Ejemplo de Creación de un Bloque de Evaluación

1. Traditional ROSCAs in the Current Regulatory Landscape

Traditional ROSCAs are practiced locally and casually among friends and family members. Therefore, legal compliance might not be the main concern of people who form a traditional ROSCA. Nevertheless, most traditional ROSCAs already complied with both the Bank of Thailand’s regulation and the ROSCA Operation Act because traditional ROSCAs are not suitable for scaling up to operate commercially. In particular, because traditional ROSCAs largely depends on interpersonal relationships, traditional ROSCAs are limited within the

frontiers of the social network or local community in which participants of the ROSCA belong. It is unlikely that a traditional ROSCA manager will exceed the legal limits prescribed by the ROSCA Operation Act like engaging in more than three ROSCAs at a time, having more than 30 participants in all ROSCAs, or collecting the total sum more than $10,000.282 _{Therefore, most} traditional ROSCAs that rely on interpersonal relationships are less likely to violate the ROSCA Operation Act. In other words, if a traditional ROSCA complies with the ROSCA Operation Act, the ROSCA will not be able to go beyond relationship-based to operate at a commercial level.

282 _{Section 6, Len-Share Act B.E 2534.}

Likewise, traditional ROSCAs are unlikely to be considered as a financial institution because most traditional ROSCAs operate locally by a handful of friends and family members and do not operate commercially like financial institutions. The Thai Supreme Court Decision 2013/2537 suggests the Usury Limit Act B.E. 2475283 _{which prohibits anyone including} individual persons and business entities from charging an interest rate of more than 18 percent per year does not apply to a traditional ROSCA. This implies that the Supreme Court does not consider a traditional ROSA as a person nor a business entity. Because traditional ROSCAs are regarded as not a business of lending and fundraising, various Bank of Thailand's regulatory tools such as reserve fund, investment restrictions, business operation standards, and credit restrictions, will not apply to traditional ROSCAs. In fact, these regulatory tools are not applicable to traditional ROSCAs that are practiced primarily based on interpersonal

relationships and social networks. Moreover, as traditional ROSCAs have long been perceived as a local fundraising tool, the Bank of Thailand has never regulated or pushed any policies around the area of ROSCAs.

2. Online ROSCAs in the Current Regulatory Landscape

While online ROSCAs share many similarities with traditional ROSCAs, online

ROSCAs solicit publicly on widely accessible forums and operate commercially at a large scale. Therefore, unlike traditional ROSCAs, online ROSCAs are severely restricted by the current regulatory landscape including both the Bank of Thailand’s regulations and the ROSCA

Operation Act. As mention earlier, a single online ROSCA manager regularly recruits over thirty participants per day. Therefore, online ROSCAs can easily exceed the legal limits in terms of a number of participants or volume of capital. Most importantly, because online ROSCAs advertise and recruit participants from online forums, like Facebook pages which are publicly available. Therefore, online ROSCAs inevitably violate Section 9 of the ROSCAs Operation Act which prohibits the public solicitation of ROSCAs. In other words, even if a ROSCA manager only form and manage one ROSCA from a group of ten participants, such ROSCA will violate Section 9 as long as the manager recruits ROSCA participants from a publicly available online forum. In other words, all online ROSCAs no matter how big or small will be illegal because the business model of online ROSCAs rely on advertising or recruiting participants on online forums which are widely accessible to the public. Hence, the ROSCA Operation Act fails to address the fact that online ROSCAs depend on online forums to advertise, recruit, and manage participants. The inflexibility of the ROSCA Operation Act effectively bans all online ROSCAs rather than compelling them to operate locally among friends and family members as the legislators would have expected.

Furthermore, because online ROSCAs tend to operate commercially, it is questionable whether online ROSCAs should be considered as a business of banking and lending under the Revolutionary Council Order No. 58. It is evident that online ROSCAs operate commercially with a focus on profitability to the ROSCA managers who advertise, recruit members, set interest rates and rules, collect money, and enforce unpaid debts all by themselves. In other words, online ROSCA managers behave more like business operators who have control over all aspects of the enterprise. While the Thai Court has yet decided on the business entity status of online

ROSCAs, it is possible that the Court will find online ROSCAs to operate in a business manner and subject to the Usury Limit Act. By the same token, online ROSCAs would also be subject to the Bank of Thailand's banking and lending regulations. It could be even more complicated than

it appears as the Bank of Thailand's cover entities are only limited to commercial banks, finance companies, and credit fonciers.284 _{In other words, while online ROSCAs appear to be in a} business of lending and fundraising which should be subject to the Bank of Thailand' regulation, the Bank of Thailand does not have the authority to license or regulate any business outside to the enumerated categories. Without the ability to obtain a license or be regulated by the Bank of Thailand, the entire online ROSCA industry is effectively illegal and unregulated must operate in outside of the formal financial system.

3. Online ROSCAs in the Shadow

Generally, ROSCAs are legal and recognized by the ROSCA Operation Act. Most traditional ROSCAs formed with a group of friends and family members have successfully operated without any legal glitch as long as they follow the ROSCA Operation Act. On the other hand, online ROSCAs are categorially illegal because several aspects of online ROSCAs such as size and volume, advertisement, compensation, and commercialization blatantly violate many rules set out by the ROSCA Operation Act and the Bank of Thailand's regulatory framework. Instead of curbing and halting online ROSCAs, the ambiguity of legality of online ROSCAs pushes them to become more secretive and operate in the shadow system where regulation and enforcement are even harder to implements. Indeed, online ROSCAs have been used to conceal other illegal activities like loan sharks and fraudulent schemes.285

Many online ROSCAs do not operate a real ROSCA but conceal extremely-high-interest- rate lending under a ROSCA.286 _{Instead of pooling money from participants or allowing them to} bid for the fund, a loan shark would set up a fake ROSCA in which all capitals are provided by the ROSCA manager or loan shark. A loan shark in disguise will let a participant take the first round of fund and require her to pay back in the form of contributions to the nonsexist ROSCA afterward. Participants do not see through the trick because they do not know other participants and every interaction is made between an individual participant and the ROSCA manager. Like loan sharks, such fake ROSCAs also use violent tactics such as coercion, illegal confiscation of properties, threats and actual bodily harms to enforce unpaid debts.

Online ROSCAs are also utilized to conceal frauds. Several online ROSCAs were formed to defraud participants who yearn for high-return investment. For example, Bann Share Starzy which was a collection of online ROSCAs managed by one ROSCA manager defrauded more than 500 million baht (approximately $16 million) from 222 victims who were participants from the Bann Share.287 _{The victims reported that the ROSCA manager formed dozens of ROSCAs.} Each ROSCA offered very high-interest rates to dupe the victims to make substantial capital contributions to the ROSCAs. The manager will take the first few rounds of the funds meanwhile still making regular contribution and interests. Once the manager took all the funds, she had her name on, she closed down the ROSCA and stopped making payment anymore. The manager used some of the money she made as seed fund to pay for other new formed ROSCAs. The number of ROSCAs and the number of victims expanded exponentially within just less than a year. Bann Share Starzy is just one example of many cases of serious frauds that cause

significant losses to a high number of victims in the past few years. Indeed, the number of

284 _{Financial Institution Act B.E. 2551 (2008) Section 4.}

285 _{Polawut Songskul Disclosing Online ROSCA Frauds: New Form of Pyramid Scheme (in Thai), The Standard}

(Published Nov. 29, 2017), https://thestandard.co/cheats-pyramid-scheme/ (Last visited Jan. 18, 2019).

286 _{See id.} 287 _{See id.}

fraudulent online ROSCAs like Bann Share Starzy have far exceeded those of other traditional fraudulent fundraising methods like Ponzi scheme and pyramid scheme.

One possible way to pull online ROSCAs out of the shadow is to regulate online

ROSCAs. By assigning an appropriate regulator to make specific policies and to systematically oversee online ROSCAs, online ROSCAs can be regulated just like other traditional lenders. The Bank of Thailand can be the regulator that oversee online ROSCAs because the Bank of

Thailand already have resources and expertise to regulate various lending activities. The Bank of Thailand may be able to apply the financial regulatory framework which involves policymaking, registration, and systematic oversight to online ROSCAs. Nevertheless, the Bank of Thailand is not able to regulate online ROSCAs under the current regulatory regime because online ROSCA activities are still practically illegal and the Bank of Thailand does not have authority to regulate entities outside the current list of regulated financial entities.

The first step towards regulating online ROSCAs is to lift the ban by changing the scope and language of the ROSCA Operation Act to allow the commercialization of online ROSCAs that are regulated by the regulator. For instance, the ROSCA Operation Act should allow registered ROSCAs to advertise to the public and increase the limit on the number of ROSCAs participants and volume of capital so that online ROSCAs can operate commercially and sustainably. The next step is to pass a specific law that authorizes the Bank of Thailand to regulate online ROSCAs and their peripheral activities. These two steps will ensure that online ROSCAs can operate legally under the supervision of the Bank of Thailand. Ultimately, the proper regulation may help the Bank of Thailand achieve its regulatory goals of ensuring that online ROSCAs will be safe for the economic system, enhancing the efficiency of online ROSCAs, and protecting online ROSCA consumers from unfair and inequitable practices.

Conclusion

This essay shows how ROSCAs have operated and evolved in response to technological advancement and regulatory influences. ROSCAs offer an alternative method for ordinary people, especially those underserved by the formal financial system to borrow and invest at desirable rates and terms. ROSCAs have become a viable alternative to traditional financial services because ROSCAs can address the fundamental concerns of lending from both the economic and sociological perspectives. From the economic perspective, ROSCAs rely on interpersonal relationships to mitigate uncertainty and information asymmetry. From the sociological perspectives, interpersonal relationships within ROSCAs also build and maintain interpersonal and institutional trusts among participants. Nevertheless, as online ROSCAs have adopted the internet and mobile technology thereby allowing them to reach to a broader base of financial consumers and operate commercially, online ROSCAs seem to lose their focus on interpersonal relationship. Hence, online ROSCAs may not be able to tackle the fundamental concerns as well as traditional ROSCAs. Moreover, the current laws and regulations regarding ROSCAs have been developed in response to the characteristics of more traditional fraudulent fundraising methods. Hence, while the current regulatory landscape can regulate traditional ROSCAs, it does not recognize the legality of online ROSCAs and fails to address the pertaining fundamental concerns of online ROSCAs. Indeed, the ambiguity of legality of online ROSCAs pushes online ROSCAs to operate in the shadow financial system leaving the online ROSCA participants in a worse position economically and sociologically. Therefore, a proper regulation of online ROSCAs under an oversight by a competent regulator like the Bank of Thailand, rather than an outright ban, will enable the online ROSCA industry to provide valuable financial opportunities to the people at its full potential.

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