Recently government banned the operations of QuestNet in Rwanda, with the reason that it was operating under the shadow of a pyramid scheme.
However, the company insisted that it is a network marketing entity. Business Times’ JOHN GAHAMANYI interviewed Bipin Patel of Forever Living products, another network marketing company that also has operations in Rwanda.
What is the difference between a network marketing company and pyramid scheme?
In a pyramid scheme usually there is no value that is going down to the end person. Basically, there is no product moving yet people are asked to pile very large stocks.
Usually in these systems what happens is that the money is going to be siphoned out of the county whereas people who are paying that money are not getting value for that money.
As far as network marketing is concerned, it is a new way of distribution.
What is your take on the view that modern pyramid schemes operate network marketing as a concept to promote their interests?
That is the difference. These people who are operating under the pretext of network marketing are not promoting a product or a service.
In network marketing there will be movement of a legal product that is valuable to the value of the product. It is not over priced.
Are there laws in East Africa that stop the operations of pyramid schemes?
Not yet and that is why a lot of people are taking advantage of the situation. As far as we are concerned at forever living products, we are a very reputable company worldwide. What we are doing in Kenya right now is to dialogue what we regard as a direct selling association.
There is a body called the World Federation of Direct Selling Associations. This world federation has got stipulated laws or legislations which are necessary.
Any network marketing association has to fulfil those legislations for it to be registered in the country where the direct selling association is.
That is where we have to draw a line. We have to set some system and step-in as individuals until governments come in.
In Kenya in the last budget speech, Finance Minister Uhuru Kenyatta said that in future all no-genuine MLM schemes and pyramid schemes will be banned.
That statement has put us into this motion where we need to dialogue the criteria to differentiate between non-genuine and genuine.
Are there genuine pyramid schemes?
There is nothing wrong with a pyramid scheme. The scam comes when value is not flowing down to the consumer. Every single institution in this world is a pyramid.
In a legal pyramid, value has to flow down to the consumer. If they (consumers) buy the product that product will generate profit and that profit must be distributed among all the levels.
Is it necessary for every network marketing company to have a physical office?
Yes! If the company doesn’t have an office where are you going to find its products?
If they are working online and you buy their product on-line and maybe that product has fault where are you going to return that product. How are you paying taxes and where is the benefit of government?
How have you managed to differentiate yourselves from these scams?
We have been in the industry for the past sixteen years. We need to educate people about this industry because the industry is very lucrative.
Unfortunately, right now too many people are joining because of lack of legislation within our community.
Anybody can come and open up a scheme or scam. A lot of people will come and its import that the public are aware about what is a true network marketing concept and what it involves.