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Homechevron_rightOpinionchevron_rightEditorialchevron_rightUnending investment...

Unending investment scams

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Unending investment scams
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A furore about investors of Fashion Gold Jewellery in Cheruvathur, Kasargod raising complaints against its promoter and MLA MC Kamaruddin, now at the centre of the controversy, became big news over the last few days. Investors who had put in crores of rupees in the pool, are reported to have come out together when the firm could not pay profit share or repay the investment share. Most of those in the front-line of the company, of which Kamaruddin is the chairman, are related to Muslim League. When the matter naturally became a political issue, the state leadership of Muslim League stepped in to intervene in the matter, beginning with removing Kamaruddin from the post of district convenor of United Democratic Front (UDF). The party has put before him the suggested wayout of providing details about he assets and liabilities of the company within 15 days, and repaying the investment amount to shareholders within six months. Apparently the League leadership is trying to wriggle out of the ruckus. On his part, Kamaruddin has been repeating that it was not a case of any swindling, but only the natural fallout of a business loss and because he was a politician some unnecessary uproar has been created. Iti s quite common in the land that when one launches a venture and then is unable to disburse its profit share or repay the share, and then absconds, investors who lose money will go into jitters and come out with complaints.

Such incidents periodically appear in news media as investment scams. A recent case in point is that of Popular Finance reports about which are very much current related to fleecing scores of investors in central Kerala; and that includes legal action against it and arrests. Earlier cases that had caused quite a flutter in the state and involving hundreds of investors are those of the goat-teak-manchium firms, Liz finance company and the ponzi schemes of Total4U floated by a youth named Sabarinath in Thiruvananthapuram. When such events happen, it triggers stories and analyses in the media, but then after a brief interval such incidents again surface. A relevant question is why such fiascos keep happening. It is also worth pondering why after a venture flounders - and even after news and debates about it take place - another promoter is able to enter the scene and repeat such adventures. One major factor that breeds fraudulent investors is greed for quick money without much effort. The moment some one tempts people offering a fixed profit within a definite time for a certain investment, people flock to him. And it is this instinct for quick buck that becomes fertile soil for fraudsters, who also thrive on the confidence that if the invested amounts are from unaccounted wealth, their owners may not come out in the open even in the event of fraud.

That is the reason why after each crashed venture, another crops up and scams follow. Take the case of the Kasargod jewellery itself as example. A person who presides over Islamic rites is at the top of this firm. He has been receiving investments - and conversely the investors have been putting money at his disposal - in total disregard of the fact that accepting investments on the promise of certain fixed amount/percentage as profit is not permissible in his religion. In the perspective of Islamic financial transactions, collective ventures work through equal sharing of profit and loss; it is not in order to put money in a firm on the agreement that a certain amount will be paid every month. But, the greed and avarice we mentioned here make them oblivious of this fact.

In practice, the investment amount received from one batch is passed on to another set of investors as profit. After this chain moves forward for a certain time, it hits a roadblock somewhere along the line and the firm crashes. This is a common feature of many such entities. It is not productive for the society or the economy to let money lie idle in the hands of many in this manner with no reproductive circulation. Money should be circulated and used in productive spheres and only then will the economy get stronger. The person possessing that money also will also benefit only through such utilisation of funds. Therefore, the emergence of investment ventures is key to the country's economic health. But the reason for fake firms to mushroom and then disappear, is the absence of robust and scientific investment avenues in the country. A situation in which people have cash, but there are not enough enterprises to attract investment, is a shame viewed from the perspective of finance management. Governments have a big role to play here. It is important to set up credible investment ventures, and then to channelise idle funds into that in order to make it beneficial to capital owners and the society. In their absence, we will continue hearing tales of investment scams.

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TAGS:Investment Scam Fashion Jewellery MC Kamaruddin Kasargod 
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