History, asked by vava5388, 1 year ago

What is the danger of saving money in informal institution

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Answered by karamvirsingh7p7bwae
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bro ur ans is as follow


=)+) This is the first in a new series of articles on different types of investment clubs or informal finance schemes. As an introduction to the series, Esann de Kock looks at the difference between legal and illegal schemes.You may have come into contact or have been invited to participate in an informal finance scheme or deposit-taking scheme such as a stokvel, a pyramid scheme or an investment club where the members contribute money on a regular basis to buy shares on the Johannesburg Stock Exchange (JSE).And, you may have wondered whether it was worth your while to participate and whether it was legal.Informal finance schemes have become very popular in South Africa. This is a good reason why you should be aware of the risks associated with them. You should also be able to distinguish between the legal and illegal schemes.Informal finance schemes have been thoroughly researched by the South African Reserve Bank. It has laid down strict rules and regulations on which schemes are lawful and which are unlawful.To protect the public, the office of the Registrar of Banks is responsible for the prevention of activities whereby deposits are solicited or accepted from the general public in contravention of the Banks Act.And, the Business Practices Committee is investigating money revolving schemes such as get-rich-quick pyramid schemes, a number of which have been declared illegal over the past few years.How to you distinguish between lawful and unlawful deposit-taking schemes?Subject to certain conditions, no one in South Africa may conduct the business of a bank (for example, accept deposits from the general public) unless the person is registered as a bank.Schemes such as stokvels, credit unions and employees' savings clubs, because of the nature of their business operations, accept deposits in a manner that is tantamount to conducting the business of bank.After thorough research, the Registrar of Banks issued a government notice two years ago based on the "common bond" principle, whereby these schemes can lawfully conduct business.In the case of stokvels, the bank decided they are legal because they generally enable people belonging to a particular group to save and to benefit from the contributions of all the members of the group.In other words, their common bond principle makes it possible for a stokvel, savings and credit co-operative or an employee savings scheme to operate lawfully.On the other hand, get-rich-quick schemes purport to be formed for the purpose of advancing some form of social benefit and usually promise extraordinarily high rates of return on the money that you put into the scheme. They require the continuous introduction of new members.Money revolving structures, including pyramid schemes, are currently under investigation by the Business Practices Committee.Pyramid schemes, in particular, contain a high risk of financial loss and simple mathematics shows that it will fail at some point.The authorities have, on several occasions, warned you should avoid being lured into these schemes.The Reserve Bank requires a group like a stokvel or savings and credit co-operative to keep accounting records that reflect its business and that explains the transactions and financial position of such a group.In the case of stokvels and savings and credit co-operatives that hold funds of not more than R1 million, a report by an accountant and an auditor is not required.Those who hold funds in excess of R1 million but not more than R9,9 million, must submit annual financial statements with a report by an accountant and auditor.Any stokvel or savings and credit co-operative whose funds exceed R9,9 million must register as a mutual bank.The Reserve Bank recommends that stokvels be members of the regulatory body governing stokvels, the National Stokvels Association of South Africa (NASASA).Savings and credit co-operatives should register with the Savings and Credit Co-operative League of South Africa (SACCOL) Limited.This organisation is a member of the African Confederation of Co-operative Savings and Credit Associations (ACCOSCA) ­ an organisation which, together with 86 countries in seven regions worldwide, makes up the World Council of Credit Unions.There are over 56 000 savings and credit co-operatives worldwide with a total membership of over 90 million people.A savings and credit co-operative is no different from a credit union. The term "credit union" is, however, not generally used in Africa to avoid confusion with the various labour movements.Later in this series we will look at the differences between stokvels, savings and credit co-operatives and gooi-goois.
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