Essays on second-generation stokvels: Their essential role in promoting financial inclusion in South Africa
Date
2024-12
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Publisher
Stellenbosch : Stellenbosch University
Abstract
Stokvels are informal institutions where members pool their savings through periodic contributions; the pooled savings are distributed to members at a time and under mutually agreed-upon circumstances. They are an important source of informal financial services and a shield against exploitative practices for those excluded or underserved in formal financial services. However, their current operating model is heavily biased towards consumption activities and characterised by specialised and disparate product offerings, limiting members’ ability to exploit the total of their pooled savings to maximise their welfare. The study seeks to investigate the possibility of integrating different financial products into a consolidated offering, including savings, credit, insurance and investment for stokvel members. Literature has established that these products have positive linkages to welfare improvement and are important for alleviating poverty, improving the welfare of individuals and, therefore, structural transformation in developing countries.
However, there is a dearth of literature on how traditional stokvels could be nudged to enhance their operations in this regard. To this end, the study has three objectives attended to in three distinct and interrelated papers. The first objective is to assess the evolution of stokvels in South Africa and the factors that have influenced their development. The first paper presents a scientific analysis of the development of stokvels and their various typologies. The assessment is done by reviewing the literature on stokvels and highlighting potential products and institutional gaps. Due to the rarity of such analysis, this work adds to the scant literature on potential product or institutional gaps related to stokvels.
Given the growing literature focusing on gender dynamics in stokvel participation, the second paper empirically investigates the potential existence of the gender gap in the stokvel industry and its correlates. The Global Financial Inclusion database of 2014 shows that women make up 55% or 1.1 billion of the world’s unbanked population (Demirgüç-Kunt et al., 2015). This highlights the fact that the gender gap in financial inclusion could persist in varying degrees across different segments of the population and different contexts. The dearth of empirical literature on whether such a gap extends to the usage of informal financial services, particularly in stokvels, creates an opportunity for further investigation. This paper offers an innovative methodological approach to analysing the financial inclusion gender gap. It extends existing literature, which has focused on the binary classification of either being financially included or not, by introducing ordinal categorisation that brings more nuance and insights, using 2020 data from the Old Mutual Savings Investment Survey. From a policy and practical perspective, the insights generated from this research could provide opportunities and guidance on how such institutions can be used to overcome exclusion challenges.
The third objective of the study is to propose a conceptual framework towards a next-generation stokvel that integrates different financial products into a consolidated offering, including savings, credit, insurance and investment for stokvel members. This is in line with Walsham (1995), who posits that the output of research and its contribution to knowledge can take the form of concepts, a conceptual framework and propositions or mid-range theory. The contribution of this research to knowledge is in the form of a conceptual framework to further analysis or discourse on stokvels as an instrument for financial inclusion.
Description
Thesis (PhD)--Stellenbosch University, 2024.