Stokvels or Banks – Which Do You Prefer?


Most South Africans save via informal savings clubs and stokvels instead of bank accounts, according to new research. The Old Mutual Savings Investment Monitor (SIM) revealed that:


  • 42% of households rely on stokvels as a savings method,


  • 26% of households depend on burial schemes,


  • 17% are dependent on unbanked cash savings, and


  • 13% of households rely on grocery schemes.


‘42% of households rely on stokvels’


Black households tend to make use of stokvels the most.  One reason for their popularity may be that funds can be easily accessed.  “It is easier to get a loan, and it is often at a better interest rate,” said Old Mutual research manager, Lynette Nicholson.


‘It’s a nice way for friends and family to come together’


Cultural Aspect

Stokvels also have a cultural aspect. “It’s a nice way for friends and family to come together,” explained Nicholson. They put social pressure on one another to save, as all members are saving.

Single mothers often make use of grocery schemes. How it works is members pool money together, buy groceries in bulk and then share them out. They often distribute the groceries during holiday season. “It’s a way to get things cheaper,” said Nicholson.

Learning how these informal savings vehicles work can help banks come up with better products.  “There’s a lot that can be learnt in terms of how they operate and their efficiency,” she added.


‘Funeral policies are the most popular formal savings product’


Funeral Policies

When it comes to formal savings vehicles, funeral policies are the most popular.


  • 3 out of 4 working metro households have taken out a funeral policy,


  • +/-26% of households have taken out education policies,


  • +/-59% have invested in retirement products, and


  • 51% are paying towards a provident or pension fund.


  • 25% contribute to a retirement annuity.


More people are making retirement a priority, as more are living longer. “They are using these years to plug money into retirement,” said Nicholson. What’s more, many people have more than one pension fund.  “You need more to live,” she said.


‘42% of people use bank savings accounts’


Formal Savings Products

With regard to other formal products:


  • 42% of people rely on banked cash savings,


  • 87% on formal policies and products,


  • 8% on investments, and


  • 5% depend on bonds.


‘South Africans rely more on friends, family and the internet for financial advice’


Sources of Financial Advice

Overall, South Africans rely more on friends, family and the internet for financial advice and information, than they do financial advisors.

Although, people are still hesitant to buy investment products and life insurance online. “They still prefer to speak to a financial advisor and have contact,” Nicholson said.

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