Immigrant-operated Informal Financial Associations in South Africa: Problems and Solutions

While immigrants are at liberty to start self-help financial associations (referred to as stokvels in South Africa) to cater for their unfufilled need for capital, the benefits of this laudable effort are seldom maximised due to a number of shortcomings. Aim: This paper seeks to ascertain the operational obstacles that immigrant-run stokvels face and to suggest solutions accordingly. Method: Aiming to complement each other, quantitative and qualitative research approaches were utilised to conduct this study. Quantitative and qualitative data were collected through a self-administered questionnaire and one-on-one in-depth interviews. Purposive sampling technique was employed to reach the 123 participants who responded to the survey questionnaire and the 10 that took part in oneon-one in-depth interviews. Results: The typical immigrant African entrepreneur who participates in a stokvel, is a married male between ages of 30 and 46, and is fairly educated. While most of the respondents conceded that their stokvels faced operational problems, they also noted that the default on loan repayment and unskilled personnel on the loan management team were the issues of a greater concern. Hence, providing training and practical management skills becomes paramount to the smooth functioning of these stokvels. Uniqueness and implications: Though presumed to be a possible source of finance for immigrant-owned businesses, most studies have not explored the operational challenges that stokvels in South Africa face. The lessons drawn from this study may be of benefit to the respondents, policy-makers and academics.