Financing Your Dreams Through Family, Friends & Fools

Financing Your Dreams Through Family, Friends & Fools


85% of all South African start-ups are self funded according to the 2016 Seed Academy Startup Survey. This reality tells us that many entrepreneurs get creative in exploring the options available to them to raise startup capital.

Its at this critical moment in an entrepreneurs journey that they look into their networks to see if there are any potential funders within their community and what better community to consider than the R44bn stokvel community.

In this article we look at exploring how an entrepreneur can use stokvels as a vehicle to raise startup or expansion capital.

Raising funding from your stokvel

Stokvels generally provide a supportive environment for members to share and discuss ideas openly and freely.

Assuming your stokvel has sufficient reserves to fund your next game changer, you must be fully aware of the type of funding you require and the terms you are willing to enter into.

Related: Stokvels 101: Is Group Saving For You?

The loan approach

Should you choose to take a loan from your stokvel, you must consider the implications of the loan; after all this is a transaction. For example, consider payment terms, what happens in the case of default, how to repay the stokvel if the business goes bust etc.

Yes, the best advantage about stokvels is less paperwork in comparison to mainstream funders but, as much as you will not have to prepare a 100 page business plan to present to your stokvel, I do recommend a basic loan agreement to be put in place.

If no one in your stokvel has experience with drafting legal documents; standard loan agreement templates can be found online and amended to suit your arrangement.

The equity approach

If you are a part of a savings/investment stokvel, you could consider positioning your business as a potential investment for your stokvel.

This must be carefully thought out as this would entitle your stokvel to equity in your business and furthermore, you would be answerable to your stokvel members as shareholders in the business.

This can be somewhat strenuous as instead of answering to one individual, you are now answering to a group of individuals no matter the size of the equity. However, this cannot take away the fact you now have more human resources to call upon on when needed, herein lying the deal breaker.

Should you part with equity to your stokvel, make certain the transaction goes beyond monetary value. The skills and experience of your stokvel members are crucial. Similarly to the loan approach, the terms of this transaction must be laid out clearly in a shareholders agreement.

In closing, your biggest common challenge with the two approaches will be separating yourself as a member of the stokvel and an entrepreneur who has a business dealing with the stokvel.

Related: Start Your Balance Sheet Today

Here are a few short tips on how to go about this:

Do’s & Don’ts


  • The key to successfully raising funding from your stokvel is transparency. All relevant stakeholders must be aware of the process.
  • Prepare a clear, well researched business model with key objectives and targets to be met.
  • Give regular updates/reports at every meeting on the status of the investment/loan.
  • Get an independent auditor to annually review your business and present it back to your stokvel. This will increase confidence amongst all members.


  • Do not confuse your ongoing contributions to the stokvel with agreed repayments.
  • Gentlemen’s handshakes don’t work even in stokvels. Documented agreements are crucial and act as a reference when necessary.
  • If your stokvel takes equity in your business, try not to pay out dividends to the club too soon. Make sure the business is stable, has enough cash reserves and growing at a steady rate before withdrawing funds from it.
  • When the stokvel club looks to make investments in other businesses, measures must be put in place to keep the decision making process impartial. Your personal bias must not cloud your judgment on whether or not to participate in any deals.
Tshepo Moloi
Tshepo Moloi (M.Eng) (M.Fin) is a Soweto born citizen who holds a strong sense of community and believes in empowering everyday South Africans to become equitable, financially active citizens. As a member of several stokvels himself, it became apparent to Tshepo that the biggest challenges limiting stokvels from reaching their full potential were administration constraints and the lack of financial management tools available to stokvels. This gave rise to StokFella, a financial services provider for stokvels looking to grow their wealth.