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NASASA Urges Public to Exercise Caution When Joining Stokvels Amid Recent Fraud Cases

Published December 28, 2023
7 months ago

In light of recent fraudulent activities involving informal savings schemes known as stokvels, the South African public is being cautioned to thoroughly investigate such entities before becoming members. Andrew Lukhele, the chairperson of the National Stokvel Association of South Africa (NASASA), spoke out following an investigation by the Financial Sector Conduct Authority (FSCA) that implicated the United African Stokvel in a nationwide scam.

Stokvels are a popular form of collective savings in South Africa, where members contribute fixed sums of money to a central fund on a weekly, fortnightly, or monthly basis. The funds are often pooled and rotated among the members or used for communal investment purposes. Despite their generally positive reputation, a spate of fraudulent stokvels has tarnished the image of these financial collectives.

The United African Stokvel is the most recent high-profile case investigated by the FSCA. This unlawful scheme lured in participants with the promise of high returns but ultimately resulted in substantial financial loss for countless individuals. It is not an isolated incident; similar situations have occurred in the past, such as with Money Up and the Tshwaranang Community Stokvel in Free State.

Lukhele emphasized that people should be very careful when considering joining pre-existing stokvels, especially those with which they have no prior involvement or knowledge about. He pointed out that it is better to be involved from the beginning when objectives and membership are clear. This provides greater oversight and transparency, which is necessary to prevent falling victim to fraudulent operations.

The advice given to potential stokvel members is to undertake due diligence, examining the stokvel's operational history, its objectives, and the background of its members. Being vigilant about unsolicited invitations to join stokvels, particularly those promising unrealistic returns, can serve as a red flag for potential scams.

For NASASA, part of their mission is to educate the public about the nuances of stokvels and to uphold a standard within the industry that promotes trust and effective financial cooperation. To this end, they are also advocating for proper regulatory frameworks that could further protect the interests of stokvel members.

By emphasizing the importance of creating new stokvels with familiar individuals, trust is enhanced, thereby mitigating the risk of deceit. It also fosters a sense of community and financial empowerment among members, a principle that lies at the heart of the stokvel concept.

In conclusion, the rise in fraudulent stokvels serves as a stark reminder of the need for heightened awareness and careful consideration before joining any financial collective. With proper due diligence and adherence to the spirit of togetherness and transparency, stokvels can continue to be a viable and beneficial savings mechanism for South Africans.

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