COL 3704 / COL3704 FINAL EXAM

COL 3704 / COL3704 FINAL EXAM Q1. DESCRIBE AND DISCUSS LEGAL NATURE OF STOKVELS A stokvel is defined in the schedule to the Financial Advisory and Intermediary Services Act as “a group of natural persons amongst whom a common bond exists joined to form an invitation only group savings scheme and that consists of members who have pledged mutual support to each other towards the attainment of specific objectives; it establishes a continuous pool of capital by raising funds by means of subscriptions of or contributions by members…” Members of stokvels are free to create their own constitution which will regulate its composition; the reasons for which the money collected is to be used; who will be the treasury; where the money will be invested and so on. Ordinarily, stokvels are formed by people who already know each other through different social interactions. At times the public gets involved with a particular stokvel through word-of-mouth, through the church or simply through living on the same street as another member. There is rarely any form of formal advertising done. Each Constitution of a Stokvel is different, however, the basis of them are the same in that each member will be required to contribute an amount to the Stokvels’ ‘kitty”, whether that be monthly, fort-nightly or weekly. The money is then invested and paid out to each member on a rotational basis. The contributions are usually small amounts, sometimes as little as R50, but the amount will vary depending on the purpose of the Stokvel. The Constitution of the stokvel provides for its checks and balances and regulates all aspects including the number of members that may participate in the stokvel. More and more stokvels are using the option of getting its constitution endorsed by the police, by way of an official stamp, the purpose of this is to give it some form of legal validity and provide security to its members.