Bringing peace of mind to stokvel members

A new financial service for the stokvel sector will provide members with greater financial inclusion and protection against scams.

Sanlam, together with the National Stokvel Association of South Africa (Nasasa), recently announced the launch of Nasasa Financial Services, a brokerage catering for the financial services needs of the stokvel market.

The association is a self-regulatory organisation with a database of 125 000 stokvel groups and reaches about 2,5 million people.

Jacqui Rickson, Chief Executive: Group Benefits at Sanlam Developing Markets and board member of Nasasa Financial Services, says the peace of mind that each member of a stokvel will be protected in their time of need is invaluable. ‘For South African stokvels, this is an opportunity to formalise their existence without having to forego their traditions.’

Mizi Mtshali, Chief Executive: Nasasa Financial Services, says stokvels are powerful financial services providers in their own right, with the potential to help grow South Africa’s economy once they enter the more formalised sector through appropriate product offerings.

There are more than 800 000 stokvels in SA, amounting to about R50 billion a year, Mizi adds. These stokvels are quite exposed, especially to liquidity issues that may render them unable to discharge benefits to their members and scams that promise to resolve such issues.

This results from a lack of accessible, relevant products that meet the needs of a more informal savings sector and, as a result, some burial stokvels may not pay enough to cover funeral expenses in their entirety.

By offering broad-based financial services to members, Nasasa Financial Services will empower stokvels through greater socio-economic inclusion and security, Mizi says.

Jacqui says the venture supports Sanlam’s client-centric focus by allowing financial inclusion to be extended to South Africans who are on the edge of formalised insurance structures.

‘Through this we can help families recover financially following difficult, unexpected events.’

Nasasa Financial Services will initially offer group-based funeral benefits, tailored to each individual type of stokvel.

Mizi says research conducted during the build-up of the product launch saw the solution being entirely built by participating stokvels.

‘Among the majority of South Africans, funeral insurance fulfils an unmistakable need. While many are excluded from the formal financial system, those who do interface with the sector largely feel inadequately serviced.

‘Burial societies are formed as providers of such services and have developed systems around the real needs of their members. There are roughly 200 000 active burial societies in South Africa, with the majority being self-underwritten.’

Because such groups rely on their collective savings to discharge their benefit to members, they often face liquidity problems that could lead to their disbandment, he adds. ‘This brings about the need for an underwriter who’ll take on the risk on behalf of the group, as well as offer a set of products and services built around the group’s needs.

‘Nasasa is tasked by its members to solve this problem, and we have identified Sanlam as the most suitable partner in this regard.’

The venture will also facilitate job creation, which is key to socio-economic inclusion. ‘For South Africans, this opportunity provides meaningful employment, particularly in the township economy. This is not only a step towards financial inclusion but also a giant leap towards societal transformation.’

Noluyolo Betela, Client Relationship Manager at Allan Gray, says being part of a savings club such as a stokvel is a great way for consumers to reach their financial goals.

‘Traditionally, most savings clubs keep their members’ contributions in cash or deposit them into a bank account. The downside is that traditional bank accounts generally don’t earn enough interest to beat inflation and the value of your money decreases over time.

‘Many stokvels aren’t aware that there are other options available in the form of investment products such as unit trusts, which grow your money and get returns that beat inflation in the long run.’

This article, written by Joseph Booysen, appeared on IOL.co.za.