I. Introduction

The ‘third-sector’ of business activity refers specifically to that which is neither private, for-profit enterprise, nor State-owned enterprise.[1] This is the realm of civil society, including NGOs and community-based organisations. In this article I focus on financial organisations which operate in this sphere, or which have historically arisen with a community-upliftment purpose. Within this category, I will narrow my ambit further to financial institutions based on the co-operative model of organisation.[2] The reason for the co-operative emphasis is two-fold: first, this is a key component of the South African government’s vision for economic development and social upliftment of society.[3] In a country where inequality still largely mirrors racial divisions, this means uplifting and empowering Indigenous African communities in particular. Secondly, co-operation as a business model appears to link to Indigenous culture in both South Africa[4] and Canada,[5] making this a potentially useful vehicle for financial services in Indigenous economies.[6] This article will test this latter hypothesis in both countries against both legal and contextual reality.

A co-operative is a member-owned and democratically controlled form of corporate entity.[7] Co-operatives have historically held an appeal for those with a more communitarian outlook on economic activity, including the international labour movement.[8] Narrowing the focus from there (as above), in this article I refer to ‘credit unions’ in Canada; and ‘co-operative banks’ and ‘co-operative financial institutions’ (CFIs) in South Africa. These formats of organisation are all based on the co-operative model and are licensed (or otherwise permitted) to accept deposits from members of the public and thereby perform the function of a bank.[9] I will also discuss an Indigenous form of informal saving and lending association in South Africa, which is known generically as a ‘stokvel’.[10] Stokvels are not co-operatives according to the statutory definition, but there are some similarities, particularly in the emphasis on community and upliftment.

The article proceeds as follows: in part II I situate the co-operative format of financial institution within the framework of internationally accepted co-operative principles. Thereafter in part III I will briefly examine the law on credit unions in Canada, contextualised by both the historical and current status of these entities and their connection to the Indigenous economy. In part IV I discuss the South African legislative framework and evaluate the contemporary position of CFIs, including among Indigenous African communities. The juxtaposition of parts III and IV reveals that credit unions have fared better in Canada, but that credit unions controlled by the Indigenous community there are quite rare. In South Africa, where Indigenous Africans form an overwhelming majority of the population, despite government support there are also significant barriers to CFI success. In part V I move into the realm of informality to explain one key barrier to success in the South African Indigenous economy, namely competition for market share from stokvels. Part VI will conclude with a summary and reflection on why CFIs or credit unions may not be the best fit for the Indigenous economies in South Africa or Canada, despite the appeal of their organisational structure and co-operative emphasis.

II. Co-operative Principles

The co-operative movement worldwide is based on a set of ‘Co-operative Principles’, the current version of which was adopted by the International Co-operative Alliance in 1995.[11] These principles form the blueprint for how a co-operative must be managed. They have a lengthy pedigree, being based on the set of principles initially adopted by the Rochdale Pioneers in 1844.[12] The Pioneers were a group of workers who founded a self-help retail organisation in order to counter the difficulties of life during the industrial revolution in Britain.[13] Similar movements arose elsewhere in Europe and the co-operative format of organisation was soon exported around the globe.[14] Today the co-operative movement also has the significant support of the International Labour Organisation (ILO). ILO Recommendation 193 of 2002 calls on member states to adopt legislation on co-operatives in order to promote the Co-operative Principles.[15]

The 1995 version of these principles, contains the following seven core propositions:

  1. Voluntary and open membership (open to all who are prepared to accept the responsibility of membership);

  2. Democratic member control (members control the organisation on the basis of one vote per member);

  3. Member economic participation (members contribute the capital of the association and democratically control how it is used);

  4. Autonomy and independence (control of the association must remain with members);

  5. Education, training and information (co-operatives contribute to the education of their members so that they can participate better in the co-operative, they also provide information on co-operation to the broader community);

  6. Co-operation among co-operatives (co-operatives should participate as members of regional and international networks of co-operatives);

  7. Concern for community (co-operatives work towards the sustainable development of their community).[16]

Credit unions, as a sub-category of co-operative, trace their origins to the self-help financial organisations which arose in mid-nineteenth century Germany, both in rural areas and in the towns.[17] These co-operative banks encouraged financial discipline and helped their members grow wealth through saving.[18] They also provided loans to members in need.[19] Once in Canada, the credit union caught on swiftly and became firmly entrenched in the financial sector, as we shall see below.[20] In South Africa, finance was historically provided by a small number of commercial banks – credit unions did not enjoy the same level of prominence.[21]

As a form of co-operative, credit unions must also be based on the Co-operative Principles.[22] This reflects in how a credit union operates: since the capital of a credit union is provided by its members (in accordance with co-operative principle number (3) above), it is the savings of members which are used to fund loans to other members.[23] The democratically controlled management structure of the organisation sets the policies and terms for this lending.[24] In terms of co-operative principle (6), credit unions are also intended to exist as part of a network with other co-operatives, often providing capital for other co-operative business activities.[25]

In addition to the Co-operative Principles, credit unions are formed on the basis of a common bond between members.[26] This is a uniting characteristic which members share, such as having a common employer or profession, or residing in the same community or geographical area.[27] This bond is intended (at least in theory) to provide an element of trust and mutual knowledge between members, which facilitates co-operative financial practices and reduces default on loans.[28] A common bond may be drawn more restrictively or more permissively: McKillop and Ferguson note that a broader bond allows for diversification of membership, promoting financially stronger credit unions and also allowing for growth.[29]

Credit unions are known for their prudence in managing member funds, in line with the financial discipline which has characterised the movement from its origins.[30] Credit union networks also help to sustain the solvency and liquidity of individual unions, as we shall see with regard to the ‘mature’ Canadian market in the next Part III. Prudent financial practices have served the credit union sector well through times of general economic difficulty – such as the recent Great Recession, when risky investment strategies brought down other financial institutions.[31]

III. Credit unions in Canada

Contextual Overview

The first Canadian credit unions began in French-speaking Quebec under the leadership of Alphonse Desjardins in 1900.[32] Desjardins blended the democratic member control of the Rochdale Pioneers with the area-based community-orientation and disciplined financial behaviour of the early German co-operative banks.[33] The result was a parish-based set of organisations with close ties to the church.[34] These were known as ‘caisses populaires’ (people’s banks).[35] To this day the credit union movement in Canada is strongest in Quebec.[36] An umbrella federation of Quebecois caisses populaires, aptly referred to as the Desjardins group, is the fifth largest co-operative financial group in the world and is the sixth largest deposit-taking institution in Canada (behind the five major Canadian banks).[37]

In English-speaking Canada, a key figure in the origin of the credit union movement was Moses Coady, who founded the Antigonish co-operative movement in Nova Scotia in the 1930s.[38] Axworthy notes that Antigonish credit unions evolved to support a broader sphere of co-operation and were initially small and community-, rather than employer-based.[39] Today, most of the credit unions operating outside of Quebec are joined under the Credit Union Central of Canada (CUCC), which is a body created by federal legislation.[40] Member credit unions remain independent of the CUCC, however, and there is no group control-structure as with Desjardins in Quebec.[41]

Overall, credit unions throughout Canada reached a highpoint of about 25 per cent of the financial services market in the 1970s, which had consolidated down to about 20 per cent in the 1980s as the market reached maturity.[42] This maturity was accompanied inter alia by a reduction in the number of overall credit unions in Canada, as individual unions amalgamated into larger entities in order to drive growth in the sector and to meet the need for increased sophistication of services.[43] From a peak of about 3 200 credit unions in 1966, there were 370 credit unions in Canada in 2012.[44] Given this reduction, there was also a concomitant relaxation of the common bond requirement.[45] Stoffman notes that today most Canadian credit unions operate on an open, or community-based bond.[46] To the outside observer, there is at first glance little visible difference between banks and credit unions: both operate high street branches and offer modern electronic facilities like ATMs.[47]


From a regulatory point of view, credit unions in Canada are governed at provincial level, with each province having its own separate empowering statute. In all provinces other than Quebec, there is a credit union central, to which all the individual credit unions are affiliated.[48] Centrals regulate liquidity levels in their members and provide education and training to them.[49] At the next level up from the provincial centrals, is the CUCC referred to above.[50] The CUCC regulates liquidity for the credit union system as a whole and can inject funds into the credit union sector via the provincial centrals when needed.[51] In doing so, the CUCC would be able to channel funds from the Bank of Canada or the Canada Deposit Insurance Corporation.[52]

In Quebec the organisation of the credit union movement is different.[53] There, the vast majority of caisses populaires belong to the Desjardins group and legislation is tailored for its structure.[54] Members of the group are organised into a federation (Federation des caisses Desjardins du Quebec), which also include the central organisation, the Caisse centrale Desjardins.[55] There is a stronger control relationship between the members of the federation and the Caisse centrale than in other provinces.[56] Also there is no affiliation between the Desjardins group and the CUCC as in other provinces.[57] Prudential supervision and deposit insurance of the financial sector in Quebec, including for credit unions, is provided at provincial level.[58]

As far as the provincial statutes go, there are standard features in all of these, including: requirements for incorporation; aspects of membership, including member shares and voting rights; rules on meetings; corporate governance provisions; and rules on capital structure and liquidity. Although dealt with differently in Quebec, provisions governing deposit insurance are also standard. In order to set up the discussion which follows, both on the connection to Indigenous Canadian communities and on South African CFIs, I have isolated one aspect of this regulatory structure: the requirements for incorporation. To further reduce complexity, I will focus on just one province: Ontario.[59]

In Ontario, twenty or more individuals may incorporate a credit union, provided these persons are over eighteen, solvent, and of sound mind.[60] The articles of association must nominate at least five initial directors, who must be appropriately qualified and experienced for office.[61] A business plan must be submitted to the provincial regulatory authority for approval.[62] This plan must prove viability of the business and how members’ deposits will be protected.[63] It must also make it clear which niche market the credit union is aimed at and what distinguishes it from existing financial organisations.[64] The credit union must intend to follow the Co-operative Principles[65] and there must be a common bond stipulated for members in the by-laws.[66] From a monetary point of view, the Financial Services Commission of Ontario is likely to require at least CA$5 million dollars in initial capital, with a plan as to how to reach CA$10 million within 5 years of commencement.[67]

Connection to the Indigenous Economy

Indigenous economies vary widely in Canada, from those of the Inuit in the Arctic North, to the legal intricacies of First Nations reserves, to rural Metis communities.[68] There are also Indigenous communities within the urban areas of Canada.[69] In some of these spaces, traditional economies involving hunting, fishing, and trapping remain possible, but in others it has been necessary to move to a modern, financialised economy.[70] These vast contextual differences make it hard to present a unified account of one Canadian Indigenous economy. My focus in this article is largely on the use of corporate structures, however, and hence I will rely on general trends in the financial services market subject to this initial caution.

Canada’s history reflects an exclusion of Indigenous persons from formal sector financial organisations, including both banks and credit unions.[71] Things have changed in more recent times, although more work still needs to be done to increase access to financial services and small business capital. In this regard, the Indigenous Economic Progress Report of 2019 describes a network of over 50 ‘Aboriginal Financial Institutions’ (AFIs).[72] AFIs are an Indigenous-led initiative dating back to the 1980s and focus in particular on providing Indigenous businesses with access to capital.[73] AFIs are mostly trusts or companies, rather than credit unions, and they usually only engage in loans and do not take deposits from the public.[74] In addition to AFIs there is a fully-fledged Indigenous bank, namely the First Nations Bank of Canada (FNBC), which operates on a general mandate to serve Indigenous communities and entrepreneurs.[75] From a more mainstream perspective, each of the five big Canadian banks today also has a banking service tailored to the needs of Indigenous communities.

When looking specifically at co-operatives and co-operative financial institutions, Ketilson noted that in 2014 there were 123 co-operatives of all types in Canada which were owned and operated by Indigenous communities.[76] Of all such communities, co-operatives have been most broadly adopted by the Inuit in the Arctic circle.[77] There are, however, some Indigenous controlled credit unions in Quebec, Manitoba, and Saskatchewan.[78] Ketilson also records that some credit unions with membership from the general population have established effective policies for assisting Indigenous communities in Manitoba, Saskatchewan, and British Columbia.[79] A good example of this latter category is the Vancity Credit Union.[80]

There are challenges to Indigenous communities starting up new credit unions. These include: the large amount of capital required to establish, sustain, and grow a credit union (as seen with the law in Ontario above); the fact that AFIs often focus on high risk lending, whereas this is not normally a focus for credit union loans; an emphasis on consolidation among Canadian credit unions at regulatory policy level, which could discourage the approval of a new credit union’s business plan; and the fact that credit unions typically operate within provincial boundaries, which complicates serving a First Nations membership across such boundaries.[81] Ketilson’s reluctant conclusion is that despite an apparent fit between First Nations’ traditional culture and the co-operative business model, the existing financial regulation may explain the shortage of such entities in Canada.[82]

IV. South Africa: co-operatives, CFIs, co-operative banks

Contextual Overview[83]

The current Co-operatives Act of 2005 is not the first South African statute legislating for this form of corporate entity. Co-operatives have been a recognised form of business vehicle in that country since the early twentieth century, with previous Acts in 1922, 1937, and 1981.[84] Co-operatives are a firm part of South Africa’s history, but due to past racially discriminatory policies, these earlier co-operatives comprised white businesses only.[85] In the white minority rule era, co-operatives were strongest in the commercial agriculture sector.[86] Agricultural co-operatives were used in funding or controlling many of the inputs used in production, such as fertilizers, fuel, and equipment.[87] Sarkin cites the following statistics from the 1980s: ‘at their pinnacle … there were about 250 white agricultural co-operatives with a membership of 142 000 people, assets of some R12 billion, with an annual turnover of R22.5 billion.’[88]

Co-operatives in other sectors were generically referred to as ‘trading co-operatives’.[89] At the time of the transition to democracy in 1994, there were 256 agricultural co-operatives and 213 trading co-operatives.[90] While the agricultural co-operatives were well-resourced, the trading co-operatives were far smaller.[91] In the democratic era the number of general trading co-operatives grew rapidly: in July 2004 there were 2 150 registered trading co-operatives.[92] These were operating in sectors such as: transport (the minibus taxi industry); retail; financial services, such as savings and credit, village banks, or insurance; housing; construction; and fishing.[93]

In the same year, responsibility for co-operatives was transferred from the Department of Agriculture to the Department of Trade and Industry (DTI).[94] The DTI thereafter promoted co-operatives as a driver of economic development in South Africa, making its Co-operative Development Programme one of its flagships.[95] The upward trend in numbers continued with the promulgation of the Co-operatives Act of 2005 (in force 2007):[96] 19 550 new co-operatives were registered between 2005 and 2009, mostly by Indigenous Black South Africans.[97] The DTI attributes this increase in numbers to legislative changes; as well as support from government, including through procurement practices.[98]

The literature reports a high proportion of failed co-operatives, however. In his review of the Co-operatives Act, Sarkin cites a failure rate of 88 per cent among the post 2005 crop of registered co-operatives.[99] He attributes this to a lack of capital, a lack of access to credit, and a lack of access to markets.[100]

With regard to CFIs in particular, Hull presents useful qualitative evidence on a CFI operating in a rural part of the province of Kwazulu-Natal.[101] She narrates how this organisation began among local farmers in 2007, when members of the local community were encouraged to buy in for R100 each.[102] New members joined hoping for easier access to credit.[103] The DTI’s relevant department advised that they needed to raise R100 000 in capital in order to qualify for government funding assistance.[104] In 2010, this threshold was reached and the CFI was accredited by the DTI.[105] There was concomitant advice: members must save before loans could be granted.[106] The CFI faced obstacles in attracting savings, however, particularly its lack of facilities for accessing funds when members travelled to other parts of South Africa.[107] The study ended in 2011, when the organisation was still in existence, but was struggling to progress.[108] Members had not received the access to credit they desired, and the CFI, while still surviving on the DTI grant, had not been a resounding success.[109]

In another empirical study, Jones and Dallimore noted failures in the governance structures of the rural ‘village banks’[110] on which they conducted case studies, with unequal member participation and poor management oversight.[111] Even at the best capitalised village bank in their sample, no dividends had been paid on savings: interest had been used to fund operations instead.[112]

The latest available statistics on the Co-operative Banks Development Agency’s (CBDA – discussed below) website (dated March 2018) reflect that there were just 22 CFIs and four co-operative banks registered with them.[113] This does not reflect the wide popularity of the co-operative business model in the democratic era: clearly there are obstacles in place to establishing sustainable CFIs in South Africa.


A CFI must be registered as a co-operative with the Companies and Intellectual Property Commission (CIPC), which is located within the Department of Trade, Industry and Competition (as the DTI has been known since June 2019).[114]

A ‘co-operative’ is defined under the Co-operatives Act of 2005 as:

An autonomous association of persons united voluntarily to meet their common economic, social or cultural needs and aspirations through a jointly owned and democratically controlled enterprise organised and operated on co-operative principles.[115]

The Co-operatives Act sets the general model for how any co-operative must be established and managed. These general categories of provision have parallels with the requirements for operating an individual Canadian credit union discussed above. This reflects common ancestry to the worldwide model discussed in part II. Indeed, the Co-operatives Act refers to both the international Co-operative Principles and ILO Recommendation 193 in its preamble.

As one would expect, it is above the level of the individual credit union that the South African idiosyncrasies are clearest. Since April 2018, the South African oversight bodies comprise: the Co-operatives Advisory Council;[116] the Co-operatives Development Agency;[117] and the Co-operatives Tribunal.[118] These bodies are given wide powers to oversee (respectively): national co-operatives policy; financial and non-financial support, education and training of the co-operatives sector; and dispute resolution within co-operatives.[119] Collectively the oversight bodies are intended to increase the efficacy of co-operatives in promoting economic development, although Sarkin draws attention to the broad powers given to members of the executive to intervene in co-operatives, which hold the potential for abuse.[120]

As far as CFI-specific legislation goes, one has to look beyond just the Co-operatives Act for the full picture. CFIs are regulated in addition by a 2014 exemption[121] from the Banks Act.[122] The Co-operative Banks Act of 2007 also sets up the Prudential Authority and the CBDA as the sectoral oversight bodies: following the introduction of the Twin Peaks model of financial sector regulation in 2018, a new CFI must now register with the Prudential Authority, although this function may be delegated to the CBDA in terms of the Act.[123] The CBDA retains its supporting role under the Co-operative Banks Act, with the overall task of developing the co-operative banking sector.[124] In its ‘CFI Start-up Guide’, the CBDA lists the following requirements: 1) 200 members; 2) R100 000 in capital; 3) solvency; 4) a common bond between members; 5) legislative compliance (Co-operatives Act; 2014 exemption; and CBDA rules and standards).[125] Under the Banks Act exemption, a common bond for a CFI may arise from: having a common employer or being employed in the same business district; common membership in a religious, social, co-operative, labour, or educational group; or residing within the same defined community within a rural or urban district.[126]

The most developed form of CFI is the co-operative bank, provided for in the Co-operative Banks Act.[127] In order to register as a co-operative bank, a co-operative must apply to the Prudential Authority for registration.[128] The application must include a business plan, along with the co-operative’s constitution and savings and loans policies.[129] The applicant must convince the Authority that it has sufficient ‘human, financial, and operational capacity’ in order to function as a competent co-operative bank.[130] The proposed directors must also be sufficiently qualified and experienced and be fit and proper persons.[131]

The Co-operative Banks Act is intended to supplement and co-exist with the Co-operatives Act. The former Act stipulates that the Co-operatives Act applies to all co-operative banks and CFIs unless its application is specifically excluded or amended.[132] The Co-operative Banks Act does, however, include specific prudential measures which co-operative banks must observe.[133] In this regard, functions assigned to the CBDA include: establishing and managing a deposit insurance fund (the Co-operative Banks Deposit Insurance Fund);[134] providing financial support to co-operative banks through loans or grants;[135] and assisting co-operative banks with liquidity management.[136]

In conclusion, South African government policy has specifically promoted, supported, and regulated for co-operatives and CFIs. Uptake of these initiatives has been good, but at the time of writing this had not yet filtered through into a wide-spread CFI or co-operative banking sector. Part of the reason for this may be the prudential and compliance hurdles this corporate format entails. These are compounded by the availability of an informal Indigenous economy alternative: the stokvel.

V. Stokvels: the informal Indigenous economy alternative in South Africa

Contextual Overview

South Africa is a country forever scarred by a history of racial discrimination. The Black population was subjugated by a careful and deliberate policy aimed at obtaining their labour cheaply and at systematically excluding them from political influence or commercial opportunities.[137] This legacy means that race is still a proxy for disadvantage in South Africa, despite the emergence of a Black middle class in the democratic era.[138]

The social division in South Africa is also depicted in the dual economy thesis, which holds that there are two separate economies: a formal, developed, first economy and an informal, under-developed, second economy.[139] Although this thesis has been challenged on the grounds that the two economies are not separate but interwoven, this challenge does not negate the concept of informality.[140] When the South African DTI (or in its current format, the DTIC) publishes a strategy about economic development, this would include changing the circumstances of the poorest class of South Africans – the majority of whom will be Indigenous Africans, and many of whom will be engaged in the informal economy in some capacity.

The ‘Indigenous economy’ thus in effect refers to that part of the economy which is predominantly informal. Into this category fall the economies of most South African ‘townships’ – urban settlements set aside for Black persons under Apartheid, which endure to this day in South African cities. It would also include the rural areas where many South Africans continue to live in largely Indigenous African communities. Formal businesses such as banks, retailers, and mobile network companies do penetrate this space, but usually without changing the largely informal characteristics of the dominant modes of employment and production.

It is within this Indigenous economy that we find most of South Africa’s stokvels. African Response adopted the following very general definition of ‘stokvel’ for their quantitative survey of the South African market:

Stokvels are group saving schemes providing for mutual and financial well being as well as social and entertainment needs.[141]

There is a more detailed statutory definition, which may be found in the National Credit Act[142] and, in virtually identical form, in the 2014 exemption from the Banks Act discussed above.[143] As the African Response definition indicates, stokvels are collective associations which members join in order to save money. Another core function not mentioned there is the use of these savings to provide credit to members. I will develop this further below. There may also be other purposes in some types of stokvel, such as insuring against the costs of a funeral (a burial society) or to save specifically towards bulk purchases of groceries (a grocery stokvel).[144]

In order to set up the empirical discussion which follows below, it is also necessary to distinguish two key models of saving and lending stokvels. First, in the ROSCA (‘rotating savings and credit association’), members contribute on a defined regular basis to a common pool, with the total pool on each occasion going to a different member according to a roster agreed by the association in advance.[145] Secondly, in the ASCRA (‘accumulating savings and credit association’), members contribute on a defined regular basis to a common pool, which is saved until a pre-determined maturity date when all members receive a payout at the same time.[146] In this model the stored pool of capital may be increased by lending: members may be permitted to take a loan from the accumulated capital and return the borrowed sum later with an agreed amount of interest.[147]

In taking deposits from members, stokvels exercise a function which would be illegal for non-banks in South Africa.[148] Stokvels are exempted from the Banks Act, however, and may thus lawfully accept deposits from the public.[149] The exemption notice does provide that if R100 000 or more in capital is held in the stokvel, then it should register with the National Stokvel Association of South Africa (NASASA).[150]

Similarly, under consumer credit law, an interest-bearing loan to a natural person would invariably trigger the application of the National Credit Act.[151] This would mean, for example: that the lender would need to be a registered credit provider;[152] that affordability and creditworthiness assessments would have to be done on the borrower prior to granting the loan in order to avoid reckless lending;[153] that there would be a complicated procedure to follow before a debt could lawfully be enforced;[154] and that there would be clear limits on the costs of credit.[155] These would be barriers to borrowing in the Indigenous economy if enforced, particularly since many applicants may be credit-blacklisted, which would raise the reckless lending barrier to any potential loan. In a manner which is comparatively unusual, there is no exemption in South Africa for consumer-to-consumer lending and the registration threshold for lenders is R0.[156] (In other words, regardless of loan size or the fact that it was not granted as part of a lending business, a lender must register.) Failure to register means that the loan agreement is unlawful and hence void.[157] Possibly for this reason, the National Credit Act exempts ‘a transaction between a stokvel and a member of that stokvel in accordance with the rules of that stokvel’ from its ambit.[158] Hence if a stokvel’s constitution permits loans to members, this may lawfully take place without regard for consumer credit law.

In sum, South African financial sector law regulates stokvels largely in order to exclude their activities from the sphere of statutory application. In this way stokvels are lawfully permitted to act as the banks of the informal economy and, like most economic activity in the informal sector, they escape legal scrutiny. Stokvels tend to be formed between friends, family, and neighbours, with the relational element between members providing the trust and accountability mechanisms needed to make an extra-legal system workable.[159] These factors have combined to make stokvels a highly successful form of financial institution in South Africa. African Response estimates that there are currently about 550 000 stokvels in South Africa, collectively holding R49,5 billion in capital representing the investments of 11.6 million people.[160] Given that there are roughly 60 million people living in South Africa, this comprises a sizeable proportion of the population.[161]

Taken together, stokvels offer significant competition to CFIs as a vehicle for the savings and loans of the Indigenous community. CFIs are part of the formal sector and hence have to comply with financial sector regulations. For example, CFIs do not enjoy an exemption under the National Credit Act and would be bound by its provisions if money was loaned to natural person members. As a result, any advantages accruing through CFI format, such as access to government funding through the CBDA, must be weighed against the costs of compliance with the formal sector law.

The next section will provide an empirical account of the stokvel sector in one part of Khayelitsha, a large township near Cape Town. The purpose is to provide qualitative context on the potential for stokvels to formalise by converting into CFIs.

An Empirical View of Stokvels in Khayelitsha[162]


My team collected empirical data on stokvels in Khayelitsha between April and September 2018. I worked with a research assistant familiar with Khayelitsha, as well as a community sponsor known to him. By these combined methods, we obtained access to local stokvels. We worked predominantly in the ‘Harare’ suburb where the sponsor lived, drawing our sample from her neighbourhood connections. We conducted 20 individual interviews of stokvel members, whose stokvels all followed the ROSCA or ASCRA model. Some participants belonged to multiple stokvels of both the ROSCA and ASCRA variety. There were also two focus group sessions, drawing on the same pool of research participants. These were used to test the data in an inter-subjective manner. Interviews were conducted orally, using a semi-structured guide, and lasted anywhere between 30 and 90 minutes. At the second focus group there was also a written survey conducted of the 17 stokvel members who attended. Our dataset thus comprises a rich compilation of qualitative information, with a certain limited amount of quantitative data from the written survey.


Khayelitsha covers a large geographical area on the outskirts of Cape Town, about 30km from the city centre.[163] It was first established in 1983 toward the end of the Apartheid era, when it became clear that new land was required for the urban African population.[164] Today, many residents are unemployed and economic opportunities within Khayelitsha are scarce.[165] There is only minimal formal sector business conducted in the township, largely concentrated in the mall next to the train station.[166] Other businesses tend to be informal: from spaza shops, to taverns, to money-lenders.[167] General income levels are low as a result and housing is fairly rudimentary, varying between small brick-built homes and shacks.[168] Law enforcement does not adequately penetrate the township, leading to a high crime rate.[169] The failures of policing in Khayelitsha were confirmed in 2014 by a provincial commission of inquiry.[170] Other public services are also inadequate and service delivery protests against the government often result.[171]

Stokvels and their members

The stokvel members we spoke to comprised mostly older women of Xhosa[172] ethnicity, although most reported that men belonged to their stokvels and one of our research participants was male. Some participants had been born in Cape Town, but most traced their heritage to the ancestral lands of the amaXhosa in the Eastern Cape region of South Africa. In the written survey conducted at the second focus group, many participants reported earning a living as domestic workers; through self-employment within Khayelitsha; or by being a money-lender. Several were unemployed. Although many chose not to declare their income, the most commonly reported bracket was R5 000 or less per month, followed by R5 000 – R7 500 per month.

With regard to the stokvel associations themselves, the ROSCAs described to us varied in membership numbers between 5 and 21, with the average being 10 members. Having 10 members would allow for one full rotation in a calendar year. Contributions per member ranged from R1 000 to R5 000. Extrapolating from the higher end of this scale: if a member contributed R5 000 to her ROSCA ten times per year, that represents an annual savings figure of R50 000. This is a considerable sum, bearing in mind the general level of poverty in Khayelitsha. ROSCA payouts would usually be earmarked for a big-ticket item, like a household appliance, a car, or paying for home improvements in Cape Town or at the family home in the Eastern Cape. Given the structure of a ROSCA, members who receive a payout earlier in the cycle receive an interest-free loan from members who are paid later.[173] The loan would then be repaid by continuing to contribute until the end of the cycle.

Participants who reported membership of an ASCRA generally paid lesser monthly contributions to these associations of between R200 and R400. Sometimes an ASCRA was run simultaneously with a ROSCA with the same membership pool. Other times the ASCRA was independent. Since an ASCRA has no payment roster, membership numbers could be greater. ASCRAs were also reported to lend to members, with the most common interest rate being 30 per cent per month.[174]

As to the common bond between members, most stokvels in our sample drew their membership from within Khayelitsha. Usually the community bond was even closer to home, coming from the same immediate neighbourhood or church congregation. When asked why she chose to belong to a stokvel, one participant responded as follows:

Sometimes you say you want to buy a washing a machine and a stove but when I get the money I decide to buy shoes. You waste the money, you don’t buy what you budgeted the money for. That’s when we intervene. We help with that. … Because the reason we started this was to help each other. Because other people misuse money: they get the money and they do something else with the money. If you are doing gooi-gooi [the local term for a stokvel following the ROSCA model], you do it to get what you need. … If maybe I live in a fancy house, I also want you to live my life. That’s how we help each other.[175]

As far as the connection between stokvel members in our sample and the formal economy goes, I use two indicators here: use of a bank account (either personal or for the association) and attitude towards the law and its apparatus. In our written survey, about a third of the seventeen respondents had a personal bank account, another third kept their savings ‘somewhere else’, and the final third did not record an answer to this question. When asked whom they would borrow money from if needed, only three stated that they would borrow from a bank or formal sector lender. The most common response (ten) said they would borrow from their stokvel. There was one response each for borrow from a friend or relative and borrow from an informal money-lender. Two persons did not respond to the question.

Several South African banks also offer a club account for stokvel associations to hold collectively.[176] In interviews, a significant majority of participants said that their stokvel held such a club account with a bank.[177] This is an interesting example of symbiosis between the banking and stokvel sectors. The former gains access to the savings of township residents, whereas the latter benefits from secure storage of funds; electronic transaction mechanisms; and a certain amount of interest on deposits.

With regard to the law: all interview participants were asked about procedures in the event of default by members on payments to the stokvel. In response, we heard varying stories of non-payment and consequent methods of contract enforcement. Of these stories only one person had ever approached the local Magistrate’s Court.[178] Most debts were collected through negotiation, group pressure, or informal township dispute resolution agents. One participant was actually hostile to the idea of using formal sector law, saying it wasn’t ‘our law’.[179] Others saw law and the use of the courts as a lengthy and largely futile process.[180] These findings confirmed the view that just as with the failure of the police to curb crime, formal private law had little to offer Khayelitsha’s residents.

Potential for the CFI Model to Penetrate Khayelitsha

The findings above allow for speculation as to whether the CFI model could benefit our research participants in Khayelitsha. Empirically, we did not hear any stories about a CFI or village bank in our sample, even of a hearsay nature. Participants seemed locked in informality and as we saw above, many would be described as financially excluded in the formal sense of not having a personal bank account. In addition, there was a certain amount of distrust of State law, which does not bode well for registering a formal entity with the CBDA and then submitting to ongoing compliance duties such as financial reporting. The financial market we observed had its own idiosyncratic characteristics and needs, some of which it seems unlikely that a CFI could respond to. I will focus on two key aspects of this here.

First, members use stokvels in order to impose financial discipline on themselves and to lock away savings from competing demands. By earmarking funds for a big-ticket item at a future date and then roping in the stokvel collective to ensure that the payout was indeed spent in this way, members were saved from themselves. If funds were simply held in a CFI account like any other bank, this does not offer this form of personal coercion needed to manage money in a situation of need. Secondly, there is a massive demand for credit in Khayelitsha, often just to meet day-to-day consumption needs. Many residents, however, would be barred from borrowing from formal sector lenders due the affordability and creditworthiness rules of the National Credit Act mentioned above. A CFI would not enjoy the same exemption from this Act which a stokvel enjoys and would hence struggle to lawfully provide much needed access to credit to members.

From a human resources point of view, stokvel members were experienced in stokvel practice and had created a functional system. We did not come across many members who had formal work experience or qualifications relevant to financial management, however. This could complicate drawing up an effective business plan or finding suitably qualified directors to initiate and manage a CFI.

The conclusion must thus be that although there was significant saving activity taking place amongst the community of stokvel members we studied, the informal, close-knit stokvel model they followed was probably better suited to their needs than the legislated CFI model.

VI. Comparison and Conclusion

Once a comparative law account becomes contextual, it is more difficult to draw firm conclusions due to the idiosyncrasies of each particular jurisdiction.[181] All the more so in an account such as this one, which narrows the focus from comparative law to the usage and efficacy of co-operative formats of financial institution across markedly varied Indigenous economies.

In both Canada and South Africa, co-operatives and co-operative forms of financial institution have been a feature of the formal economy since the early twentieth century. Historically, South African co-operatives focused mostly on agriculture, and the ‘trading’ class of entities, which included CFIs, were smaller and less influential. In Canada, however, credit unions are an established part of the financial and legislative framework and have been since the beginning of co-operative enterprise in that country. When the legislation was concretised around credit union start-up requirements, we saw that in Ontario significant financial capital, as well as human and social resources, are required for successful registration. In South Africa, the formal requirements for an entry-level CFI start-up are a little more relaxed, particularly with regard to the amount of capital needed. A co-operative bank is thus perhaps a better comparator for a credit union than a CFI. The start-up requirements in the South African Co-operative Banks Act of 2007 are very similar to those for credit unions in Ontario, although the capital amount required is lower in South Africa, even adjusting for differences in currency value.

The Co-operative Banks Act of 2007 appears to be an attempt by the South African government to transplant a model of community banking which works well in some parts of the world, including Canada, to South Africa. While co-operatives are not new in this country, widespread adoption of this model of corporate organisation by Indigenous African enterprise is fairly recent. When narrowed to co-operatives trading as CFIs or co-operative banks, we have a form of deposit-taking institution which does not have deep roots among South African Indigenous persons.

If we analyse this economic policy-driven legislative trend in accordance with the metaphor famously set out by Kahn-Freund: is the CFI model similar to a carburettor which can easily be transferred from one motor vehicle to another and become integrated there as a functioning element of the whole? Or is its addition more akin to a heart transplant operation, where there is a danger that the living host body may reject the alien component?[182]

This is a question which history will answer in South Africa. While statistics are not entirely up to date, the CBDA figures do not represent a significant uptake of the model. When this is evaluated in the context of a market where CFIs must compete both with well-resourced and established conventional banks and with popular and effective informal stokvels, the prospects of success seem slight. Conventional banks offer convenient services such as ATMs, internet and mobile phone banking, money transfers through agents such as retail outlets, and country-wide access through their branch network. Stokvels offer close community connection, enforced financial discipline, and the allure of hassle-free informality. Stokvels and commercial banks are also acting in concert at present, with the advantages of each curing the defects of the other. It seems that in this cultural context there is little scope for the legislative model of the formal CFI in South Africa, and that the device exists possibly only due to significant intervention and support by an eager and willing government.

In Canada by contrast, the credit union sector is alive and well and is so long established that there is no need to talk of legal transplants. There are few examples of First Nations appropriation of this device into Indigenous communities, however. AFIs tend to take other corporate formats which allow them to respond better to Indigenous economy needs, including servicing the demand for high-risk credit and small business loans. In the absence of a federal or provincial policy specifically promoting credit unions in the Indigenous economy, the high barriers to entry created by the existing regulation prevent significant adoption of this model.

What then of the third sector mentioned in the introduction? Are the credit unions of modern-day Canada or the co-operative banks of contemporary South Africa sufficiently community-focused to qualify for this classification? This is a debatable question – the price of growing into a large corporate entity may be the loss of connection with local populations on the ground. As common bonds grow weaker, so the organisation loses it human face. This may be a price worth paying, however, if it leads to increased availability of development finance for the Indigenous economy. In Canada’s advanced economy, development finance is already available through AFIs and dedicated products and services from mainstream banks. In South Africa too, the banking sector is courting the Indigenous market, although access to credit for both personal and business purposes remains an obstacle for many. Informality fills the gaps in access, in the guise of the vernacular stokvel. In many ways the stokvel is the truest example of third sector finance covered in this article, given that these associations exist entirely in the realm of community and cater to friends, family, and neighbours. It is an irony of modern existence that economic development and formal sector legal regulation can sever the connection between self-help finance and local community.

  1. On the ‘third sector’ generally, see Catherine Alexander, ‘The Third Sector’ in Keith Hart, Jean-Louis Laville & Antonio David Cattani (eds), The Human Economy: A Citizen’s Guide (Polity Press 2010) 213.

  2. On co-operatives and credit unions as part of the not-for-profit sector, see: Charles Ferguson & Donal McKillop, The Strategic Development of Credit Unions (John Wiley & Sons 1997) 2; Christopher S Axworthy, ‘Consumer Co-operatives and the Rochdale Principles Today’ (1977) 15 Osgoode Hall LJ 137, 137; Malcolm Stoffman, ‘Credit Union Social Responsibility: Their Mission-Driven Difference’ (2017) 33 BFLR 41, 42.

  3. See generally: Department of Trade and Industry (DTI), ‘Integrated Strategy on the Development and Promotion of Co-operatives: Promoting and Integrated Co-operative Sector in South Africa 2012-2022’ (2011) <https://www.gov.za/sites/default/files/gcis_document/201409/33943gen34.pdf> accessed 18 February 2021.

  4. For argument to the effect that South African Indigenous culture is community-focused, see for example: Justice Yvonne Mokoro, ‘Ubuntu and the Law in South Africa’ (1998) 4 Buffalo Human Rights LR 15. For African societies more generally, see: Kwame Gyekye, Tradition and Modernity: Philosophical Reflections on the African Experience (OUP 1997) chapter 2.

  5. This connection is made explicitly in the Report of the Royal Commission on Aboriginal Peoples (1996) volume 2, chapter 5, 873 <http://data2.archives.ca/e/e448/e011188230-02.pdf> accessed 18 February 2021. For general authority on the community-focused nature of Canadian Indigenous societies, see: Jim Reynolds, Aboriginal Peoples and the Law: A Critical Introduction (Purich Books 2018) 16.

  6. By the term ‘Indigenous economy’, I intend to refer specifically to that sphere of commercial activity in both South African and Canada which is focused specifically on Indigenous persons, and where there is appropriation and adaptation of commercial practices by Indigenous communities to fit Indigenous culture and context. Based on these criteria, there are large contextual differences between the two countries in question. I explain further what I mean by ‘Indigenous economy’ for Canada in part III and for South Africa in part V below.

  7. International Co-operative Alliance, ‘What is a Co-operative?’ <https://www.ica.coop/en/cooperatives/what-is-a-cooperative> accessed 18 February 2021. See further: International Labour Organisation (ILO), ‘Promotion of Co-operatives’ Recommendation 193 (2002) [2] <https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:R193> accessed 18 February 2021.

  8. The ILO states in its explanatory guide to Recommendation 193 that it has been involved with co-operatives since its foundation in 1919. See ILO ‘Promoting Co-operatives: An Information Guide to ILO Recommendation 193’ (2014) 8 <https://www.ilo.org/wcmsp5/groups/public/----ed_emp/----emp_ent/----coop/documents/publication/wcms_311447.pdf> accessed 18 February 2021.

  9. Canada: Gouvernement du Quebec, ‘Report on the Application of an Act Respecting Financial Services Co-operatives’ (2013) 3 <http://www.finances.gouv.qc.ca/documents/autres/en/AUTEN_loicoopservfin.pdf> accessed 18 February 2021. South Africa: Co-operative Banks Development Agency (CBDA), ‘CFI Start-up Guide’ (2011) 3 <http://www.treasury.gov.za/coopbank/CFI start up guide.pdf> accessed 18 February 2021.

  10. Stokvels are defined in more detail with reference to the literature in part V below.

  11. International Co-operative Alliance, ‘Co-operative Identity, Values and Principles’ <https://www.ica.coop/en/cooperatives/cooperative-identity?_ga=2.24492216.369042572.1585592202-1150267900.1585592202> accessed 18 February 2021.

  12. Axworthy. ‘Consumer Cooperatives’ (n 2) 137-138; Genesis Analytics, ‘Understanding Financial Co-operatives: South Africa, Malawi and Swaziland’ (2013) 4 <https://finmark.org.za/system/documents/files/000/000/288/original/understanding-financial-cooperatives-in-south-africa-malawi-and-swaziland-full-report.pdf?1613655595> accessed 18 February 2021.

  13. Axworthy, ‘Consumer Cooperatives’ (n 2) 138.

  14. CS Axworthy, ‘Credit Unions in Canada: The Dilemma of Success’ (1981) 31 UTLJ 72, 72-74.

  15. ILO (n 7) [6].

  16. International Co-operative Alliance (n 11).

  17. Axworthy, ‘Credit Unions’ (n 14) 72-74.

  18. Ibid 73.

  19. Ibid.

  20. Ibid 74-77.

  21. Charles H Feinstein, An Economic History of South Africa: Conquest, Discrimination and Development (CUP 2005) 176-179 describes the South African banking sector from the late nineteenth century to mid-twentieth century. During this period South Africa’s banking market was controlled by just two major, foreign-owned banks. With the rise of Afrikaner nationalism in the twentieth century, some local Afrikaner-controlled financial institutions arose, one of which, Volkskas, was briefly a co-operative bank in the 1930s. Volkskas converted to a listed commercial bank in 1941, however. Finmark Trust, ‘Third Tier Banking Report: A Review of the Capacity, Lessons Learned and Way Forward for Member-based Financial Institutions in South Africa’ (2003) 18 <https://finmark.org.za/system/documents/files/000/000/289/original/ThirdTierBanking.pdf?1613657073> accessed 18 February 2021, begin their history of credit unions in South Africa with the Cape Credit Union League, founded in 1981. As we shall see below, however, the early movement was not widespread and it was subsidised by international donors.

  22. Axworthy, ‘Credit Unions’ (n 14) 78.

  23. Stoffman (n 2) 43.

  24. Ibid.

  25. Fortunate Mavenga & M Rose Olfert, ‘The Role of Credit Unions in Rural Communities in Canada’ (2012) 40 Journal of Rural Co-operation 1, 3.

  26. Stoffman (n 2) 42-43; Ferguson & McKillop (n 2) 21-23.

  27. Stoffman (n 2) 43; Ferguson & McKillop (n 2) 22.

  28. Ferguson & McKillop (n 2) 22.

  29. Ibid 22-23.

  30. Axworthy, ‘Credit Unions’ (n 14) 87; Genesis Analytics (n 12) 6.

  31. Genesis Analytics (n 12) 6.

  32. Axworthy, ‘Credit Unions’ (n 14) 74.

  33. Ibid.

  34. Ibid 74-75.

  35. Ibid 74.

  36. Lou Hammond Ketilson, ‘Partnering to Finance Enterprise Development in the Aboriginal Social Economy’ (2014) 40 Canadian Public Policy 39, 43.

  37. Gouvernement du Quebec (n 9) 6.

  38. Axworthy, ‘Credit Unions’ (n 14) 76. Cf Stoffman (n 2) 44 who states that the credit union movement in English-speaking Canada began in Ontario and then spread to the Maritimes, Prairies and British Columbia in 1930s and 1940s.

  39. Ibid.

  40. Gouvernement du Quebec (n 9) 10. Ketilson (n 36) 43.

  41. Gouvernement du Quebec (n 9) 10.

  42. Stoffman (n 2) 44. A watershed moment which occurred shortly before 1970 was the change to the Canadian federal Bank Act, RSC 1927, c 12 in 1967, which permitted banks to offer mortgage-backed personal loans. See: EP Neufeld The Financial System of Canada: Its Growth and Development (1972) 128-131; Virginia Torrie ‘Protagonists of Company Reorganisation: A History of the Companies’ Creditors Arrangement Act (Canada) and the Role of Large Secured Creditors’ (PhD thesis, University of Kent, 2015) 150. Neufeld argues that this ate into the market share of credit unions and may have contributed to their popularity levelling off from this point. Ibid 407.

  43. Stoffman (n 2) 44-45.

  44. Ibid 45.

  45. Ibid.

  46. Ibid.

  47. This is my own observation. Stoffman (n 2) 43 notes that while credit unions ‘may look and feel like banks, they are not banks’.

  48. Ketilson (n 36) 43.

  49. Ibid.

  50. Ibid.

  51. Ibid.

  52. Ibid.

  53. Stoffman (n 2) 43.

  54. Gouvernement du Quebec (n 9) 5-7.

  55. Ibid 6.

  56. Stoffman (n 2) 43.

  57. Ibid.

  58. Gouvernement du Quebec (n 9) 8-10.

  59. Credit Unions in Ontario are governed by the Credit Unions and Caisses Populaires Act, 1994, SO 1994, c 11.

  60. Ibid section 13.

  61. Ibid section 14, read with: Financial Services Commission of Ontario, ‘Incorporating and Registering a New Credit Union or Caisse Populaire in Ontario’ (2016) 6 <https://www.fsco.gov.on.ca/en/creditunions/Documents/Incorp-newCU.pdf> accessed 18 February 2021.

  62. Credit Unions and Caisses Populaires Act, 1994, SO 1994, c 11, section 16.

  63. Ibid.

  64. Financial Services Commission of Ontario (n 61) 7.

  65. Ibid 6.

  66. Credit Unions and Caisses Populaires Act, 1994, SO 1994, c 11, section 30(1).

  67. Financial Services Commission of Ontario (n 61) 8.

  68. See generally: Report of the Royal Commission on Aboriginal Peoples (n 5), Volume 2, chapter 5, 779-793.

  69. Ibid 785-789.

  70. Ibid 779-793.

  71. Ibid 871-872.

  72. National Indigenous Economic Development Board (NIEDB) ‘Indigenous Economic Progress Report’ (2019) 67 <http://www.naedb-cndea.com/wp-content/uploads/2019/06/NIEDB-2019-Indigenous-Economic-Progress-Report.pdf> accessed 18 February 2021. See also: Ketilson (n 36) 41-43.

  73. NIEDB (n 72) 67.

  74. Ketilson (n 36) 46.

  75. See the FNBC website <https://www.fnbc.ca/Personal/> accessed 18 February 2021. See further NIEDB (n 72) 67; British Columbia Assembly of First Nations ‘Economic Development Toolkit: Black Book Series’ (2019) 73 <https://www.bcafn.ca/sites/default/files/docs/blackbooks/Black Book Series 2020 FINAL-02-18-2020.pdf> accessed 18 February 2021.

  76. Lou Hammond Ketilson, ‘“To See our Communities Come Alive Again with Pride” (Re)inventing Co-operatives for First Nations’ Needs’ in Brett Fairbairn & Nora Russel (eds), Co-operative Canada: Empowering Communities and Sustainable Businesses (UBC Press 2014) 209, 210.

  77. Ibid.

  78. Ketilson (n 36) 44.

  79. Ketilson (n 36) 45.

  80. See the dedicated page on the Vancity website <https://www.vancity.com/AboutVancity/InvestingInCommunities/StoriesOfImpact/Indigenous/> accessed 18 February 2021. See further: British Columbia Assembly of First Nations (n 75) 73.

  81. Ketilson (n 36) 45-46.

  82. Ibid 46-47.

  83. At the time of writing (18 February 2021), CA$1 was worth approximately R11,56.

  84. DTI (n 3) 31.

  85. Jeremy Sarkin, ‘The Reshaping of the Co-operatives Legal Architecture as a Result of the 2013 Amendments to the 2005 Co-operatives Act: Promoting Democratic Governance and Economic Sustainability or Control and Over-regulation?’ (2015) SA Merc LJ 275, 277

  86. Ibid 277.

  87. Ibid.

  88. Ibid.

  89. Jan Theron, 'Co-operatives in South Africa: A Movement (Re-emerging) in Patrick Develtere, Ignace Pollet & Frederick Wanyama (eds), Cooperating out of Poverty: The Renaissance of the African Cooperative Movement (ILO 2008) 306, 308.

  90. Ibid.

  91. Ibid.

  92. Ibid 311.

  93. Ibid.

  94. DTI (n 3) 33. In June 2019, the DTI merged with the Department of Economic Development to become the Department of Trade, Industry and Competition (DTIC). In this article I will continue to refer to this department by its historic acronym when describing events prior to 2019.

  95. DTI (n 3) 33. In 2014, the responsibility for co-operatives was transferred to the newly created Department of Small Business Development.

  96. Co-operatives Act 14 of 2005. See: DTI (n 3) 33.

  97. DTI (n 3) 34.

  98. Ibid.

  99. Sarkin (n 85) 278.

  100. Ibid 279.

  101. Elizabeth Hull, ‘Banking in the Bush: Waiting for Credit in South Africa’s Rural Economy’ (2012) 82 Africa 168.

  102. Ibid 176.

  103. Ibid.

  104. Ibid.

  105. Ibid.

  106. Ibid.

  107. Ibid 182.

  108. Ibid 183.

  109. Ibid.

  110. There does not appear to be a technical distinction between a CFI and a village bank, other than that the latter operates in a remote rural part of the country.

  111. Gareth A Jones & Anthea Dallimore, ‘Whither Participatory Banking? Experiences with Village Banks in South Africa’ (2009) European J of Development Research 344, 357.

  112. Ibid.

  113. Statistics may be downloaded from the CBDA website <http://www.treasury.gov.za/coopbank/supervisory CFIs/register/Register of CFIs.pdf> accessed 18 February 2021.

  114. CBDA (n 9) 6.

  115. Co-operatives Act 14 of 2005, section 1 ‘co-operative’.

  116. Ibid chapter 12.

  117. Ibid chapter 12A.

  118. Ibid chapter 12B.

  119. For discussion, see: Sarkin (n 85) 288-298.

  120. Ibid 288-289.

  121. GN 620 in GG 37903 (15 August 2014).

  122. Banks Act 94 of 1990.

  123. Co-operative Banks Act 40 of 2007, section 40A.

  124. Ibid section 55.

  125. CBDA (n 9) 6.

  126. GN 620 in GG 37903 (15 August 2014) [1(a)(i)].

  127. Co-operative Banks Act 40 of 2007, section 2(c). (Section 2(c) sets out that the purpose of this Act is to provide for the establishment of co-operative banks and CFIs.)

  128. Ibid section 6(1).

  129. Ibid section 6(2).

  130. Ibid section 7(b).

  131. Ibid section 7(c).

  132. Ibid section 4(1).

  133. Ibid chapter III.

  134. Ibid section 25.

  135. Ibid section 55(1)(f).

  136. Ibid section 55(1)(h).

  137. Feinstein (n 21) chapters 3-4.

  138. For general statistics on South African households, variously broken down by income level, race, and levels of formality and informality, see: Statistics South Africa, ‘Living Conditions of Households in South Africa: An Analysis of Household Expenditure and Income Data Using the Living Conditions Survey 2014/2015’ (2017) <http://www.statssa.gov.za/publications/P0310/P03102014.pdf> accessed 18 February 2021.

  139. Former President Thabo Mbeki used this thesis in some of his speeches, see: SARPN, 'Reading on the Second Economy (2004) <https://sarpn.org/documents/d0000830/P944-SARPN_Second_Economy_Nov2004.pdf> accessed 18 February 2021. For critical discussion of the dual economy thesis, see: Ralph Callebert, ‘Transcending Dual Economies: Reflections on “Popular Economies in South Africa”’ (2014) 84 Africa 119.

  140. This is the ‘popular economies’ approach to economic anthropology for example. For a description of this approach, see: Elizabeth Hull & Deborah James, ‘Introduction: Popular Economies in South Africa’ (2012) 82 Africa 1, 7-10.

  141. African Response, ‘Stokvels – A Hidden Economy. Unpacking the Potential of South African Traditional Saving Schemes’ (2012) 2 <https://www.africanresponse.co.za/assets/press/2012StokvelHiddenEconomy.pdf> accessed 18 February 2021.

  142. National Credit Act 34 of 2005, section 1 ‘stokvel’.

  143. GN 620 in GG 37903 (15 August 2014) [1(c)].

  144. African Response (n 141).

  145. Erik Bähre, Money and violence (Brill 2007) 12.

  146. Ibid 15.

  147. Ibid 15-16.

  148. Banks Act 94 of 1990, section 1 ‘deposit’, ‘the business of a bank’, read with section 11(1).

  149. GN 620 in GG 37903 (15 August 2014) [2.2].

  150. GN 620 in GG 37903 (15 August 2014) [3(b)]. NASASA is a self-regulatory organisation authorised by the South African Reserve Bank in GN 404 in GG 35368 (25 May 2012).

  151. National Credit Act 34 of 2005, section 4(1).

  152. National Credit Act 34 of 2005, section 40. This provision must be read with the threshold determination of R0 set out in GN 513 in GG 39981 (11 May 2016).

  153. National Credit Act 34 of 2005, sections 80-84; read with the affordability assessment criteria set out in National Credit Regulations (2006), regulation 23A. For recent commentary on the South African affordability and creditworthiness assessments, see: Michelle Kelly-Louw & Philip Stoop ‘Alternative Methods of Validating Unbanked Consumers’ Income and Assessing their “Creditworthiness” and “Affordability” of Repayments’ in Derek van der Merwe (ed) Magister. Essays vir/for Jannie Otto (LexisNexis 2020) 50-77.

  154. National Credit Act 34 of 2005, chapter 6, part C.

  155. National Credit Act 34 of 2005, chapter 5, part C; read with National Credit Regulations (2006), chapter 5.

  156. GN 513 in GG 39981 (11 May 2016).

  157. National Credit Act 34 of 2005, section 89(2)(d), read with section 89(5).

  158. National Credit Act 34 of 2005, section 8(2)(c).

  159. Polly Mashigo & Christie Schoeman, ‘Stokvels as an instrument and channel to extend credit to poor households in South Africa’ 2012 Journal of Economic and Financial Services 49, 55-56. For a more critical look at the role of ‘trust’ in stokvels, see Bähre (n 145) 133-140.

  160. African Response Website <https://www.africanresponse.co.za/stokvels-research/> accessed 18 February 2021.

  161. Worldometer, ‘South African Population’ <https://www.worldometers.info/world-population/south-africa-population/> accessed 18 February 2021.

  162. A full write up of this empirical study is published as: Andrew Hutchison, ‘Uncovering Contracting Norms in Khayelitsha Stokvels’ (2020) 52 Journal of Legal Pluralism and Unofficial Law 3.

  163. Kate O’Regan & Vusi Pikoli, ‘Towards a Safer Khayelitsha: Report of the Commission of Inquiry into Allegations of Police Inefficiency and a Breakdown in Relations between SAPS and the Community of Khayelitsha’ (2014) 30 <http://www.saflii.org/khayelitshacommissionreport.pdf> accessed 18 February 2021.

  164. Ibid 30-33.

  165. Jeremy Seekings, ‘Economy, Society and Municipal Services in Khayelitsha’ (2013) Centre for Social Science Research, University of Cape Town 15 <https://s3-eu-west-1.amazonaws.com/s3.sourceafrica.net/documents/14388/10-b-professor-jeremy-seekings-affidavit.pdf> accessed 18 February 2021.

  166. This statement is based on my own observations during field work.

  167. For an overview of informal enterprises typical of a Cape Town township economy (although unfortunately not including analysis of Khayelitsha specifically), see: Andrew Charman & Leif Petersen, ‘Informal Micro-Enterprises in a Township Context: A Spatial Analysis of Business Dynamics in Five Cape Town Localities’ (2014) <https://www.researchgate.net/publication/271729618_Informal_micro-enterprises_in_a_township_context_A_spatial_analysis_of_business_dynamics_in_five_Cape_Town_localities> accessed 18 February 2021.

  168. Seekings (n 165) 6-8.

  169. O’Regan & Pikoli (n 163) xxiv-xxv, 40-45.

  170. O’Regan & Pikoli (n 163) is the report of this commission.

  171. Seekings (n 165) 9.

  172. The amaXhosa are one of South Africa’s Indigenous African ethnic groups.

  173. This feature has been noted by other commentators, see: Shirley Ardener, ‘The Comparative Study of Rotating Credit Associations’ (1964) 94 Journal of the Royal Anthropological Institute of Great Britain and Ireland 201, 201-202; WG Schultze, ‘The origin and legal nature of the stokvel (part 1)’ 1997 SA Merc LJ 18, 24-25.

  174. This rate of interest is confirmed by the facts of Mndi v Malgas 2006 2 SA 182 (E), see: [8]. Mndi involved a loan by a stokvel to its member at 30 per cent interest per month. Bähre (n 145) 16 reports a slightly lower average interest rate of 20 per cent per month from his fieldwork in Cape Town stokvels. Bähre’s fieldwork was conducted in 1995, however, a considerable time before our own.

  175. Interview 2.

  176. Compare for example the Nedbank club account <https://www.nedbank.co.za/content/nedbank/desktop/gt/en/personal/save-and-invest/savings-accounts/club-account.html> accessed 18 February 2021. A similar club account is offered by ABSA Bank <https://www.absa.co.za/personal/save-invest/products/club-account/> accessed 18 February 2021. African Response (n 141) 11 provides quantitative data on the usage of banks by stokvels in South Africa.

  177. In only five interviews (Interview 2, 8, 10, 13, 16) did participants state that theirs was a club which did not use banking facilities at all.

  178. Interview 8.

  179. Interview 15.

  180. This was clearly most clearly stated in Interview 16.

  181. A similar argument is made by Pierre Legrand in the context of the debate on legal transplants in comparative law. Pierre Legrand ‘The Impossibility of “Legal Transplants”’ (1997) 4 Maastricht Journal of European & Comparative Law 111.

  182. O Kahn-Freund, ‘On Uses and Misuses of Comparative Law’ (1974) 37 MLR 1, 5-6.