Instability has gripped Bangladesh’s banking sector for several years. Failures to return customer deposits, coupled with irregularities, corruption, and large-scale looting during the Awami League era, have eroded public trust in the country’s banks and financial institutions. Exploiting this ongoing turmoil and loss of confidence, multi-level marketing (MLM) companies and cooperative societies have been expanding their reach. They first target low-income groups to gain trust, then lure them with promises of profit before siphoning off their money.
A recent investigation by the Criminal Investigation Department (CID) found that in just one year, 23 cooperative societies in Madarganj upazila of Jamalpur misappropriated more than BDT 10 billion. Sector insiders fear the amount nationwide could be many times higher.
Inquiries show that many people are withdrawing funds from mainstream banks and investing them elsewhere for higher returns. Both registered and unregistered cooperatives, along with MLM firms operating under different disguises, have been seizing this opportunity to collect billions from customers. While some initially pay small profits, many eventually shut down operations, absconding with client funds. Experts say that the weaker banks and financial institutions become, the more these fraudsters thrive. Without effective oversight and monitoring, far more people could fall victim to such schemes.
According to CID, a financial institution called Madarganj Al-Aqaba Multipurpose Cooperative Society Limited abruptly shut down in July this year without returning client deposits. The matter came to light when thousands of investors held protests demanding their money back. Soon after, 22 more cooperative societies were identified as having fled with depositors’ money. More than 50,000 customers had invested in these societies. Besides Al-Aqaba, others include Swadesh, Shatadal, Nabadwip, Ashar Alo, Jonokollan, Poroshmoni, Daridro Bimochon, Holy Target, Shopnotori, and Madarganj Sheba Savings and Loan Cooperative Society Limited.
In addition, there are Al-Aqsa, Ruposhi Bangla, Shyamol Bangla, Matribhoomi, Mitali, Swadhin Bangla, Agragami, Rongdhonu Business Cooperative Society, Al-Amanat, Doridro Shromojibi Cooperative Society, Al-Insaf, and Jonota Shromojibi Cooperative Society Limited. Most clients of these organizations are low-income workers. Lured by flashy advertisements promising high profits, many of them are now almost destitute. They are going door to door in search of their deposited savings.
According to CID spokesperson Special Superintendent of Police Jasim Uddin Khan, a group of people have been exploiting the instability of the country’s formal financial institutions to set up cooperative societies and misappropriate customers’ money. He told Bonik Barta, “We have received several specific complaints of this nature. These are being investigated. Assets worth BDT 4 billion belonging to Al-Aqaba have already been seized. Other such cooperative societies are also being investigated. If criminal elements are found in their overall activities, legal action is being taken.”
Investigators said the cooperatives in Jamalpur expanded widely over the past decade and a half under political patronage. These organizations were set up under the protection of influential leaders, with the poor as their main target. Exploiting poverty and the instability of banks and financial institutions, the cooperatives misappropriated billions of taka from customers. With the embezzled money, they built extensive wealth both at home and abroad. Some invested in different businesses. Authorities are preparing a list of assets built with misappropriated funds. After verification, the process of confiscating those illegal assets will begin. Al-Aqaba alone embezzled BDT 7 billion from clients, of which BDT 4 billion worth of assets has been seized.
Following changes in the country’s political landscape, many of these cooperatives shut down operations without returning the deposited savings. Some officials of the cooperatives have also gone into hiding.
Inspector Sayedul of the CID’s Financial Crime Unit is leading the investigation into embezzlement by cooperative societies in Jamalpur. He told Bonik Barta, “These cooperatives start their operations by targeting the poor and working-class people. In the beginning, they provide some small loans. Later, at a convenient time, they lure clients with promises of high profits and encourage them to deposit money as collateral. The collateral schemes are designed in such a way that clients are bound to keep their savings for the long term. But when the time comes to return the deposits, they shut down their operations. In just the past year, 23 cooperative societies in a single upazila of Jamalpur have embezzled clients’ money and closed down.”
It is not only cooperatives. Fraudsters are also siphoning money under new names and forms of MLM businesses, luring people with promises of high profits. Sometimes it starts as microcredit, sometimes as a cooperative society or cooperative bank, and sometimes as a multipurpose society. In other cases, fraudsters set traps through new forms of MLM businesses, offering false job opportunities. Unemployed youths are given short training and promised lucrative jobs. For this, they are asked to deposit a certain amount as security. They are also enticed with the promise of extra commissions if they recruit new members.
In March, Bangladesh Bank issued a warning urging the public to remain cautious about MLM schemes. The notice said that certain organizations in the country have been illegally collecting deposits or investments, offering referral-based commissions, and deceiving people with promises of unusually high and unreasonable profits. It also pointed out cases of e-commerce firms defrauding customers by selling products at abnormally high discounts. Offering abnormal profits and referral-based commissions are key features of multi-level marketing, the notice said, which are highly risky and have repeatedly caused customers to lose their investments. In such schemes, profits are not generated from business but rather paid to one group of customers from the deposits of another. Since similar fraudulent activities have recently been observed again, investigations are underway. Considering customer protection, the central bank has strongly discouraged transactions with such organizations and advised people to remain extremely cautious.
Crime experts believe instability in the banking sector has deepened due to the failures of the past government. As a result, the volume of unpaid and default loans has increased. The capital base of nearly every bank in the country has weakened. No new foreign bank has entered the market, while those that had been operating in the 1980s have gradually pulled out. Taking advantage of this gap, cooperative societies began luring customers with offers of unusually high returns. As instability spread through the formal financial sector, such cooperatives continued to expand. Experts say these crimes must be curbed by tightening oversight—from registration to day-to-day operations—and by setting strict legal precedents. At the same time, instability in banks and other financial institutions must be addressed, along with efforts to restore public trust.
Misappropriation of customers’ money through cooperatives fosters a sense of distrust in society, said Tawohidul Haque, Associate Professor at the Institute of Social Welfare and Research at Dhaka University and a sociologist specializing in crime. Speaking to Bonik Barta, he said, “In our country, there is a large section of people who try to build savings for the future by keeping their money as deposits and earning profit from it. Cooperatives target them, attracting deposits with flashy promises of high profits. To build trust, they pay returns for the first few months. This encourages customers to spread the word among relatives and acquaintances, bringing in more deposits. Once these cooperatives collect the desired amount, they shut down operations and flee. This creates a kind of social distrust, which then spills over into the formal financial sector and beyond. To control such crimes, the first requirement is exemplary enforcement of the law. But here we see excessive delays. Often, a person leaves the country after embezzling funds, and only then is a travel ban imposed. Such incidents further encourage financial crimes.”