SARA 1 Malaysia - 1 Malaysia Ponzi Scheme

“You cannot find a package like this anywhere else,” said Prime Minister Najib Razak at the launch of the scheme at Putra World Trade Centre.

The scheme, known as “Skim Amanah Rakyat 1 Malaysia” or “Sara 1 Malaysia”, allows households earning RM3,000 and below to purchase 5,000 units of Amanah Saham 1 Malaysia (AS 1 Malaysia) at RM1 each and earn guaranteed returns of double their investment after five years.

Under Sara 1 Malaysia, applicants can choose to invest RM5,000 of their savings to purchase the units or apply for loans from participating banks. According to the PM, those who invested in the scheme using their savings will be given a fixed dividend of RM134 monthly. But if they choose to reinvest it in the scheme, they will stand to receive RM13,000 at the end of the programme’s five-year lifespan.

Those who obtained loans, however, will have to pay RM84 monthly as repayment, leaving them RM50 to reinvest and a RM10,000 pay out in five years. The scheme is however limited to 100,000 households.

I immediately cried Ponzi when I first read the news.

I’m assuming a scheme called amanah saham is a mutual fund/unit trust kind of investment. Having been in the financial services sector for close to 16 years, I think I have the credibility to claim that the so called ‘investment’ scheme is not an investment per se. An investment is one that offers a return based on the performance of the investment. Any placement of funds with a guaranteed return above the principal amount is deemed a conventional loan.

The way I see it, the government is in effect ‘borrowing’ from the rakyat. RM5,000 x 100,000 equals a loan of RM500 million. The fixed monthly dividend is in effect the coupon payment on the loan. At RM134 per month on a 5,000 ringgit ‘investment’, the returns are nothing short of extraordinary. An equivalent amount put in FD would only earn the depositor RM150 per annum! Even the ASB at its most generous years would only pay 10 per cent per annum.

My question is, how is the fund manager going to generate that kind of returns? Stocks and bonds won’t pay that well and they are subject to fluctuations. Even the highest yielding property won’t pay that much.

I’m sorry but I still can’t see this scheme other than a Ponzi. Bernie Madoff would be very proud.