The Deputy Director of Policy and Regulations at the Bank of Namibia, Elifas Kamati, cautioned the public that they may lose their assets from financial institutions if they borrow money to partake in the now common illegal financial schemes. Kamati was speaking during a journalism workshop hosted by the central bank last week. 

 Kamati warned that there has been cases in the country were people invested huge amounts of money in the schemes and never received any returns. He said that while the central bank intervenes to ensure a sound financial system in the country, a number of participants in these schemes sustain heavy losses when the illegal practices collapse. 
 He added that participants may use borrowed funds and the downfall of the scheme would result in defaults and poor creditworthiness. Illegal financial schemes are also considered harmful as they threaten financial stability.

 Lending institutions or individuals demand their money through vigorous collection and repossession of assets.
 “Participation in such schemes can lead to economic hardships and social unrest and collapse of schemes would sour human relations and destroy social fabrics,” Kamati cautioned.
 He encouraged the public to desist from participating in such schemes and report them to the central bank or police. He added that as responsible citizens, everyone is duty-bound to report any illegal scheme or activities.
 Kamati stated that pyramid and illegal financial schemes contravene the country’s laws and could result in an imprisonment or fine, adding that the central bank is just executing its 
mandate.

 A pyramid scheme is described as an unsustainable business practice that works by recruiting an increasing number of members at different levels. Instead of supplying any tangible, for-value goods or services, the model banks on promises of profits for recruiting other members to join the scheme. These recruits are then required to pay an upfront cost, and this cost makes for the promised payments. 
 Kamati urged the public at large to be able to spot pyramid schemes and refrain from joining them, warning that these schemes are not sustainable without recruits and are bound to collapse.

 Commenting on how to spot a pyramid scheme, Kamati stated that these place an emphasis on recruiting new members. These new members sign up at a fee, and the modus operandi is that the scheme promises high returns within a short period and do not offer tangible products.
 He continued that if products are sold, they are not genuine and do not have any intrinsic value and the schemes use products to disguise the modus operandi of the business practice, i.e. that the primary source of income is generated from the recruitment of new members as opposed to the sale of products.

 “These schemes often offer a complex compensation structure, no return policy is available that offers refunds if a member is not satisfied with the product or service and change of status of the participating members (or new participating members within the business practice) are red flags to identify a pyramid or illegal scheme.” Kamati explained.
-mndjavera@nepc.com.na