Everyone knows savings are important – but what if there is always too much month left at the end of your earnings? What do you do when you know there’s a large expense coming up – kid’s school uniforms, balloon payment on your car or a baby on the way?
Some expenses just can’t be met by bank loans and borrowing from unregistered sources is never a good (or cheap) option. It was with situations like this in mind that people all over the world got together with others they trusted and created socially-constructed savings plans or clubs, many of which still operate today and provide life-changing funds for their members.
The premise of each is the same as that on which ProfitShare Partners was founded: SMEs who approach ProfitShare Partners for assistance need only show an official order from a legitimate source such as a large corporate of Government department to be eligible for finance, which is provided rapidly on approval.
Here’s how it works around the world with savings clubs and similar mechanisms:
Stokvels: Pronounced “stock-fells”, these are informal savings clubs widely used in South Africa. A group of people pool their money together regularly – usually monthly – and take turns receiving the entire pool. This gives members access to a larger sum of money when it’s their turn.
If a stokvel has 12 members, each will receive their payout once a year. The month is usually allocated by drawing names, or determined by need.
Some stokvels have evolved in sophistication, with members voting in a treasurer and chairperson who invest the money to enhance returns. Members take turns in hosting the monthly meeting, where the financials are reviewed and members create close bonds with each other.
Trust is a vital factor in any situation in which money is central to the organisation, so gatherings are important to solidify relationships.
Chit Funds: These are a traditional type of informal savings common in India and other parts of South Asia. Like stokvels, each person in a group contributes a fixed amount monthly, and one member receives the total pool as a payout in turn. This cycle continues until all members have received their payouts.
Hui: This traditional savings system is prevalent in China and other Asian communities and works in the same cycle as stokvels and chit funds.
Largely working in the same manner are tandas – also known as cundinas – found in Latin American and Hispanic communities; sou-sou, rotating savings and credit associations within the Caribbean and African Diaspora; and Chama, savings groups common in East Africa.
Apart from specifically-named systems, informal rotating savings and credit associations (ROSCAs) are widespread globally. Usually formed by individuals within a community, workplace or social network, and they follow similar principles of contributing and receiving funds in rotation.
Also more available to those with less financial clout or traditional banking services are micro-Loans or micro-credit programs that provide small loans to individuals in order to help them start or expand small businesses, improve their livelihoods, and manage emergencies.
“All of these financial mechanisms have at their heart the essence of what ProfitShare Partners was founded on,” says the company’s founder and CEO, Andrew Maren. “It’s the spirit of ‘Ubuntu’ – I am because you are; you are because we are.
“By enabling small businesses to access finance, we engender growth and job creation as a vital by-product,” he says. “Just as the stokvel or micro-loan can assist individuals to achieve their dreams, ProfitShare Partners does the same – and we feel immense gratitude where our clients succeed.”
