Nyarmid: (defn) Nairobi pyramids are not physical structures, but they are everywhere, some in classy buildings, and some in run-down ones where they do business, spread the word, and churn the money.

They are known as investments schemes, savings plans, multi-level, merry go rounds, revolving funds, savings plans, investments. No one calls them ponzis or pyramids.

They are unregulated and their exclusivity and extremely attractive returns make them too enticing for many. They spread virally, by word of mouth from people eager to share their good fortune, to others who have not seen the light.

One group is associated with an up-coming communications company. Maybe the company wanted to tap a cheap source of unlimited funds for expansion instead of going to a bank – but it has worked for the company which still runs one of the better-established funds.

The wars between funds are vicious with some bad-mouthing their competitors. One allegedly leaked information to the CBK – leading to the swoop on a competing group last week.

They are untouched by any authorities, even though the Central Bank of Kenya (CBK tried to shut down one last week. They will not be affected even by the micro-finance bill scheduled to pass through parliament later this year.

Since they don’t lend money, and are not accepting deposits, I can’t see how they can be regulated by the CBK. But many rely on the banking system, giving some oversight to accounts that have high volumes of transactions and values. Even bank tellers are curious enough about people banking multiple checks into their accounts to ask about how/where they can sign up!

The shocking thing is they actually work – or have worked for some people. I have never joined one, but know many who have – friends more accustomed to risk, some who have invested as little as 2,000 to as much as 100,000 shillings in more than one of these, with the money doubled in a year. Some have provided a steady monthly income that supplements or even doubles their monthly income. Maybe because of their better contacts and networks, they are at the top of the pyramids, the early investors who get paid by the later investors, but they have all done very well.

I almost feel stupid for not joining any. Am I any better for buying shares in Uchumi or leaving money in the bank earning almost nothing from a savings account?

My problem is I am too cautious, too curious, ask too many questions. Questions the backers of these never want to answer. You’re either in or you’re not, you want to get paid or you don’t. Still, I rely on the conventional wisdom that nothing is free and anything that sounds too good to be true, probably is.