Thai's Pooling Money

[Beck1976]

So my girlfriend started talking about something she call "share". I've seen it described somewhere once before as Thai-bank, but searching now has proved futile.

Anyway, as my girlfriend is unable to explain it (in a way I understand it completely), I would like to know if any of you know anything about it?

I'm thinking the legality, is it a scam, and what are the actual procedures?

As far as I understand a group of people pool together an amount of money every week. Then these same people can then bid on the pool of money, sort of an auction. And whoever bids the most (i.e. paying the highest interest) will get the pool of money. And that happens every week.

But I am unsure how it is decided to share the revenue/interest, as it is my understanding that not everybody get the same?

Please enlighten me

[southerndown]

So my girlfriend started talking about something she call "share". I've seen it described somewhere once before as Thai-bank, but searching now has proved futile.

Anyway, as my girlfriend is unable to explain it (in a way I understand it completely), I would like to know if any of you know anything about it?

I'm thinking the legality, is it a scam, and what are the actual procedures?

As far as I understand a group of people pool together an amount of money every week. Then these same people can then bid on the pool of money, sort of an auction. And whoever bids the most (i.e. paying the highest interest) will get the pool of money. And that happens every week.

But I am unsure how it is decided to share the revenue/interest, as it is my understanding that not everybody get the same?

Please enlighten me

is it your money she is or will be pooling

[skipvice]

I do know it goes on in just about every village in Thailand. My wife says it is against the law in Thailand. Some time the people running it are crooks.

[endure]

5 Thais agree to put 1000bt a month into the 'pot'. At the end of the first month Thai 'A' bids 100bt for the pot. Thai 'A' wins. S/he gets the pot of 5000bt. Thai 'A' takes the 5000bt and for the next 11 months puts 1100bt into the pot. This happens for the next 11 months.

[soundman]

good explanations here.

[CWMcMurray]

I have heard about this from several Thai People I know and was as confused about it as you were when I did.

Their explination was similar to your own exept the part about bidding for the money every week. They way it was explained to me was that they will create a pool savings account where everyone will have to contribute an equal ammount. Then they will "take turns" borrowing the money.The way that they decide to take turns can be decided among the group, some may just decide among themselves or others may set up a bidding structure as you explained.

Then the person who borrows the money will have to payback the amount plus the agreed upon interest to the group.

Based upon the people I have heard about this from, I don't think that these things are scams (or at least a lot of them aren't). But I never was able to find out what happens if someone defaults on their loan???

The first time I heard about this was from a small business owner that is friends with my wife. She got the capital needed to start her business by being a member of a similar group.

Another person I heard about this from was the owner of my company. We were just chatting about things and talking about credit and debt and how people many times will spend more they have and the problems that can cause(you know just light afternoon conversation to pass the time).

She also mentioned about these groups and said that they are very popular among Chinese Thai's (but first ewxample is not of Chinese decent, so I think they have become popular among all Thais). She said when she first started working, she joined a group like this, but never borrowed any money, she just let all of her friends borrow and she kept the interest.

[Heng]

The once a month share group is more common for moderate to larger amounts. Imagine trying to come up with an interest payment 4 times a month!

Bottom line is that it's good interest for savers, and extremely high interest for spenders. Which group your gal is in would be a good indicator of whether she should participate or not. The risk is relative to who the members are (obviously a share group made up of gold shop owners will be less likely to fail than one made up of bar "cashiers"), but in the end is still (higher) market type risk as opposed to institutional risk. That is: if a member dies, has a car accident, has their factory burn down, etc. you might lose some funds, whereas even if the whole board of executives of your bank or brokerage dies in a plane crash, you still have your money.

[CWMcMurray]

Amounts and time lines can also vary greatly and the amounts can be quite large, in my boss' case for example she said that some her friends took out loans from the group for cars...

[Gary A]

Most villages have a group that uses this system. My wife always contributes to it. It runs from year to year. I don't know exactly how it works but I do know the person or persons borrowing the money bid on it. Whoever bids the highest interest rate gets the money. My wife's share is 500 baht a month so it's not a high stakes thing. She has never lost any money and has a decent return at the end of the year.

[mgjackson69]

My wife explained this one to me a while back...I mostly understood, but now it makes more sense.

She also said "police not like". But I got the impression that is not so much because it is illegal, but more likely because they do not have a mechanism for "automatically" getting their share of the action.