A study on property as an investment option for Rotating Savings and Credit Associations (ROSCAs) in South Africa
Date
2021
Authors
Shube, Thembelihle
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Abstract
The aim of the research was to investigate ROSCAs in South Africa as potential property investors. Through the analysis of the economics that govern ROSCAs and property investing, the research aimed to determine whether residential property investments could be a viable option for these informal credit and savings associations, known as stokvels in South Africa. A literature review and investigation on the financial products tailored for ROSCAs in South Africa was conducted to determine the risk appetite of these associations. Investment portfolios, including residential property returns, were constructed to get mixed asset portfolios. The risk and return associated with each portfolio was calculated to determine if the inclusion of property would yield a positive return. The results of study suggest that direct property investment is a feasible investment option for ROSCAs. The inclusion of property investment with existing savings and investment products available to these associations, can result in a diversified portfolio for ROSCAs with increased returns. The findings of this study have implications for stokvels investing in property, formal financial institutions, and policymakers. Property is a viable investment asset with a higher risk than the current products mostly used by stokvels. Although these associations are known to be risk adverse due to consumption related activities, their risk profile can change with financial education and exposure to investments. Direct property investments can be approached in different ways by stokvels, with the construction backyard rooms for rental income as an example of exercising such an avenue
Description
A dissertation submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Master of Management (in Finance and Investments), 2021
Keywords
South Africa, ROSCAs, Investment, Rotating Savings and Credit Associations, Direct property investments