Themba tells Sophie that there are both formal and informal institutions where she can either save or borrow money. She needs to look at both of them because they have different costs and different services

Formal financial institutions are regulated by various legislation. Sophie can choose one of the following formal financial institutions:

• Banks
• Insurance Companies
• Investment Companies
• brokerages
• Underwriters
• Loan
• Retailers
• Providers

Some retailers are also formal financial institutions as they allow people to buy on hire purchase or lay-by. Many retailers also use stamps or coupons which have the equivalent of the ZWL value that people buy e.g. ZWL1000 upfront to be spent at a later stage.

Sophie could also use the following informal financial institutions:

• Pawnbroker
• Chimbadzo
• Money Box/Mattress
• Pyramid Scheme
• Burial Society
• Stokvel

Themba tells Sophie straight away that she needs to avoid a pyramid scheme because they are illegal and she will lose all her money. Themba tells Sophie that they will discuss both formal and informal institutions in more detail later in the day.

Some informal financial institutions are collectively owned and managed by members. These groups collect money from members and provide short-term loans to members as well as non-members at varying interest rates and payment plans depending on their structure. These informal financial institutions are not regulated by legislation which means that you as a consumer are not as protected as you would be when saving or borrowing money from a formal financial institution.