Do social networks facilitate the spread of Ponzi schemes?: Evidence from a primary survey

Abstract

Ponzi schemes, which have become widespread in some parts of the country, including eastern India and West Bengal, have inflicted heavy losses on the investors and have claimed several human lives. A primary survey shows how social networks created by self-help groups, though they provide higher incomes and social insurance to the members, also facilitate the spread of misinformation regarding Ponzi schemes and hurt naïve investors. The gullibility of potential investors can be reduced if the same networks are used to foster financial literacy.