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Private wealth, estimated to be in hundreds of billions, has been thriving in the Gulf, especially in the UAE, which explains why many households are trying to invest in various savings schemes - to multiply the sum or make some "quick bucks" - and sometimes get their fingers burnt after seeing that their hard-earned savings disappear into thin air.
A lot of these schemes, referred to family chit fund, micro loan fund, common family saving fund, might not come under the microscope of the government regulators as they are too small and very informal.
Two days ago, UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi told a local Arabic daily that such fund management businesses are illegal and only funds managed by banks or investment firms are licensed.
The latest scam believed to be involving Dh7 billion is a case in point and provides a wake-up call for the rest. It could be one of many similar incidents that go unnoticed and without reporting as most affected lenders and investors try to keep it to themselves.
Lack of comprehensive legislation and regulations to guide this sector could prove much costlier as other sharks could exploit the situation in the coming months.
The latest incident, therefore, calls for tighter regulations and due diligence to be exercised by the investors before placing their money in unregistered investment schemes, run by those who might not have solid track record.
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