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Understanding the operating mechanism of the Modaraba Scam: Victims’ perspective on a Ponzi scheme

Author

Listed:
  • Irfan Ullah

    (Government College of Management Sciences, Thana, Malakand)

  • Waqar Ahmad
  • Arshad Ali

    (University of Malakand)

Abstract

This study aims to explore the operating mechanism of the Modaraba Scam that emerged as a viable investment opportunity in Pakistan and ultimately unraveled as a mega Ponzi scheme. Thematic analysis of the findings reveal that the scam emerged with the conception of a sharia-compliant business and gained validity by the intermediation of religious clerics. Initially the scam operators paid out substantial profits to attract maximum investment. However, soon after, the profit was discontinued and the agents escaped. This research adds to the literature on fraudulent investment traps and can help in the identification of similar Ponzi schemes in the future.

Suggested Citation

  • Irfan Ullah & Waqar Ahmad & Arshad Ali, 2018. "Understanding the operating mechanism of the Modaraba Scam: Victims’ perspective on a Ponzi scheme," Business Review, School of Economics and Social Sciences, IBA Karachi, vol. 13(2), pages 81-93, July-Dece.
    • Handle: RePEc:aho:journl:v:13:y:2018:i:2:p:81-93
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    File URL: https://businessreview.iba.edu.pk/articles/Modarbascam.pdf
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    References listed on IDEAS

    as
    1. Tennant, David, 2011. "Why do people risk exposure to Ponzi schemes? Econometric evidence from Jamaica," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(3), pages 328-346, July.
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