Stokvels as an instrument and channel to extend credit to poor households in South Africa

Abstract

The aim of the article is to investigate the possible use of traditional stokvels as a channel or conduit to give poor households access to much-needed cash. Cash and access to cash or credit is central to economic life. The hypothesis of the article is that traditional stokvels in South Africa can be used in their existing form, when pooled, as a special purpose vehicle (SPV) to extend much-needed cash to poor households in order to smooth their consumption. In dealing with uncertainty, the traditional stokvels ensure reliable and predictable behaviour in a mechanism that makes it possible to supply credit at low cost and risk.