How stokvels are empowering women entrepreneurs

Creating generational wealth requires the discipline to save consistently and the insight to invest wisely. Even small amounts set aside over the long term can improve the financial well-being of multiple generations. On paper, these principles may seem straightforward to apply, but in a South African context, generational wealth creation is challenging.

 Due to the country’s underperforming economy, rising consumer inflation, existing debt, and financial hardship, many South Africans are struggling to cover daily essentials with their disposable income, such as food and utilities. Consequently, South Africa’s Household Saving Rate decreased to -1,20 percent at the beginning of 2025. Compared to the global average of 10%, South Africa has one of the worst savings rates in the world.

 However, the global savings rate is calculated with national accounting standards based on global practices set by international organisations, such as the World Bank. While a good indicator of South African households’ formalised savings, these statistics exclude a unique and inherently South African savings and investment tradition that is deeply embedded in our history and culture: stokvels.

Over the past years, stokvels have grown to over 11 million South African adults managing R50 billion annually. These community-based resource pools are built on the African ideals of social cohesion, accessible financial support, and interconnectedness. Not only are stokvels deeply rooted in South African heritage, but they can also financially empower participants in more ways than one. Apart from serving as personal savings and investment mechanisms, stokvels can be a significant business driver for generational wealth creation.

 As a child, I watched the impact that stokvels not only made on the lives of community members but my mother’s financial well-being. From providing the community with groceries, donating essential items, to lending money, her stokvel enabled others to provide for their families and my mother to provide for her own. Starting as a means of survival and eventually turning into a solid supplemental income, my mother was able to be financially well. Thanks to this stokvel, I could also pursue my educational aspirations.

Our family is only one example of the transformative momentum that stokvels can create. Throughout history, African women have embodied a spirit of entrepreneurship to support their families. With one of the highest rates of entrepreneurship in the world, almost one in four women in sub-Saharan Africa manages their own business. Despite these numbers, Africa’s women-led businesses face a $42 billion financing gap.

 Africa’s women-led SMEs, especially early-stage businesses, currently face a stringent risk assessment process. Often, women without the necessary financial literacy, business track record, available liquidity, or collateral are deemed ‘unbankable’. Unlike formal investment vehicles, stokvels don’t have the same strict regulations for SME’s funding application processes as financial institutions do.

 By removing these entry barriers to funding, stokvels can use their collective power to advance South Africa’s women-led SMEs where needed most – low-margin sectors and informal environments. As a real-world solution that reflects South Africa’s on-the-ground realities, stokvels can fulfil a transformative role by advancing economic inclusion at a grassroots level.

 In turn, business-focused stokvels can help women entrepreneurs to build creditworthiness. In this way, stokvels are enabling women entrepreneurs to showcase financial responsibility and build a business track record when future funding is needed from financial institutions.

Fortunately, Africa’s financial institutions are beginning to expand their risk perception processes by including more informal indicators of financial reliability. Financial institutions have also started to expand their own alternative funding solutions in the form of formalised stokvel accounts. By merging the flexibility of traditional stokvels with the security, technology, and structure of commercial banks, business-focused stokvels have the choice to collectively build prosperity in a more accountable setting.

 By welcoming more women entrepreneurs into the business sector, generations of South Africans stand to benefit. Stokvel-backed SMEs can build generational wealth in multiple ways: as a stable source of income, creating financial literacy, and transitioning wealth to the next generation.

 Sustainable income streams are generated by investing in high-potential areas, such as crop farming. Centred on inclusivity and generational wealth, women and their children are empowered by shared resources, collaborative opportunities, and financial literacy workshops to build long-term wealth.

Stokvels have been passed on by generations for a reason. South Africans should revere this tradition not only as a part of our heritage, but as a solution for our shared future too. In the past, stokvels have united communities around a common purpose. To build transformative wealth for the next generation, our new common purpose must be to support the success of South Africa’s women-led businesses with authentic, traditionally inspired solutions such as the humble stokvel.

* Lengolo is the product manager of personal and private banking and co-founder of Stokvel Awards at Absa.

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