Central Bank of Kenya and the Sacco Societies Regulatory Authority warns Kenyans against Ponzi/pyramid Schemes

Kenyans have been warned by the Central Bank of Kenya (CBK) and the Sacco Societies Regulatory Authority (Sasra) against Ponzi-style investment schemes that promises quick returns but eventually rob Kenyans of their hard labored money.

The two regulators in a joint statement cautioned against the activities of some rogue co-operative societies that have gone beyond their primary mandate of accepting contributions from their members.

The regulators said in a statement that the Central Bank of Kenya (CBK) and the Sacco Societies Regulatory Authority (Sasra) wish to draw the attention of members of the public to the re-emergence of unlicensed deposit taking entities and Ponzi/pyramid schemes.

Such entities entice members of the public to place money with them and promise quick and abnormally high returns on their money or acquisition of non-existent properties

CBK and Sasra advise members of the public not to place their money with such unlicensed entities

The regulators have cautioned Kenyans to ensure they place funds with credible and duly licensed deposit taking institutions. Kenyans can now confirm, from the two regulators’ websites, the list of the duly licensed deposit-taking institutions.

The get-rich quick scams are fraudulent operations that pay returns to separate investors from their own money or money paid by subsequent investors rather than from actual profits earned. Investors are attracted to the schemes because they guarantee high returns over a short period of time.

Unfortunately these returns are not from the success of a real investment.

Instead, the returns are paid from the investors’ own money and the contributions of other investors hence they are unsustainable.

The essence of the Ponzi scheme is that money is borrowed from some investors to pay others.

Written by Amina Martha.