The flip side of multi-level marketing: A diagnosis of factors leading to the mass uptake of unregulated pyramid schemes in South Africa

Abstract

This study sought to diagnose the factors leading to the mass uptake of unregulated pyramid schemes in South Africa. The study adopted an exploratory and qualitative research design. Face-to-face interviews were conducted with 20 respondents using a non-probability sampling technique known as purposive sampling. The respondents were drawn from the target population of individuals who have previously used unregulated pyramid schemes. Data were analyzed using the Nvivo framework matrix. The findings of this study show that individuals are motivated to join pyramid schemes because of the expected benefit or return, accounting for 40%, followed by current economic conditions (30%), friends and family recommendation (15%), desire to get rich quickly (10%), and past performance of the scheme (5%). This study has contributed to the literature on multi-level marketing and pyramid schemes in South Africa and the developing world in general. It will further act as a launchpad for designing policies in the financial services sector.

Keywords

• downline
• enrollment
• money-making scheme
• participant
• pyramid scheme
• scam