Yunus Boda, a legal manager at Legal and Tax, defines stokvels as groups of people, who make contributions to a common fund from which each member can withdraw money, for various purposes, such as putting down a deposit on a home. Stokvels have been around in South Africa for many years and are legal, he says.
Boda notes that there are many benefits to stokvels. "They are a great way of forcing yourself to put away a bit of money each month and can provide you with a community network that helps you in ways besides saving money," he says. Boda warns, however, that investing in a stokvel is not without risks. "There are a lot of scammers out there who claim to be running stokvels," he says "when they are actually running illegal and risky pyramid schemes. It might look as if you'll get lots of money when your payout arrives, but these schemes usually run out of cash very quickly. The result is that you could lose your savings."
For that reason, Boda suggests a few important rules-of-the-thumb: only get involved in a stokvel if you know and trust the other members, make sure the stokvel has clear rules about how much money everyone will invest, who will manage the money, and where and how often meetings will be held. "You should also be clear on how often payouts will be made and when it will be your turn to benefit from the money. A stokvel should be managed by a trustworthy chairman and treasurer, who will be responsible for keeping records and managing the bank account," at the same time, all members need to discuss how the money will be invested and agree about the risks they are willing to take-on. If you are careful about the stokvel you join - or the members you invite, Boda tells Sowetan Live, "a stokvel can be your best friend, [if a day comes that you] need some money."
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