Warwick Business School has recently confirmed that women investors outperform their male counterparts, and by no less than 1,8 % per annum on average. Over 30 years, that’s double your money!
Mike Lledo CA(SA)
Independent
Financial Services Consultant
R50 billion a year invested in stokvels. Incredible for a nation where the latest personal savings ratio is a mere 0,7%. R50 billion could buy a large number of the Top 100 JSE companies! Have we underestimated the ‘informal’ financial services sector?
Financial inclusion is critical
Despite financial services dominating global economies, according to the World Bank Global Findex, in 2017 there were some 1,7 billion adults worldwide who were unbanked. Financial inclusion is a key enabler for 7 of the 17 Sustainable Development Goals ‘to reduce extreme poverty and boost shared prosperity’. ‘It means that individuals and businesses have access to useful and affordable financial products and services that meet their needs … delivered in a responsible and sustainable way.’
In South Africa, we are well serviced by the big-brand banks, life assurers and investment managers. The World Economic Forum in 2019 ranked us 19th in the globe as a financial hub with a score of 100 for our ‘well-developed equity, insurance and credit markets’. We are renowned for our sophistication in financial services and high quality of regulation.
Yet we also have an extraordinary ‘informal’ financial services sector.
Are community schemes unusual?
The International Cooperative and Mutual Insurance Federation (ICMIF), reporting a decade of financial highlights (2017), showed premium income at USD1,31 trillion, assets of USD8,9 trillion, 27% global market share, 922 million members and 1,16 million employees. Mutuals are some of the oldest insurers and dominant in developed markets.
Emerging markets throughout the world have also developed their own community structures, albeit far less formal than the structures we are familiar with.
At home, the National Stokvel Association of South Africa (NASASA) represents over 800 000 stokvel groups with over 11 million members who are saving some R50 billion per year. They are registered with the Reserve Bank. Their members include a diverse set of groupings such as rotational stokvels, grocery stokvels, savings clubs, burial societies, investment clubs, social clubs, borrowing stokvels and multi-function stokvels.
NASASA’s vision states: ‘Our organisation sees a future where our society is equal. This will be done through a revision of the financial system, which will be underpinned by the Stokvel method, and owned by the Stokvel constituency. Stokvels will be at the centre of the sharing economy – a key feature of the fourth industrial revolution.’
Beyond NASASA are numerous other associations, more and less formalised in various communities, with burial societies and funeral parlours being a significant component. Funeral policy premiums alone are in excess of R7,3 billion per annum incorporating some 14 million households.
Today our banks are responding with more affordable and easier access to bank accounts. Life assurers and boutique funeral insurance companies are partnering with investment and risk solutions. Mobile technology has accelerated access and service.
Even grocery wholesalers are now partnering with stokvels.
What impact are we making on these communities?
- Do we understand the financial needs of these schemes and our domestic and corporate employees?
- Do we understand how they are managing insurance risks and investments?
- Can we assist in basic financial literacy and education, and especially avoiding scams?
- Can we assist with basic bookkeeping, financial controls, cash management, fee negotiation and record-keeping?
- Are there opportunities for broader access to solutions such as partnering with established institutions?
- How does one preserve the ethos, principles and culture of these communities?
