What are stockvels?

What are stockvels?

The name stokvel can be traced back to the term stock fairs,as the rotating cattle auctions of English settlers in the Eastern Cape during the early 19th century were known. Stockvels are invitation only clubs of twelve or more people serving as rotating credit unions or saving scheme in South Africa where members contribute fixed sums of money to a central fund on a weekly,fortnightly or monthly basis.There are different types of stockvels in South Africa.

Contribution stokvels – These are traditional savings scheme in which members contribute a fixed amount of money to a common pool weekly,fortnightly or monthly. Members would receive the lump sum on a rotational basis,and they are free to use the money for any purpose.

Basic Stokvels – These differ from the contributions stokvels in that it functions as a saving scheme that pays out for specific events such as a death or at Christmas.

Grocery Stokvels – This one collects pool money on a regular basis and uses it to purchase big items that can be used by the group to generate an income for example,a marquee that could be rented out to the community for use on special occasions.

Family Stokvels – This one entails investing the pooled money in formal bank accounts or financial services.The money is paid out according to the needs of the family, but generally the funds are used for buying land or cars,for business investments,or for deposits on bank loans.

Investment Group – Invests money in order to benefit from the interest.When an investment pays out,the money is split but,in some cases,part of it will be kept back for reinvestment.

Party Stokvels – This type arranges street or jazz parties,often with live entertainment. An entrance fee is charged and food and drinks are sold. Members then share in the profits. Some of these stokvels have grown into sophisticated businesses.

Borrowing Stokvels – This type loans money at high monthly interest rates between 20% and 50% to members and sub members from its regular pool money.

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