Beware of ‘Halal’ Investments!

Several Ponzi firms from Bengaluru have defrauded investors in the city, state and neighbouring areas of hundreds of crores of rupees by luring gullible Muslims into the net through devious means. A host of fly-by-night operators who had found a convenient haven in the city have closed shops with their owners having decamped with the booty.
Ajmera, Ambidant, Morganall, Aala and Hareem Tours and Travels and a couple of Umrah/Hajj tour companies figure prominently in the list of these fraudulent firms. The directors had attracted hundreds of crores of rupees as investment funds without having any business transactions, products for sale or services. Some of them had even promised ten to twelve per cent profits a month and had won the confidence of a few early investors to impart some credibility to their promises. One need not have any superior intelligence to guess that such profits are neither imaginable nor realistic as no business can yield as well as offer more than ten per cent profits annually. Such companies fall in the category of ‘Ponzi’ schemes in the popular parlance. The name owes itself to Charles Ponzi, who cheated hundreds of investors in Boston in the 1920s.
People chase money and those who lack basic financial literacy and are devoutly ‘religious’ fall prey more easily to such fraudsters, who inveigle them into their devious parlours with tags of ‘Halal’ and ‘Interest-free’. Theandnbsp;modus operandiandnbsp;of Ponzi firms is to gather investments through false promises of unrealistically high returns. Initially they do comply with their promises, which tricks the beneficiaries to spread the ‘good word’ around. Investments from later investors are then used to keep up the promise of profits to early investors, thereby expanding the base of investors. But there being no product or service on the ground to continually generate profits, this circulation of money becomes unsustainable once the money market gets gripped with some crisis and investments get choked. In short, these companies return the investments of more recent investors as ‘dividends’ to the older investors. The tag of ‘Halal’ (religiously permissible) is freely used to lure Muslim investors. Even more deceitful is the fact that some pictures of the directors of these fraudulent firms with religious clerics are advertised in newspapers to add an element of credibility among the common Muslims, who take the clerics to be paragon of virtues.
India has a long history of ‘blade companies’ or ‘cheat funds’. Even a man of the calibre of Sir C. V. Raman was cheated by one such firm where the honourable physicist had invested a quarter of the Nobel Prize honorarium. A major reason for their success lies in low financial literacy among the common masses. People are unaware that mobilization of investments requires a SEBI licence and deposits can only bear interest, not profits. The common man cannot differentiate between a private and public limited company or between individually owned and partnership firms. They blindly flock to fake, false and bogus promises of profits.
In the case of Bengaluru firms, several of the investors had even mortgaged their homes, jewellery and hard assets to reap ‘quick returns’ only to discover that all of this was a mirage, illusion and a fanciful façade. The firm owners had no intention of transacting any business, nor were they motivated with any public interest. Years ago, Barkat Investments and Al-Ameen Islamic Financial Investment Corporation had cheated hundreds of investors and depositors. Even a cursory knowledge of the financial market and economy should be enough to convince that El Dorados simply don’t exist in this world where businesses compete in tight corridors with thin margins of profit and barely deliver any sizeable profits.
Even ‘Halal’ is becoming a dirty word in the present environment where such firms are vanishing with sickening regularity. There could be bodies to authenticate ‘Halal’ meat and ‘halal’ food products. But the complexity of modern finance can challenge the ingenuity of even the best of mathematicians in telling the element of interest from cost of operation. Such being the intricacy of the present scenario, Muslims will be better advised to safe keep their money in conventional banks rather than companies eyeing their hard-earned incomes and savings for rainy days.