Financial Literacy and Stokvels Savings of Low-Income Households in South Africa

Abstract

Purpose: Despite the fact that low-income households have limited financial literacy and are regarded as unbanked, they still earn higher returns on their savings. The aim of this study was to examine financial literacy and stokvels savings of low-income households in South Africa. Design/Methodology/Approach: The study is using a quantitative research methodology (descriptive statistics and correlation analysis) with data collected from questionnaires administered to respondents in Gauteng province. Findings: The results revealed that more females (52,3%) than males (45,1%) participate in stokvels. As regards the education levels of participants, most respondents indicated that they had a matric (33,9%) or had no schooling (16,8%). It was found that low-income households tend to invest in stokvels to provide for high festive season cash requirements (with the highest mean of 4,62) while others invest in pyramid schemes to generates lots of income (with the lowest mean of 4,07). Practical Implications: These results may be used to guide policymakers in terms of where emphasis should be placed regarding financial literacy in savings for low-income South African households. Originality value: An examinination was done in financial literacy and stokvels savings of low-income households in South Africa. Furthermore, stokvels are regarded as unbanked. The results revealed that stokvels low-income households are generally financially illiterate contrary to many studies the relationship between stokvels and savings is not assymetry. Acknowledgment: This research paper is a product of my unpublished master's degree 2018 thesis entitled: "The nature and characteristics of credit instruments issued by stokvels in South Africa". This thesis may be found in the UNISA repository but is unpublished material.