Gareth Manning, Sunday Gleaner Reporter

Contrary to popular perception, a survey has found that most people investing in the current wave of high-yielding informal investment schemes, are not working-class Jamaicans and, hence, should be able to withstand any financial losses.

More than half of those investing in the schemes are middle-class professionals, many of whom are expected to know about and understand the schemes' viability, reveals the study. It was conducted by the Caribbean Policy Research Institute (CAPRI), based at the University of the West Indies, Mona. Four-hundred investors were surveyed.

Recently, securities regulator, the Financial Services Commission, issued cease-and-desist orders against several of thes investment schemes, including Olint Corporation, Cash Plus Limited and LewFam Invest-ments. Another investment club, Higgins Warner, closed its operation in Jamaica and relocated overseas last month.

CAPRI's study found that one fifth of investors in these schemes are managers and supervisors in their respective professions, while

just under one third are lawyers, medical professionals and teachers. Most of them are between the ages of 25 and 40. Many of them invested in these schemes to earn higher returns, then reinvested the interest, mainly, in commercial banks and credit unions.

Due to the preponderance of the middle-class in these schemes, the researchers argue that any failure of the schemes will not adversely affect the economy because most of the investors are in a position to absorb losses.

few risked life savings

CAPRI's study found that only a small number of investors risked their life savings in the schemes while only 14 per cent sold their assets to get involved "which means that an early collapse might not have the harsh widespread socio-economic consequences feared", reasoned the researchers.

The biggest losers, the researchers suggest, will be people who used loans from other regulated institutions, family and friends to make their investments in these schemes, as they might end up paying twice. This group represents 27 per cent of all investors.

CAPRI recommends that the Government should not bail out investors should the schemes collapse, as such an action would disrupt the national economic performance. CAPRI believes the most appropriate response is for the regulatory authority to prod the schemes into formalising their operations.

"It would be irresponsible for the authorities to permit them (informal schemes) to expand their operations, since this would only make the eventual collapse even more painful," says the researchers.

don't foresee collapse

But most investors don't believe the schemes will collapse any time soon and they hardly expect the Government to bail them out should they fail.

One man, who says he was a pharmacist by trade, told The Sunday Gleaner recently that he had invested $1 million in Cash Plus and was not about to remove his money even though the institution has come under severe pressure from regulators.

"I am prepared to go down if it is going to go down like the Titanic," he declared. "... I (have been) able to pay my mortgage, pay for my cars, send my daughter to UTech and my son to sixth form..."

The CAPRI study will be officially launched on Wednesday.