Using Stokvels to Raise Capital for Your SME

Stokvels have always helped multitudes of South Africans save for years; they are usually used to save for important things like bulk groceries, paying for school fees, funeral funding, and leisure reasons like holiday trips or vacations. Stokvels are no longer just for saving for events but are also used as an investment tool to raise capital for small businesses in the community. 

People who gather to join a stokvel together have a common goal: to build each other, support each other’s dreams, and also make sure there is trust amongst them. We will learn how stokvels fund businesses, who to turn to when you want to start one, the type of business to start, and examples of groups that made profitable businesses out of stokvel savings. 

Dynamics Of A Stokvel

Stokvels happen when a group of people decide to contribute money on a weekly, monthly, or quarterly basis and alternate receiving lump sum payments in return. This is a form of saving or investment usually used in communities by either lower-class or nonworking community members willing to start a business or save for a different goal. 

Most individuals prefer this method of saving because it forces consistency and instills discipline and community accountability. You must agree to the group’s contribution because you know others will expect the same when it’s your turn. If group members decide to contribute at least R500 or R1000 monthly/weekly, then you will have enough money to start a small business of your desire in a few months. According to NASASA (National Stokvel Association of South Africa), South Africans have recorded over 800,000 stokvels so far, collectively raising more than R50 billion.

Using a Stokvel to Fund Your Business

1. Approach a Group With Similar Goals

There is always a friend, neighbor, colleague, or family member that has the same vision as you, and that is where you start. Form a business stokvel group with people who have the same interest in saving to start a business, share goals amongst each other, and decide on a method that befits everyone in the group. 

An ideal and manageable stokvel group size would consist of 6 to 12 people, each contributing R500 to R2,000 monthly.

2. Equally Agree on an Investment Target

Now that the group is formed and you are all on the same page, agree on the target amount and the timeframe to raise the money. For example, a 10-member group contributing R1,000 a month will collectively have R120,000 a year, which is enough to start enough small businesses for each member.

Group members can also choose to rotate payouts so that each person receives a lump sum once. Alternatively, group members can also contribute money to start a joint business like

• Property flipping may require saving for a few years.
• Laundromat business or a car wash
• A fast-food joint using a container
• Spaza shop or mini retail shop
• Poultry business
  

How to Protect the Group Funds in the Stokvel

To avoid theft and mismanagement of funds, decide as a group to register your stove under the Co-operatives Act as a legal entity. Doing this enables you to open a business account in the stokvel’s name where every member can track financial records for transparency. There are apps that help with financial tracking, management of contributions, and also allocating shares, for example, StokFella or Absa Stokvel Account.

How Much Money Can Be Raised Through a Stokvel?

How much you raise will depend on how big the group is, how much you contribute monthly, and for how long. Realistic illustration:

Number of Members	Monthly Contribution	Timeframe (Months)	Total Amount
8	R500	12	R48,000
10	R1,000	12	R120,000
15	R2,000	12	R360,000

This is suitable for people raising money for businesses under R100,000 that require capital, like mobile car washes, small bakeries, and vending machine businesses.

Success Stories Of Real Stokvels From Real South Africans

The Women of Tembisa Cooperative

• They each contributed R1,500 every month for a year and bought an industrial bread oven, which they still use now, running a township bakery supplying local schools and shops and making big profits every month.

Six taxi drivers in Durban 

• A group of taxi drivers each contributed R2,000 a month for 18 months. They used the Stokvel money they saved to buy a second-hand minibus. They later registered a company, and today they run a small transport business collectively.

A farmers’ stokvel in Limpopo

• Farmers in Limpopo grouped themselves to contribute money monthly and ended up buying irrigation equipment, which they now use to produce and sell vegetables to local supermarkets.

If you choose the right people with the same life goals, stokvels can become the start of shared business ownership, financial independence, and many more opportunities to make money that can turn profitable.

Business Ideas Suitable to Start with Stokvel Funds

Choose a business that has a steady cash flow and could improve the community you live in as long as it is low risk and easy to manage as a group. For example:

• Any agribusiness idea that provides the community with food, e.g., egg production, raising chicken for meat, or vegetable farming.
• Venture into retail, either small grocery shops, small clothing stores, or spaza shops.
• Consider offering services that are in high demand in your area, such as car wash, catering, cleaning, and event rental.
• Start a small manufacturing business, e.g., peanut butter production, detergent making, and/or brick production.

Managing a Fair Transactional Relationship and How to Maximize Returns

• Create the conditions of the payout systems, decision-making process, and the exit rules in your constitutions.
• To ensure that there is accountability for every transaction and regular reporting, choose a treasurer.
• Incorporate digital tools like StokFella, Capitec Stokvel Account, or FNB Group Save to track each and every payment.
• Maximize your returns by reinvesting the money you have made and splitting it at a later stage.
  

A Real Example of ROI in Stok

You can still recover your whole investment in a year while still having a thriving business. For example, if your stokvel group invests your collective money in an R120,000 chicken farm that makes R10,000 a month, it makes a way higher return on investment than if you had put your money in a savings account. This is a real economic empowerment for you and your community. 

Are Stokvels the Future of Grassroots Entrepreneurship?

The difficult lending conditions in South Africa are not so kind to the unemployed and low-income community members, making stokvels the best solution for them to access capital to start any business of their choice. Stokvels have a way of bringing the community together based on trust, discipline, and the spirit of togetherness. Through stokvels, ordinary people can participate in the business ownership industry and become collective investors.

Final Thoughts

Ordinary people can finally start a business and make enough money to feed their families through stokvel. Starting a business doesn’t always require a bank loan or a wealthy investor if you have a dedicated group that shares the same goals and plans. A stokvel is a perfect example of how a simple R500 per month can transform into a well-functioning business with high profits as long as we learn to share resources and come together as one to achieve our goals. South Africans have now started making stokvel more meaningful and not only about saving; they now come together to form businesses like bakeries, poultry farms, and even car washes. Stokvel is now a