October 01, Colombo (LNW): Central Bank Governor Dr Nandalal Weerasinghe has raised concerns over the use of funds collected from the public through cultivation investment schemes, saying some companies had diverted investors’ money into a range of unrelated commercial and promotional activities.
Speaking yesterday, Dr Weerasinghe said funds obtained from members of the public for agricultural investment projects had, in some cases, been channelled into businesses including newspapers, supermarkets and tourism ventures. Some companies had also used the money to organise entertainment events and sponsor cricket matches, he said.
According to the Governor, portions of the funds had even been distributed as gifts to artistes, while significant amounts were spent on advertising and promotional activities.
He also criticised the use of social media influencers to market cultivation-based investment schemes, pointing out that the money paid to such influencers ultimately came from members of the public who had invested their savings.
Dr Weerasinghe said influencers promoting these schemes were effectively representing the companies that paid them rather than the interests of ordinary investors.
The Governor stressed that the Central Bank had not suspended the bank accounts of legitimate cultivation investment schemes. He explained that action had instead been taken against accounts linked to the unlawful acceptance of deposits.
As a result, he said, companies could not attribute their failure to repay investors to an alleged Central Bank freeze on their cultivation investment accounts.
The Central Bank has repeatedly warned the public against handing over their savings to companies that collect money under the guise of cultivation investments, Dr Weerasinghe said. He noted that the financial difficulties faced by some of these firms had intensified as the flow of new investments declined.
With fewer new funds coming in, the companies had increasingly struggled to meet obligations to earlier investors. The Governor also questioned the sustainability of schemes promising returns of around 40 per cent, saying such payments could not be maintained without a continuing inflow of fresh deposits.
Dr Weerasinghe said accounts associated with the illegal acceptance of deposits had been frozen to preserve the funds until court proceedings were completed, after which the money could be distributed among affected depositors in accordance with the law.
He further warned cultivation investment companies that they would be required to face legal proceedings and present a credible mechanism for repaying funds collected unlawfully.
Unless such companies provide a clear plan to settle their obligations to investors, the Governor cautioned, they could face consequences similar to those encountered by operators of unlawful pyramid schemes in the past.