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Characteristics of Credit Instruments Issued by Stokvels in South Africa

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  • Lindiwe Ngcobo
  • Joseph Chisasa

Abstract

Access to formal credit and other financial instruments remains a challenge for the majority of households in South Africa. The objective of this study was, therefore, to determine the characteristics of credit instruments issued by stokvels to households in South Africa. Prior studies have generally focused on mobilization of savings through stokvels while none has paid particular attention to the credit supply function of stokvels. This study attempts to fill this gap by using a self-administered research questionnaire on a sample of 386 respondents. Members of stokvels were surveyed from the cities of Pretoria and Johannesburg in the Gauteng province of South Africa. Data was analysed using descriptive statistics, exploratory factor and correlation analyses. Results show that stokvels issue short-term loans from less than 3 to 6 months. Interest rates are high ranging from 25% to 35% and are charged monthly. Loan sizes are small with approximately two-thirds of the respondents receiving loans above R500 while the remaining third received less than R500. Finally, all loans are secured by the borrower’s identification document or bank card and personal identification number. The results of this study have policy implications for financial institutions in South Africa.

Suggested Citation

  • Lindiwe Ngcobo & Joseph Chisasa, 2018. "Characteristics of Credit Instruments Issued by Stokvels in South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 10(6), pages 240-250.
    • Handle: RePEc:rnd:arjebs:v:10:y:2018:i:6:p:240-250
    DOI: 10.22610/jebs.v10i6(J).2614
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    References listed on IDEAS

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    1. World Bank, 2013. "The World Bank Annual Report 2013," World Bank Publications - Books, The World Bank Group, number 16091, April.
    2. World Bank, 2006. "The World Bank Annual Report 2006," World Bank Publications - Books, The World Bank Group, number 7526, April.
    3. Brigit Helms, 2006. "Access for All : Building Inclusive Financial Systems," World Bank Publications - Books, The World Bank Group, number 6973, April.
    4. Demirguc-Kunt, Asli & Klapper, Leora, 2012. "Measuring financial inclusion : the Global Findex Database," Policy Research Working Paper Series 6025, The World Bank.
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    Cited by:

    1. Lindiwe Ngcobo, 2024. "The Impact of Stokvel and Banking Sector Efficiency: an Econometrics Model using (ARDL) Approach to Cointegration," ACTA VSFS, University of Finance and Administration, vol. 18(2), pages 127-140.
    2. Lindiwe Ngcobo & Joseph Chisasa Joseph & Mantepu Tshepo MaseTshaba, 2023. "Stokvel saving and banking sector liquidity in South Africa: cointegration and short-run dynamics," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 12(7), pages 263-270, October.
    3. Lindiwe Ngcobo, 2023. "The Relationship Between Stokvels and Banking Sector Efficiency: An ARDL Approach," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 15(11), pages 1-40, November.

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