REPORTS of a pyramid scheme being run by certain elements, some linked to mosques, are reviving memories of Double Shah, except this time the scam comes clothed in the garb of religious sanction. A recent report in this newspaper throws light on a scheme being promoted by some mosques called a ‘Musharika’ which purports to offer returns as high as 120pc to be shared with the ‘investors’. Such ventures are billed as ‘Islamic’ because they are supposedly built on a profit-and-loss-sharing basis. This makes it all the more disturbing because it appears to put the swindle beyond regulatory powers, although the state has every legal right and the moral obligation to regulate these schemes to protect the interest of ordinary investors. The latter may not have the means to determine the safety of these instruments while being lured by the promise of substantial returns.

Thus far only the ‘profits’ are being shared, with the result that large amounts of money are being drawn into these dubious ventures. What is not being shared is information on how the funds are being placed. It is crucial to understand this, given the size of the returns being offered. What’s even more troubling to contemplate are the consequences when the inevitable losses have to be shared. Earliest reports put the amountof money circulating through these schemes at Rs50bn, which means the scam is already larger than the Double Shah scandal. No legitimate business can offer these returns, and nothing is known about how the mosques in question are utilising the funds placed in their trust. It is imperative that the schemes be brought under regulatory scrutiny at the earliest because such ventures always end in tears for naïve investors.