What makes the base of the pyramid susceptible to investment fraud
| DOI | https://doi.org/10.1108/JFC-03-2019-0035 |
| Pages | 143-154 |
| Date | 22 January 2020 |
| Published date | 22 January 2020 |
| Author | Sadrita Deb,Subhojit Sengupta |
| Subject Matter | Financial crime,Accounting & Finance,Financial risk/company failure |
What makes the base of the
pyramid susceptible to
investment fraud
Sadrita Deb and Subhojit Sengupta
Vinod Gupta School of Management, Indian Institute of Technology Kharagpur,
Kharagpur, India
Abstract
Purpose –Dubious investmentschemes by unlisted companies are alluring individual investorsat the base
of the pyramid to invest money and lose them. The purpose of the abstract is to identify the factors that
induce thepeople at base-of-pyramid (BoP) to invest in fraudulentschemes.
Design/methodology/approach –Open-ended interviews of people at the BoP from areas in and
around Kharagpurtown in West Bengal were conducted. Through open coding, codes, categories and themes
were generated.
Findings –Interpersonal trusts form the central feature of investment fraud. The personal relationship
among the communitymembers helps these schemes thrive. False hopes of higherreturns within a short span
combined with constraints of accessingbanking services is another motivation for the people at the base of
the pyramid to fall prey to these schemes. With limited education, they find these investment avenues
convenient providing scope to the perpetrators of fraud to exploit them. To curb these dubiousschemes to
flourish and exploit the people at the BoP, financial inclusion on a large scale is required. Moreover, the
governmentshould take steps to educate the mass at the base of the pyramid.
Originality/value –This study offers new insights on the victims of investment fraud in India those
belonging to the economicallyweak groups and lower income groups comprising together as the BoP) of the
society.
Keywords Interpersonal trust, Financial inclusion, Base of pyramid (BoP), Investment fraud
Paper type Research paper
1. Introduction
1.1 Background of the study
Dubious investment schemesby unlisted companies are alluring investors to invest and lose
money, leading to a surge in investment fraud activities.These companies are raising funds
from the public without adhering toregulatory norms. Such cases of investment fraud deter
the investors from participating in the financial market and induce a negative investment
climate in the economy.
Though the Securities Exchange Board of India (SEBI) is repeatedly warning investors
to be cautious before making any investment,a large number of investors are falling prey to
the fraudulent money-raising schemes by unlisted companies. Some notable cases of
investment fraud include thatof Sahara Investment Scam, Rose Valley Financial Scam and
Saradha Group FinancialFraud.
In most of these investment fraudcases, it is observed that it is the people at the base of
the pyramid (BOP) who have mostly fallen prey to these schemes. Academic literature on
victims of investmentfraud in India is lacking, although innumerable investors belongingto
the economically weak groups (EWG) and lower income groups (LIG; comprising together
Base of the
pyramid
susceptible
143
Journalof Financial Crime
Vol.27 No. 1, 2020
pp. 143-154
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-03-2019-0035
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
To continue reading
Request your trial