Stokvel saving and banking sector liquidity in South Africa: cointegration and short-run dynamics

Abstract

Stokvel is a term used in South Africa to denote an informal saving club. A large population of South Africa are members of one stokvel or the other. A large amount of stokvel savings go unaccounted for in the banking sector resulting in distortions in the flow of funds in the banking sector. Thus, the objective of this paper was to establish the presence of a long-run relationship and causality between stokvel savings, money supply, gross domestic product growth rate and banking sector liquidity in South Africa. Applying the Autoregressive Distributed Lag (ARDL) and Error Correction Model (ECM) techniques on quarterly time series data for the period from 1987Q3 to 2020Q1, the study reveals that in the long run, stokvel savings and money supply were found to have a negative relationship with banking sector liquidity albeit insignificant, however, gross domestic product growth rate exhibited a negative and statistically significant relationship at 1%. The coefficient of the error correction model (ECM(-1)) was, as expected, negative and statistically significant thus providing evidence of a short-run relationship. This study concludes that informal savings must be included in the formal banking services to harness the cash that is held by the informal sector and thus improve banking sector liquidity while minimizing the prevalence of financial disintermediation.

Keywords: {'name': 'stokvel, banking sector liquidity, ARDL, ECM approach'}

Authors & affiliations

Lindiwe Ngcobo
Affiliation not supplied

Joseph Chisasa Joseph
Affiliation not supplied

Mantepu Tshepo MaseTshaba
Affiliation not supplied

Deposited references

Supplied references, not a list of publications citing this article.

DOI: 10.32728/ric.2018.41/1

DOI: 10.32890/ijbf2008.5.1.8362

DOI: 10.32890/ijbf2008.5.1.8362

DOI: 10.1016/j.heliyon.2021.e08162

DOI: 10.1515/subboec-2017-0004

DOI: 10.1016/0305-750X(92)90136-J

DOI: 10.21511/ppm.17(4).2019.03

DOI: 10.1017/S1744137419000018

DOI: 10.1016/0305-750X(80)90030-3

Gujarati, D.N., & Porter, D.C. (2009) Basic Econometrics. 5th Edition, McGraw Hill Inc., New York.

Habumuremyi, P.D., Habamenshi, V, and Mvunabo, G. (2019). Village savings and loan associations and social economic development of poor households in Rwanda: A case of Murundi Sector (2015- 2019). International Journal of CHUR Research Academy (IJCHURA), 2(Special Issue BTI), 1–69.

DOI: 10.1016/j.heliyon.2021.e08162

Jagadeesh, D. (2015). The impact of savings in economic growth: An empirical study based on Botswana. International Journal of Research in Business Studies and Management, 2(9), 10–21.

DOI: 10.14318/hau7.3.016

Jawaid, S.T., Qadri, F.S., & Ali, N. (2011). Monetary fiscal trade policy and economic growth Pakistan: Time series empirical investigation. International Journal of Economics and Financial Issues, 1(3), 133–138.

DOI: 10.3846/1648715X.2006.9637542

DOI: 10.1108/AJEB-09-2020-0063

DOI: 10.1073/pnas.1611520114

DOI: 10.15270/50-4-388

DOI: 10.1016/j.jdeveco.2015.12.003

DOI: 10.11118/actaun201664030971

DOI: 10.2139/ssrn.4028902

DOI: 10.22495/cocv11i1c8art5

DOI: 10.19030/iber.v14i3.9218

DOI: 10.4102/nc.v65i0.317

DOI: 10.4102/jef.v5i1.305

Mashigo, P. (2009) Transforming the South African credit market through group lending mmechanism. Journal of Case Research in Business and Economics, 1–16.

DOI: 10.1016/j.jbankfin.2013.08.025

DOI: 10.15208/beh.2018.09

DOI: 10.1017/ics.2021.9

DOI: 10.1016/j.eneco.2007.10.006

DOI: 10.1515/aicue-2015-0014

Nawai, M., & Shariff, M.N.M. (2010). Determinants of repayment performance in microcredit programs: A review of literature. International Journal of Business and Social Science, 1(2), 152–161.

DOI: 10.4102/jef.v12i1.194

DOI: 10.22610/jebs.v10i6(J).2614

DOI: 10.11114/ijsss.v7i3.4137

Osman, A.M., Eldaw, K.E.H.I., Mohamed, A.S., Albadaly, N.I., & Eissa, N.O.A. (2020). Financial sector development and economic growth in Saudi Arabia: ARDL model. International Journal of Innovation, Creativity and Change, 14(11), 136–152.

Owusu-Bempah,G., Bennet,E., Amoako, D., & Frempong, R.K. (2013). The importance of the informal sector of Ghana to savings and loans companies. Research Journal of Finance and Accounting, 4(2), 108–116.

DOI: 10.3844/ajassp.2005.1158.1165

Prinsloo, J.W. (2000). The saving behaviour of the South African economy. South African Reserve Bank Occasional Paper,14(11).

DOI: 10.1186/s40854-017-0073-x

DOI: 10.1007/s10834-013-9372-1

DOI: 10.1186/s13731-020-00140-6

DOI: 10.1596/0-8213-2749-6

Shuaib, S.N. (2018). Informal financial institutions: A source of soft loans to individuals and small business owners. Master of Business Administration Research proposal. Ibrahim Badamasi Babangida University, Lapai-Niger State. 1-13. https://doi.org/10.131140/RG.2.2.19876.73609

DOI: 10.1016/j.fbj.2016.01.001

DOI: 10.1111/j.1541-0072.2001.tb02093.x

DOI: 10.1177/0308518X211041371

DOI: 10.3390/su9081396

DOI: 10.5901/mjss.2014.v5n13p360

Verhoef, G. (2001). Savings and survival in a modern African economy: Informal savings organisations and poor people in South Africa. Historia, 46(2), 519–542.

DOI: 10.5089/9781451867732.001

Zondi, M.D. (2016). The linkages between informal savings and credit mechanism (stokvels) and commercial banks. Master’s Degree, University of KwaZulu-Natal, Durban, South Africa. Available from: https://ukzn-dspace.ukzn.ac.za/handle/10413/15825 (Accessed: 08 March 2019).