Paluwagan is allegedly guaranteed members high returns without supposedly any risks.
Are you tempted to invest with high-return money without any risks? How is it possible? But remember the saying, if something seems too good to be true, it probably is.
Will you still risk your money with this kind of system, the so-called Paluwagan?
Photo by: Ken Teegardin / Flickr
You should check this out and know it better if you have doubts.
Paluwagan is a matrix/cycle type of marketing plan in our country. It could also be a simple form of money lending and savings system that is so popular in the Philippines.
Someone mentioned that it is called Rotating Savings and Credit Association or ROSCA in English. Ideally, it will work if there are at least three members.
There is no need for documentation or a memorandum of agreement among both parties because members know each other.
My mother joined a similar system called HULOGA. The group members decide to pay an amount, and then you can lend the money and pay an interest rate. Does this sound like a loan?
Will you still risk your money with this kind of system, the so-called Paluwagan?
You should check this out and know it better if you have doubts.
Paluwagan is a matrix/cycle type of marketing plan in our country. It could also be a simple form of money lending and savings system that is so popular in the Philippines.
Someone mentioned that it is called Rotating Savings and Credit Association or ROSCA in English. Ideally, it will work if there are at least three members.
There is no need for documentation or a memorandum of agreement among both parties because members know each other.
My mother joined a similar system called HULOGA. The group members decide to pay an amount, and then you can lend the money and pay an interest rate. Does this sound like a loan?
In connection with Paluwagan, it is quite a common topic among Filipinos, commonly referred to as a local saving method. The Department of Trade and Industry (DTI), Paluwagan, recently warned about engaging the Paluwagan system. Even though there's a warning advisory, it still exists in some parts of the country.
Where did this system originate? It probably started with family members who planned to use the total amount of money collected from them. So, the magic ingredient of it is trust.
TRUST is indeed a prime factor here. What if you don't trust any member? That's the worst scenario. Questioning trust can ruin the relationship.
Paluwagan is an investment scheme similar to Pyramid Schemes. But it claims to be a way of saving without the talk of interest.
How PALUWAGAN works?
Paluwagan is primarily familiar with a group of friends, officemates, neighbors, and families/relatives.
A group of members decides to pay Daily, Weekly, Twice, or Thrice a month or monthly to an appointed collector with a specified amount.
This collector will be responsible for the money collected and assure members they will pay on time. (what if they don't pay on time? That's one problem).
This collector will be responsible for the money collected and assure members they will pay on time. (what if they don't pay on time? That's one problem).
Cashout will be paid on the desired date and time, mainly at the end of the year. My mother joined somewhat like this system in our neighborhood; they pay an amount, but they will get no cash, but instead, Kilos of Pork and Coke cases on the feast day (Month of April).
Sometimes, it is a pool system.
The highest motivation is to get the first pot.
To illustrate how Paluwagan works, we will use 3 fictional names here.
1. Juan
2. Pedro
3. Diego
These three friends(members) decided to each pay Php 1,000.00 per week on a POT. In a week, a total of Php 3,000.00 was collected. Right? One cycle will be completed in 3 weeks (because there are only three members).
In the first week, a total of Php 3,000.00, the first member will get the first POT total of Php 3,000.00, Juan. In the second week, three members will pay Php 1,000.00 each, and Pedro will get the full amount. Lastly, with the same process, Diego will get the POT in the third week. That's how Paluwagan works; now, in social media, they tweak it as an investment. Here is an example:
Sample:
Sometimes, it is a pool system.
The highest motivation is to get the first pot.
To illustrate how Paluwagan works, we will use 3 fictional names here.
1. Juan
2. Pedro
3. Diego
These three friends(members) decided to each pay Php 1,000.00 per week on a POT. In a week, a total of Php 3,000.00 was collected. Right? One cycle will be completed in 3 weeks (because there are only three members).
In the first week, a total of Php 3,000.00, the first member will get the first POT total of Php 3,000.00, Juan. In the second week, three members will pay Php 1,000.00 each, and Pedro will get the full amount. Lastly, with the same process, Diego will get the POT in the third week. That's how Paluwagan works; now, in social media, they tweak it as an investment. Here is an example:
Sample:
Online paluwagan ba ang hanap ung kasisimula lang pero madami na agad naka exit as in madami na araw araw may umeexit ung hndi talo ung ipe pay in mo pwes dto na kau 1500 nyo gawin nating 10k in just 3-5 days TAMA po 10k diba walang katalo talo... and PINAPANGAKO po namen hindi po ito isang scam or pyramiding.. Kakasimula lang po namen netong july 16 and napakarami na pong naka exit... paano??? Pm po kau.. sabihn ko po...Is there a problem here? Basically, there is none. However, the first member will enjoy the POT first. What if he/she does not pay in the next week?
1. Trusted members (of course, people considerably know the characters of those members; as such, people will also know how bad a reputation a member is)
2. For Savings (ideally for savings, but since it says it turns high returns, then that is the problem. No product. Just plain investment, eh? )
3. No reason at all (just joining because it is mainstream or a majority of the office mates or families engaged or joined)
Is it bad? Not, but in the long run, a problem will inevitably arise.
Paluwagan: DOWNSIDE
Paluwagan: DOWNSIDE
1. Problem with members not paying on time
2. If a particular member stops in the middle of the Paluwagan journey, it dramatically affects other members and the system
3. Ruined relationships (money is evil)
If you decide to join the Paluwagan system even with its bad side, then you might check members by the following:
1. Determine if those members DON'T have Negative RECORDS. But it does not necessarily mean that if they already had negative records, you will conclude that he/she will be a problem someday. This is a good try or factor to consider.
2. Determine if they have had ESTAFA cases in the past; if they have, you need to think twice.
3. Ask for character references.
4. Determine if the members don't have a financial problem.
Watch DTI calls 'Paluwagan' a pyramid scheme.
Watch DTI calls 'Paluwagan' a pyramid scheme.
FINAL THOUGHTS
If you really want to invest and grow your money, try using mutual funds, UITFs, stocks, or businesses.
Trust is a magic ingredient in this Paluwagan system. If you and your members are qualified for it, then take risks.
References:
1. DTI: 'Paluwagan' is a pyramid scheme
2. All About Paluwagan!
3. What is a Paluwagan: a Money Lending and Saving System in the Philippines
4. https://www.abs-cbnnews.com/video/business/04/22/15/why-you-should-stay-away-paluwagan-schemes
Updated: March 16, 2025. Fix error links and hunt like a grammar nazi!
