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CHAPTER 4
1) TERMINOLOGY
Microcredit| The granting of credit, often without collateral, to low-income individuals or entrepreneurs. Microcredit also refers to microloan| Group lending| Group of individuals provide collateral for loans to members of that group through a group repayment pledge| Collateral| Asset pledge by a borrower to secure a loan|

ROSCAs| Rotating savings and credit associations (Stokvel)Associations formed by a group of participants who agree to make regular contributions to a fund. The fund is given in part or in total to each contributor| Micro savings| Deposit services that allow low-income individuals to accumulate small amounts of money for future use. Often without a minimum balance| Micro insurance| Provision of insurance to low-income households| NASASA| National Stokvel Association of South Africa|

SACCOL| Savings and Credit Cooperative League|
SAMAF| South African Microfinance Apex Fund|

2) Motives behind savings decisions
* Insurance against disability, illness, sudden income losses * Protection against uneven income streams due to seasonal variations * Wealth accumulation to finance a household’s long term goals such as acquiring productive assets like land or housing, or consumer durables refrigerators * Savings for future investments and retirements

3) MEMBER-BASED FINANCIAL SERVICES
* Stokvel
* Cooperative financial institutions
* Cooperative banks
* Friendly societies
* Mutual banks

4) STOKVEL
A Stokvel is a group or association of individuals who make regular contributions to a pool of savings or common fund. Generally on a weekly, fortnightly or monthly. In many stokvels the pool is given total or in part to each contributor on a strictly rotational basis.

4.1 FEATURES OF STOKVEL
* The arrangement between the members of a stokvel is rarely formalized in a written agreement * Stokvel is directed by the common bond that exists between members * Strong social motives to participate

* The key economic reason for participation is to accumulate cash and obtain credit * Members of as stokvel who receive the pool of funds early in the stokvel cycle are in the position of borrowers * Members receiving the pool at a late stage of the cycle lenders

4.2 TYPES OF STOKVEL

* TRADISIONAL STOKVEL: Earliest form of stokvel and are general savings clubs that rotate pooled funds to members on a mutual agreed basis

* BURIAL SOCIETIES: Is established to assist members with funeral cost. Formed between people with a common bond such as same church.

* INVESTMENT STOKVEL: save or bank the pool of savings with the objective of carrying out capital projects or investing in a business venture. Members are generally more affluent and make higher contributions

4.3 LEGAL AND REGULATORY FRAMEWORK

According to the common bond exemption notice
* could be formal or informal rotating scheme , with social or economic functions * mutual support to each other towards the attainment of specific objectives * establishes a continuous pool of capital by raising funds with the subscription of its members * grant credit to and on behalf of the members

* provide for members to share in profit and nominated management * relies on self-imposed regulation to protect the interest of the members

The conditions applicable to stokvel
* Purpose of self-regulation, a stokvel must be a member of or affiliated to the NASASA * Must not allow a member at any time to withdraw his/her contribution * Benefits of the members of the stokvel shall not be provided exclusively by ways of loans * Must keep accounting records that reflect the state of affairs * Must produce annual financial statements within 120 days of its financial year end * If the subscription from members is less than R3 million a report by an accountant and auditor is not required

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