The MMM fiscal system caught on similar wildfire inwards Nigeria but it has frozen its transactions, leaving many investors unsure what volition occur to their savings. The Focus Africatv's Tunde explains how the Ponzi system constitute its way to the most populous state inwards Africa as well as how it managed to survive.
What is MMM?
Well, that depends on who y'all speak to. According to MMM itself (Mavro Mondai Movement), it is a "social fiscal network of people providing aid as well as getting aid from each other".
Members are supposed to have 30% dorsum on their investment inwards merely xxx days. It launched inwards Nigeria inwards Nov 2015 as well as according to its founders, has 3 meg members.
But it has a murky history. It started inwards Russian Federation inwards the 1990s as well as collapsed a few years afterward losing an estimated $100m (£80.3m) belonging to its members.
The Russian authorities outlawed the system as well as founder Sergey Mavrodi was jailed for 4 years.
 |
Founder of the MMM pyramid system Sergei Mavrodi was released from Russian prison theatre inwards 2007
|
It made its way to PRC where it was too banned. But inwards the yesteryear ii years, the system has appeared inwards South Africa, Zimbabwe, Kenya, Republic of Uganda as well as Nigeria.
Nigeria's fiscal regulator, the Securities as well as Exchange Commission (SEC), state it is a Ponzi scheme.
That way coin paid inwards yesteryear novel members is used to pay dorsum previous members. It doesn't generate whatsoever turn a profit but relies on novel members to croak along going, which way that sooner or afterward it volition collapse.
"No turn a profit is beingness created," says economist Tunji Andrews. "And the people that are going to pay for all your turn a profit correct straightaway are the people that are going to larn stuck when MMM in conclusion crashes."
How does it work?
Members either sign upwards online or amongst the aid of a "guider" - a fellow member who gets committee to recruit to a greater extent than investors.
To start, 1 tin invest every bit picayune every bit 15,000 naira (£32; $40). That coin gets paid straight to to a greater extent than or less other member.
The sentiment is that after xxx days, every fellow member reaps their profits. "Guiders" larn a 10% cutting of the novel members' investment.
Over the yesteryear few months, MMM Nigeria has undertaken an aggressive advertising motility as well as used community forums as well as church building meetings to recruit members.
Why are people talking well-nigh it?
On xiii December, the system was frozen. Members who expected a pay-out since Tuesday cause got been disappointed.
MMM claims it froze the system to bargain amongst heavy traffic that it experienced inwards the run-up to the Christmas holidays.
It says it volition re-open inwards Jan as well as though many people are skeptical, others cause got staunchly defended the scheme.
Nigeria is inwards the middle of its worst recession inwards decades. Banks are non lending as well as thence many people are hailing MMM every bit a root of capital.
Since it outset appeared inwards 2015, authorities cause got issued alert to Nigerians against investing. In a province that does non cause got a huge amount of trust inwards its government, millions ignored that advice.
Seven people, who create non wishing to live named, explicate how they got involved inwards the scheme. We volition telephone band them yesteryear unlike names.
Margaret, a farmer from Port Harcourt told me that MMM was "a blessing". She used it to pay rent when her concern slowed due to the recession.
Similarly Yinka from Ilorin described MMM every bit "beautiful". He was able to pay his schoolhouse fees as well as purchase a printer. Both are optimistic the system volition operate again.
Most of the people who spoke to our squad had initially made proficient returns on their investments, compelling them to invest huge amounts later. Unfortunately for them, the companionship froze its operations.
Isaac invested 50,000 naira inwards the system as well as got his returns. Two days afterward he invested 950,000 naira. He was supposed to larn his coin dorsum on xiv December. So far, he has received nothing.
MMM state it is upwards forepart well-nigh the risks. Influenza A virus subtype H5N1 alert on its website reads: "The exclusively dominion is no rules… "Win" mightiness non live paid without whatsoever reasons or explanations."
All the investors nosotros spoke to admitted that they had been aware of the warnings but sentiment the jeopardy was worth taking.
Have people lost their money?
At the moment, it is unclear whether participants volition larn their coin dorsum but authorities inwards Nigeria believe that it is inevitable that people volition lose out. There is non plenty coin inwards the arrangement to comport on forever.
BBC News
According to the privacy laws of SEC, 1 time a system similar this gets a sure enough degree of investment it must live registered.
MMM is non registered amongst the fiscal regulator thence technically, it could live breaking the law.
But the SEC has non nonetheless taken whatsoever active steps to prosecute it.
What happens next?
Members cause got to hold off until Jan to catch if MMM is every bit proficient every bit its word.
Until thence its investors tin exclusively promise to larn their coin back.
But MMM is nether no legal obligation to provide it.
If the system does "unfreeze", that mightiness encourage to a greater extent than people to invest.
And that way fifty-fifty to a greater extent than people are at jeopardy of losing their savings
