley (2008) contends that trustworthiness is key in minimizing defaults on contributions and is the secret behind stokvel success stories.

The second theme identified in this study which must be put in place to have a standard rotative savings associations, is the setting up of operations standards. After the associations have been formed, a meeting is organized with all members to create an operational plan and the venue of the meeting usually depends on the originator of the idea. The meeting would usually be held in a physical location where all members can be present. Elections are held for operational positions, such as treasurer, secretary and chairpersons who are chosen based on trust and their social standing in the society. Key among the activities done to set up operational standards is to have contacts and biographical details of members which will be fully documented. A decision will be taken on when meetings will be held, while the locations will be constantly rotated among members. This process is sacrosanct to the success of the association because it will determine the mode of operations; rules guiding members and agreements are reached on the amount to be contributed and the process of disbursement. Thes findings support the assertions by Luthuli (2017); Koenane (2019) that stokvel groups have their own rules and purposes, but the common denominator is trust between all the parties involved and a strong sense of mutual responsibility.

The third theme identified as an important factor for the success and standardization of the association is financial management. Agreements and rules are made on managing the finance contributed for investment or specific needs for which they were contributed. The financial transactions are mainly recorded in a ledger; the group chairperson is responsible for the administration of finances, and exceptions are made for people with pressing need to get lump sum first, while a balloting system is used to determine payout of lump sum. This finding corroborates the assumptions of Matuku & Kaseke, (2014) that contributions are made and pooled together for a reason and are effectively managed towards achieving that goal.

Lastly, a measure of dealing with financial faulters is also an important factor which is put in place to ensure the success and standardization of the association to achieve the desired goals. Rules are put in place to manage and control negative occurrences, such as lateness to meetings, absenteeism, fights and thefts which will attract fines; failure to contribute an agreed amount for others after receiving a lump sum and refusal to comply with fines and other payment terms are all liable for fines. The association ensures defaulting is frowned upon and traditional strategies are put in place through traditional leaders to bring social pressure and shame to the individual who defaults or is planning to default. This is consistent with the findings of Wyk (2017) who assert that breaching stokvel agreement on contributions and/or loan repayments is managed through social pressure; Thomas (2015) also mentioned that a defaulter in a traditional credit savings and loan association is usually frowned at and faces penalties. Our findings in this study show that traditional savings associations have a process of formation and operations; other similar associations in Africa may likely perform better too if they follow the processes - formation, setting of operations standards, financial management and dealing with financial faulters - as identified in this study,

Furthermore, with an understanding of how a traditional savings association as stokvel can be formed, financial freedom and funds for entrepreneurial endeavors in the informal economy can be pooled. This strategy can ameliorate poverty in rural Africa, provide sources of livelihood, economic engagement and also sustain traditional institutions. If the opportunities in traditional savings associations are properly harnessed, the challenges of financing for enterprise formation and development in the informal economy would be resolved in Africa.

Conclusion

There are a number of similar practices to stokvels, in Africa. The successes of these stokvel in providing funds for investment and as means of livelihood for its members while also fostering social cohesion has attracted scholarly attention. We assessed the factors that are essential for setting up a successful traditional rotative enterprise in Africa with focus on South Africa. Process of formation standards of operations, financial management and the measures of dealing with defaulters were factors identified for the success and standardization of traditional savings associations in the country. The argument of this study is anchored on the social and economic benefits an association such as stokvels provide for Africans, especially as the continent struggles with the sustainable development goals of 2030’s (SDGs 1-No poverty, SDGs 2-Zero hunger) agenda in the face of a global pandemic. Adopting principles and practices of operations, peculiar to stokvel is sure to reduce poverty, sustain livelihood and provide resources for investment among low-income earners and the most vulnerable.

In addition, traditional savings and credit associations in Africa can become financial strength for indigenous businesses and entrepreneurs on the continent. By pooling resources for each other to invest, entrepreneurial success can be enhanced in Africa through this platform. It is evident that the operations in commercial banks do not encourage the financial inclusion of those living in rural areas, the less privileged and illiterates in the society. The adoption of traditional practices such as stokvel will alleviate rural challenges associated with finance. The model could achieve more success in rural areas where the most vulnerable and the informal economy which operates mostly in this area, would benefit from. This will have social and economic implications on the drive for development and growth in Africa. Stokvel is a practice in the informal economy, and its strategies will add value and successes to indigenous entrepreneurs and businesses, if adopted.

Recommendation

The study recommends that entrepreneurs in the informal economy should adopt the stokvel model for their business growth, hence, put an end to the challenges associated with finance. This study has provided knowledge on how traditional savings associations can be established, so that room for context-specific savings associations can be established. Also, the steps identified in this study (shows in Table 3) should be tested in a broader context to inform a traditional African-based informal rotative stokvel model.

Acknowledgement

The paper is an aspect of a SASUF (South Africa - Sweden Research Forum) research initiative: “Who runs the world?” Women and Informal Finance: Now and Then. We acknowledge the Principal Investigators: Professor Elise Dermineur of Umeå University, Sweden and Professor Unathi Kolanisi of the University of Zululand, South Africa.

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