What makes the base of the pyramid susceptible to investment fraud

Abstract

PurposeDubious investment schemes by unlisted companies are alluring individual investors at the base of the pyramid to invest money and lose them. The purpose of the abstract is to identify the factors that induce the people at base-of-pyramid (BoP) to invest in fraudulent schemes.Design/methodology/approachOpen-ended interviews of people at the BoP from areas in and around Kharagpur town in West Bengal were conducted. Through open coding, codes, categories and themes were generated.FindingsInterpersonal trusts form the central feature of investment fraud. The personal relationship among the community members helps these schemes thrive. False hopes of higher returns within a short span combined with constraints of accessing banking services is another motivation for the people at the base of the pyramid to fall prey to these schemes. With limited education, they find these investment avenues convenient providing scope to the perpetrators of fraud to exploit them. To curb these dubious schemes to flourish and exploit the people at the BoP, financial inclusion on a large scale is required. Moreover, the government should take steps to educate the mass at the base of the pyramid.Originality/valueThis study offers new insights on the victims of investment fraud in India those belonging to the economically weak groups and lower income groups comprising together as the BoP) of the society.