Do property stokvels allow for greater economic inclusion than traditional mortgages?

Matshaka, Lethu Mzikaphalo

Do property stokvels allow for greater economic inclusion than traditional mortgages?

Thesis / Dissertation

2023

Abstract

Since the dawn of democracy in 1994 South Africa has made incredible strides in diverse areas, thereby cementing its place as one of the largest and most advanced economies on the African continent. However, there are areas where progress still leaves much to be desired such as the provision of quality housing, particularly to low-income earners in the country. Since 1994, the South African Government has adopted various interventions with the aim of expediting the supply of housing to ordinary South Africans and thereby ensure a right to adequate housing as enshrined in the South African Constitution. As the housing backlog seems to be everincreasing, another increasingly popular phenomenon in South Africa is that of a property stokvel. South Africans of all class put money together for the aim of gaining access to property in some form or another. Simply put, the concept of an ordinary stokvel, where South Africans would pool money to buy groceries at the end of a given year, has been adapted to enable people to now gain access to property (as opposed to simply purchasing groceries). There were three main objectives to the study. They are: to explore the challenges faced by South Africans of a lower economic class that prevent them gaining access to traditional mortgage financing from banks in South Africa; To understand the motivations for participating in property stokvels in South Africa and; To understand which, between property stokvels and mortgage financing, is more appropriate for acquiring property in South Africa. The sample of participants was drawn from individuals who have participated in property stokvels, and qualitative, semi-structured interviews were conducted with these participants. From the thematic analysis of the interview data, the study found that that there are various challenges related to traditional housing finance applications such as a complex application process, the fear of rejection by banks, the associated anxieties, and the lack of both affordability and flexibility associated with traditional housing finance. Moreover, the study found that some of the main reasons people participate in property stokvels are property affordability and long-term investment goals, strong and effective leadership in property stokvels, their flexibility and relevance to members' needs, access to large scale opportunity, and building collectively whilst being debt free. Finally, the study highlighted various challenges associated with property stokvels such as the time it took for the property to be transferred to the participants. Notwithstanding these challenges, the study found that the benefits of property stokvels outweighed their challenges. It also found that property stokvels were more appropriate than mortgage financing, particularly for low-income earners, for purposes of gaining access to property. The study recommends that property stokvels should be used more extensively in the mainstream economy to facilitate property purchases. This is especially true for low-income groups in South Africa. It is also recommended that banks should amend their processes to ascertain how they can help property stokvels operate more effectively so as to give ordinary South Africans more widespread access to property

Keywords

Development finance

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