What are MLM and co-op schemes?
In an MLM, you usually become a member of a company by paying a fee or buying its products. You are then told you can earn in two ways: by selling the products, and by signing up new members.
In a co-op scheme, you leave money with a society, and it promises monthly profits far above what a bank pays. Either way, what you hold is only a promise; you do not own any asset, and there is no deposit protection of the kind banks have.
Say a neighbour tells Selina about a society: leave Tk 1 lakh with it and get Tk 3,000 profit every month. The money arrives on time for the first few months, so Selina puts in more and asks her sister to join too. Then the payments start coming late, and one day the office is shut. The early profits had really come out of newer members’ deposits, and there was never any assurance of getting the original money back. This is an imaginary example.
How it works
MLM (multi-level marketing) is a business in which members sell products and recruit new members, earning commission on their own sales and on the sales of the people below them. On paper it is a business that sells goods.
The trouble starts when the main source of income is not product sales but new members’ joining fees or “investments”. It is then a pyramid scheme: earlier members are paid out of later members’ money. Each level needs far more people than the one before, and eventually new people run out. The money stops, the scheme collapses, and most of those who joined later lose what they paid.
Co-operative society traps are slightly different. In law, a co-operative society belongs to its own members. But some societies take deposits from the general public as if they were banks, and promise high monthly profits. Those profits are often paid from new deposits, so the structure ends up much like a pyramid. There is no deposit protection here as there is for banks.
Say each member must recruit 6 new people to make money. Level one has 1 person, level two 6, level three 36; level eleven alone needs more than 60 million new people, and level twelve over 360 million, more than twice Bangladesh’s population. So it is mathematically impossible for the people in the last levels to come out ahead.
What the law in Bangladesh says
MLM in Bangladesh is governed by the Multilevel Marketing Activities (Control) Act 2013 (first an ordinance in September 2013, then an Act). It bans running an MLM business without a licence (issued by the Registrar of Joint Stock Companies and Firms, RJSC, under the Ministry of Commerce), and bans pyramid-type activity where income comes mainly from recruiting new members. Breaches can lead to prison terms and heavy fines.
Co-operative societies are registered with the Department of Co-operatives under the Co-operative Societies Act 2001. A society is not a bank: taking deposits from the public and doing banking business needs a Bangladesh Bank licence, which societies do not have, and money kept with a society is not covered by deposit protection. Microfinance institutions are separate and are licensed by the Microcredit Regulatory Authority (MRA).
Bangladesh Bank has warned the public at various times not to deal with MLM-type schemes, including in notices in 2023 and 2025.
What has happened before
Over the past two decades, several large MLM companies, “double your money” schemes and deposit-taking societies have collapsed in Bangladesh. A 2021 Prothom Alo report, citing Bangladesh Bank, said one MLM group alone had about 4.5 million customers. The same report, citing a 2017 Department of Co-operatives report, said 266 societies failed to repay customers about Tk 4,100 crore over 2008–2017.
The pattern repeats: steady payouts at first to build trust, rapid spread through friends and relatives, then offices suddenly shut. As recently as 2025, societies in a single upazila were investigated over the alleged loss of hundreds of crores of taka. In most cases, victims have not got their money back even years later.
Warning signs
- Income from recruiting
- More emphasis on bringing in people than on selling products.
- A big payment to join
- A joining fee, a “package” to buy or compulsory stock purchases.
- Guaranteed, unusually high profit
- A “guaranteed” monthly return far above banks or sanchayapatra.
- Odd product prices
- Products priced far above the market, or hardly any products at all.
- A society taking deposits from anyone
- Becoming a “member” takes only a form and money; in practice it is taking public deposits.
- Pressure and secrecy
- “Join now or miss out”, reluctance to put things in writing, irritation at questions.
What return to expect
No “percent a year” figure makes sense here. Some early joiners do receive the promised returns, because those are paid from later joiners’ money. When the scheme collapses, the rest lose their principal too.
According to US Federal Trade Commission (FTC) consumer guidance, most people who join even legitimate MLMs make little or no money, and some lose money. In pyramid schemes and illegal deposit-taking societies, the principal itself is at risk.
Why people choose it
- In licensed, product-based direct selling some people earn commission, but that is pay for work, not an investment return.
- A genuine co-operative can offer savings and credit among its own members.
Points to weigh
- A pyramid structure is mathematically bound to collapse; most later joiners lose.
- No protection like bank deposits have; getting money back is very hard.
- Unlicensed MLM and taking deposits from the public are illegal.
- Bringing in family and friends puts relationships at risk as well as money.
- You cannot tell when it will collapse; plans to “get out first” rarely work.
Tax
Commission from lawful direct selling is part of your total income and may be taxable under the Income Tax Act 2023.
Money lost in an illegal scheme generally cannot be set off as a tax loss. If you are defrauded, the route is a legal complaint.
Tax rules can change with each year’s Finance Act. Before a big decision, check the latest rules or speak to a tax adviser.
How to get started
- If someone asks you to join an MLM or society, write down the organisation’s name first, and do not rush.
- For an MLM, check whether it holds a current MLM licence from the RJSC.
- For a society, check its registration with the Department of Co-operatives, and remember registration does not allow it to take deposits from the public.
- Ask in writing where the income comes from: product sales or new members.
- If defrauded, file a complaint with the police or the courts, and keep all papers, receipts and messages.
Check before you start
- Does most of the income depend on bringing in new people?
- Is the return far above banks or sanchayapatra, and “guaranteed”?
- Have I checked its licence or registration myself, not just the papers they showed me?
- Is it in writing how and when I can get my money back?
- Could I manage if I lost all of this money?