Financing, Thai Style

[Thanyaburi Mac]

Does anyone understand how the "share" system works here?  Seems to be often to mostly between small groups of women.  The each put in a certain amount per month, say baht 1,000, then ????

How does any of them get any benefit of the "shares" they've "invested?"

Seems to me I heard the word "bid" used but don't understand how it works.

Mac

[ThaiWanderer68]

Does anyone understand how the "share" system works here? Seems to be often to mostly between small groups of women. The each put in a certain amount per month, say baht 1,000, then ????

How does any of them get any benefit of the "shares" they've "invested?"

Seems to me I heard the word "bid" used but don't understand how it works.

Mac

I thought one of them usually steals it all...

[cmsally]

I think it works something like each person puts in a bid and the highest withdraws that months money minus the bid they put in.

So for example if they each contribute 1k and there is 10 people. The highest bidder is 110 Bt and they receive 9890Bt

So on and so on each month and doesn't the end person receive the bid money (not sure).

I am not sure about the bid amount and whether people actually receive it or not.

Somebody once tried to explain it to me but like someone said, once it gets near the end somebody normally disappears with the whole lot!

[lazeeboy]

I think it works something like each person puts in a bid and the highest withdraws that months money minus the bid they put in.

So for example if they each contribute 1k and there is 10 people. The highest bidder is 110 Bt and they receive 9890Bt

So on and so on each month and doesn't the end person receive the bid money (not sure).

I am not sure about the bid amount and whether people actually receive it or not.

Somebody once tried to explain it to me but like someone said, once it gets near the end somebody normally disappears with the whole lot!

sounds like a good scam to me

[Cooperista]

I think it works something like each person puts in a bid and the highest withdraws that months money minus the bid they put in.

So for example if they each contribute 1k and there is 10 people. The highest bidder is 110 Bt and they receive 9890Bt

So on and so on each month and doesn't the end person receive the bid money (not sure).

I am not sure about the bid amount and whether people actually receive it or not.

Somebody once tried to explain it to me but like someone said, once it gets near the end somebody normally disappears with the whole lot!

sounds like a good scam to me

Sounds like you need to drink Kaew lao to understand the details

I'm busy scamming here at the fresh market, and your idea sounds even harder than what I have to put up with.

[pete_r]

Each person in the "share" contributes X Bahts each month for Y months. The number of months is equal to the number of participants. Let's take an example of 12 people, each contributing 1000 Bahts (can be much more than that) per month for 12 months. That's 12000 Bahts available the first month.

Each month, the participants bid to indicate how badly they need the cash. The highest bidder takes the money, then until the end of the "share" he cannot bid anymore, but must contributes the 1000 Bahts, plus the amount of his bid every month. For example someone who won the cash on the first month with a bid of 100 Bahts gets 12000 Bahts immediately, but has to pay 1100 Bahts every month for the 11 remaining months. So the second month, the amount available is 12100 Bahts, and increases every month as each winning bidder starts to pay the nominal 1000 Bahts plus the amount of his own bid. At the end of the "share", only one person without winning bid remains (normally someone who doesn't need cash but wants to "invest"), and collects the cash, something like 13000+ Bahts depending on the bids of all the other participants in the preceding months.

In total, the winning bidder of the first month gets 12000 Bahts early, but pays 1000 + 11x1100 = 13100 Bahts, equivalent to (1100/12000)x100 = 9.2% interest. On the other hand the person without winning bid on month 12 has invested 1000x12 = 12000 Bahts, but receives 13000+ Bahts, equivalent to a (1000/12000)x100 = 8.3+% profit. All the other participants are in between these two.

The system is based only on trust between the participants with no enforceable penalties apart from social stigma, so there is always the risk that one of the participant will disappear with the cash at some point.

Edited September 24, 2007 by pete_r

[fletchsmile]

Each person in the "share" contributes X Bahts each month for Y months. The number of months is equal to the number of participants. Let's take an example of 12 people, each contributing 1000 Bahts (can be much more than that) per month for 12 months. That's 12000 Bahts available the first month.

Each month, the participants bid to indicate how badly they need the cash. The highest bidder takes the money, then until the end of the "share" he cannot bid anymore, but must contributes the 1000 Bahts, plus the amount of his bid every month. For example someone who won the cash on the first month with a bid of 100 Bahts gets 12000 Bahts immediately, but has to pay 1100 Bahts every month for the 11 remaining months. So the second month, the amount available is 12100 Bahts, and increases every month as each winning bidder starts to pay the nominal 1000 Bahts plus the amount of his own bid. At the end of the "share", only one person without winning bid remains (normally someone who doesn't need cash but wants to "invest"), and collects the cash, something like 13000+ Bahts depending on the bids of all the other participants in the preceding months.

In total, the winning bidder of the first month gets 12000 Bahts early, but pays 1000 + 11x1100 = 13100 Bahts, equivalent to (1100/12000)x100 = 9.2% interest. On the other hand the person without winning bid on month 12 has invested 1000x12 = 12000 Bahts, but receives 13000+ Bahts, equivalent to a (1000/12000)x100 = 8.3+% profit. All the other participants are in between these two.

The system is based only on trust between the participants with no enforceable penalties apart from social stigma, so there is always the risk that one of the participant will disappear with the cash at some point.

Hats off to you Pete. Excellent explanation...

[sbk]

Does anyone understand how the "share" system works here? Seems to be often to mostly between small groups of women. The each put in a certain amount per month, say baht 1,000, then ????

How does any of them get any benefit of the "shares" they've "invested?"

Seems to me I heard the word "bid" used but don't understand how it works.

Mac

I thought one of them usually steals it all...

In all the years I have seen Thai's participate in this scheme, someone runs off with the money every single time. It is a complete rip-off and someone (usually several someones) end up getting cheated.

[Thanyaburi Mac]

Each person in the "share" contributes X Bahts each month for Y months. The number of months is equal to the number of participants. Let's take an example of 12 people, each contributing 1000 Bahts (can be much more than that) per month for 12 months. That's 12000 Bahts available the first month.

Each month, the participants bid to indicate how badly they need the cash. The highest bidder takes the money, then until the end of the "share" he cannot bid anymore, but must contributes the 1000 Bahts, plus the amount of his bid every month. For example someone who won the cash on the first month with a bid of 100 Bahts gets 12000 Bahts immediately, but has to pay 1100 Bahts every month for the 11 remaining months. So the second month, the amount available is 12100 Bahts, and increases every month as each winning bidder starts to pay the nominal 1000 Bahts plus the amount of his own bid. At the end of the "share", only one person without winning bid remains (normally someone who doesn't need cash but wants to "invest"), and collects the cash, something like 13000+ Bahts depending on the bids of all the other participants in the preceding months.

In total, the winning bidder of the first month gets 12000 Bahts early, but pays 1000 + 11x1100 = 13100 Bahts, equivalent to (1100/12000)x100 = 9.2% interest. On the other hand the person without winning bid on month 12 has invested 1000x12 = 12000 Bahts, but receives 13000+ Bahts, equivalent to a (1000/12000)x100 = 8.3+% profit. All the other participants are in between these two.

The system is based only on trust between the participants with no enforceable penalties apart from social stigma, so there is always the risk that one of the participant will disappear with the cash at some point.

Pete

Thanks much, will print this out.

Mac

[soundman]

Does anyone understand how the "share" system works here? Seems to be often to mostly between small groups of women. The each put in a certain amount per month, say baht 1,000, then ????

How does any of them get any benefit of the "shares" they've "invested?"

Seems to me I heard the word "bid" used but don't understand how it works.

Mac

I thought one of them usually steals it all...

In all the years I have seen Thai's participate in this scheme, someone runs off with the money every single time. It is a complete rip-off and someone (usually several someones) end up getting cheated.

I have viewed this "share" system on three seperate occasions within three seperate social circles. On all three occasions someone has done a runner with a "share" or even "three shares" on one occasion.

There is usually an appointed "administrator" for every "share group" & any shortfall by someone who steals is "theoretically" covered by the "administrator".

Ends in tears & blood every time - all for a down payment on something else like a TV, motorbike or car that incurs more interest penalties.

Soundman.

[pete_r]

Hats off to you Pete. Excellent explanation...

Thanks, although all credits should go to my wife...

As an experiment, she decided to participate in a share with her colleagues recently. After reading sbk's and soundman's posts, I don't feel too optimistic, but it's too late to cancel. We'll see.

[solo siam]

Hats off to you Pete. Excellent explanation...

Thanks, although all credits should go to my wife...

As an experiment, she decided to participate in a share with her colleagues recently. After reading sbk's and soundman's posts, I don't feel too optimistic, but it's too late to cancel. We'll see.

tell her to make a high bid sooner rather than later,

[Crash999]

In all the years I have seen Thai's participate in this scheme, someone runs off with the money every single time. It is a complete rip-off and someone (usually several someones) end up getting cheated.

Contrary to your experiences, my girlfriend participates in these share circles and I've yet to see an instance where someone has run off. It may be partly the participants- they're mostly the same people who know each other well and there's also an enforcer in the group who for a token amount of money administrates the whole thing and sees to it that everyone pays up on time.

[slapout]

Crash 999: And other posters,The enforcer as you call them is the individual who starts the whole thing, collects monies etc. he shares in the profit but does not contribute any money. He gets a free ride for his time??? If a runner takes place he should have the money to cover the loss, ( doubtful ) This has many names, but the members are bankrolling each other for business or whatever reason. The best I have seen in this is one individual was involved in 4 different groups, made high bid on all 4 shares on same day, and skipped town. If your gf stays in them long enough you will see what many have said about runners. Its like all good deals in LOS get ready to get screwed. If your in it to make money you dont bid to win any until last share is sold, that way you get the profit each time other people borrow the share. A new generation of suckers are coming of age . this was a scam in Chiang Mai 15 years ago.

[pete_r]

Update: My wife's share ended a couple months ago. Her investment was 24000 Bahts (2000 Bahts per month for 12 months), and she got 28000 Bahts out of it.

That's a fairly high interest rate (~16%), but the size of the investment is limited by the high risk of someone doing a runner. My conclusion is that the potential earnings (a few 1000 Bahts per year) are not worth it, but then, it's her money.

[pab]

Each person in the "share" contributes X Bahts each month for Y months. The number of months is equal to the number of participants. Let's take an example of 12 people, each contributing 1000 Bahts (can be much more than that) per month for 12 months. That's 12000 Bahts available the first month.

Each month, the participants bid to indicate how badly they need the cash. The highest bidder takes the money, then until the end of the "share" he cannot bid anymore, but must contributes the 1000 Bahts, plus the amount of his bid every month. For example someone who won the cash on the first month with a bid of 100 Bahts gets 12000 Bahts immediately, but has to pay 1100 Bahts every month for the 11 remaining months. So the second month, the amount available is 12100 Bahts, and increases every month as each winning bidder starts to pay the nominal 1000 Bahts plus the amount of his own bid. At the end of the "share", only one person without winning bid remains (normally someone who doesn't need cash but wants to "invest"), and collects the cash, something like 13000+ Bahts depending on the bids of all the other participants in the preceding months.

In total, the winning bidder of the first month gets 12000 Bahts early, but pays 1000 + 11x1100 = 13100 Bahts, equivalent to (1100/12000)x100 = 9.2% interest. On the other hand the person without winning bid on month 12 has invested 1000x12 = 12000 Bahts, but receives 13000+ Bahts, equivalent to a (1000/12000)x100 = 8.3+% profit. All the other participants are in between these two.

The system is based only on trust between the participants with no enforceable penalties apart from social stigma, so there is always the risk that one of the participant will disappear with the cash at some point.

Pete

Thanks much, will print this out.

Mac

Thanks Pete. You have clearly explained what has been a complete mystery. Will also print out and keep as a reference.

[Naam]

[henryalleman]

Each person in the "share" contributes X Bahts each month for Y months. The number of months is equal to the number of participants. Let's take an example of 12 people, each contributing 1000 Bahts (can be much more than that) per month for 12 months. That's 12000 Bahts available the first month.

Each month, the participants bid to indicate how badly they need the cash. The highest bidder takes the money, then until the end of the "share" he cannot bid anymore, but must contributes the 1000 Bahts, plus the amount of his bid every month. For example someone who won the cash on the first month with a bid of 100 Bahts gets 12000 Bahts immediately, but has to pay 1100 Bahts every month for the 11 remaining months. So the second month, the amount available is 12100 Bahts, and increases every month as each winning bidder starts to pay the nominal 1000 Bahts plus the amount of his own bid. At the end of the "share", only one person without winning bid remains (normally someone who doesn't need cash but wants to "invest"), and collects the cash, something like 13000+ Bahts depending on the bids of all the other participants in the preceding months.

In total, the winning bidder of the first month gets 12000 Bahts early, but pays 1000 + 11x1100 = 13100 Bahts, equivalent to (1100/12000)x100 = 9.2% interest. On the other hand the person without winning bid on month 12 has invested 1000x12 = 12000 Bahts, but receives 13000+ Bahts, equivalent to a (1000/12000)x100 = 8.3+% profit. All the other participants are in between these two.

The system is based only on trust between the participants with no enforceable penalties apart from social stigma, so there is always the risk that one of the participant will disappear with the cash at some point.

Its really a Thai women thing, its a part of their secret sisterhood, many times the husband don't even knows about it, till it is too late and the debt is to big to handle fore themselves. Also I have to correct some things. The one who organize the system normally put in 2 shares. The first month she gets the money for free. Because she is responsible if somebody pull out the money and don't go on paying.

Normally its the organizer of the system who is very important. If she knows how to select trustworthy participants many people like to join. It can work out very fine for many times,but sooner or later their are always problems with people who run off with the money.

This kind of thing is also very popular with Thai women overseas. But I know many people whom lost a lot of money in one case more than 2000 000 baht.

The bid start from the second month. You put the bid in a close envelop, and it will be opened on the day that the people bring their money. When you give the highest bid you can have the money, the rest of the time you only pay the original amount. So you only pay your bid one time.

In the beginning the bids are very high, and at the end very low for the obvious reasons.

Some participants consider it as an investment with a much higher return than any other investment and wait till the last because they can have the money and don't have to put any bid. most of the time is the originator who do like that. Profit can be up to 20% but how higher the bid how more dangerous it is, because desperate people always give an high bid and run away after a while. My only advise is not participate in such adventures.

[jts-khorat]

It normally is a system between a group of poeple knowing each other well, and in village circles most have illiquid valuables like land, cows or the next rice harvest, which would prevent somebody making a runner on the spot.

It allows for fast liquidity in the very small amounts normally needed in subsistence farming without having to resort to a loan shark with much higher interest rates, and as such a very useful system of cooperation.

The controller person is normally the village headman or another person of high standing in the local society who would have the ability to put considerable shame on the families of a participant making a runner, so it normally should end well in such a controlled environment.

I have seen this system also 'played' here on Phuket, without the social controls, and indeed the chance that all goes wrong is very high.

[jmac]

does anyone if this is what I have heard called a "Huun"?

[Gary A]

My wife has been doing this for several years and in that time, no one has run off with the money.

[soundman]

does anyone if this is what I have heard called a "Huun"?

"Hoon" loosly translates as "share" or "percentage".

If you set up a business with a hundred shares, they are refered to as neung roi "hoon".

[Heng]

It's hardly a "Thai" system of finance. Indians and Chinese have long had similar systems that probably easily predate any Thai use.

In my experience, I've heard of more than a few share circles go south, but typically only in lower socio-economic cirlces. The higher up you go, the lower the odds that members (all screened by the 'tao' or the main organizing member... say if you have a group that is limited to gold/steel/aluminum/construction materials shop owners... it's fairly secure) will close up shop and take off... and the more the whole concept is used as a social event rather than strictly a means of finance.

[Crash999]

does anyone if this is what I have heard called a "Huun"?

No, 'huun' means shares as in the stock market.

My girlfriend's family only uses this system with the same circle of people each time. They know each other, have houses near each other, and many are related- so it would be hard to disappear with the money. Also the enforcer 'tao' is a person in their group who they wouldn't want to cross.

They've been doing the share system for many years. It's really the only form of investment, aside from bank interest, that many of them know and feel comfortable with.

[Crash999]

does anyone if this is what I have heard called a "Huun"?

No, 'huun' means shares as in the stock market.

My girlfriend's family only uses this system with the same circle of people each time. They know each other, have houses near each other, and many are related- so it would be hard to disappear with the money. Also the enforcer 'tao' is a person in their group who they wouldn't want to cross.

They've been doing the share system for many years. It's really the only form of investment, aside from bank interest, that many of them know and feel comfortable with.