In a Money Club, the winner in each round is decided through bidding. The highest bidder gets the pool amount but we have observed multiple cases of funds-soliciting in a short span of time where a member is in need of money and he requests his club members to let him take the pool of funds in a specific round. This soliciting of funds has the following repercussions:
- Lesser returns to the investors – If a member requests the pool amount due to financial or medical emergency, he needs to take approval from all his club members. In most cases, the members avoid bidding so that the needy member can get the pool amount and this leads to low bidding (or no bidding at all). Lesser the bidding in a club, lesser the returns made by the club members.
- Group Dynamics is affected – We have also seen many times, the member who requests the funds doesn’t get approval from all his club members. In this case, trust issues, as well as confusion, arises in the club. Also, if there are 2 or more members in the club who are in need of money and one of them gets approval from his club members as he is the first one among all other needy members to solicit the funds, then the other needy members hesitate to communicate their needs in the club and they keep waiting for the bidding to start. This leads to unexpected last second bids.
Scenario 1: When everybody accepts the request.
- There should be a fixed interest cost (e.g. 4% of the pool amount) to get the pool amount.
- All the members should refrain from bidding in that round.
Scenario 2: When the request is not accepted by all.
The winner of that round should be decided through bidding.