Original Research

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

Polly Mashigo, Christie Schoeman
Journal of Economic and Financial Sciences | Vol 5, No 1 | a305 | DOI: https://doi.org/10.4102/jef.v5i1.305 | © 2018 Polly Mashigo, Christie Schoeman | This work is licensed under CC Attribution 4.0
Submitted: 28 June 2018 | Published: 30 April 2012

About the author(s)

Polly Mashigo, Department of Economics, Tshwane University of Technology, South Africa
Christie Schoeman, Department of Economics and Econometrics, University of Johannesburg, South Africa

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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.

Keywords

group lending mechanism; stokvel; social securitisation; special purpose vehicle; formal financial sector; irreducible uncertainty

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