Traditional methods meet modern digital ways as stokvels take advantage of 21st-century tech

For generations, community-driven stokvels have met the money needs of their members by opening access to funding for everything from funerals to school fees. However, although the schemes provide regular paydays, they do not build wealth. It’s a problem that required a new view, a digital face and an entrepreneurial spirit to bring traditional stokvels up to date. Recently, all three requirements for this transformation of the traditional into modern methods came together when mining engineer turned banker, Tshepo Moloi, realised that things could be different, and began working on an app named Stokfella. The app went on to win the Best Financial Solution section of the 2020 MTN Business App of the Year Awards and is now attracting a new generation of stokvel savers.

The key to the app’s success has been digitally based options that ease the administrative burden of their traditional community-based schemes and offer business-focused investment options and benefits.

“Stokfella was my first socially based developmental challenge. My thinking was that although the stokvel concept had been meeting peoples’ needs for years, it could work better,” says Moloi.

“With my engineering background, I realised that I could build processes around stokvel operations and then, using my banking experience, marry the processes to a financially efficient model.

“I believe that stokvels are an industry. Like any industry, they operate at different levels and offer services that are matched to customer needs. I found that about 60% of stokvels are still traditional and focus on burial schemes, buying groceries, consumables and other services and that the rest of the schemes concentrate on savings.

“It became obvious that even members of community-based stokvels didn’t realise that they were, in fact, participants in long-term savings schemes. This was particularly the case in burial stokvels. People are content to contribute to these structures for many years, knowing that funds are paid out as members pass away.”

The money, instead of being invested for better returns, remains in a basic account. For example, if a scheme on average pays out about R10 000 a year and has total reserves of R100 000, this meant that the opportunity to have R90 000 invested and earning better returns was being lost.”

So, how does the Stokfella app change all this?

As a digital platform, it addresses a younger generation of savers (average age about 35 years old) and investors who are comfortable with the stokvel traditions but want to accumulate funds and build future wealth.

“They want stokvels to work for them and open up investment opportunities by using accumulated funds from like-minded people to invest in, say, a property where they can benefit from the growth of property values and also through rentals,” says Moloi.

By broadening this concept, Stokfella encouraged people to participate as group investors in activities like transport and logistics, buy franchises and even invest in start-ups buying machinery to produce retail products. The one constant of the offering with the stokvel principle is that everyone contributes and everyone shares the benefits. That’s why we describe our business as wealth-building made simple,” says Moloi.

People who have taken advantage of the Stokfella digital offering include existing stokvels that want to stick with the ‘old-way’ but wish to digitise their offerings to streamline administration, improve information flow and an interactive base for members to communicate with their stokvels.

Others create investment-based stokvels, post them on the site and invite like-minded groups or individuals to join their ventures. Stokfella also assists those who want to start community-based initiatives by helping with structuring governance measures that safeguard investors.

The success of updated, digital stokvels is demonstrated by the 30 000 people who now regularly use the platform and the millions of transactions that have been recorded since the app went live.

Stokfella may be small and focused now, says Moloi, but with more than eight million members, the stokvel industry offers boundless opportunities.

“The success of Stokfella proves that even time-honoured, traditional practices can be given new life,” says Kholo Magagane, Head of Marketing at MTN Business. The success of this app demonstrates what has made the MTN Business App of the Year a developmental tool that has helped shape the way that thousands of South Africans get information and even invest.

“By providing tech-savvy entrepreneurs with a platform for sharing their inspiration with other like-minded developers, we are helping to build a new digitally aware nation.”