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Is 'PALUWAGAN' System A Good Or Bad Method?

Paluwagan is allegedly guaranteed members high returns without supposedly any risks.

Are you tempted to invest with high-return money without any risks? How does 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?

piggybank photo

Photo by: Ken Teegardin / Flickr

If you have doubts, you should check this out and know it better.

Paluwagan is a matrix/cycle type of marketing plan in our country. Or it could be a simple form of money lending and savings system that is so popular in the Philippines.

Someone mentioned that in English, it is called Rotating Savings and Credit Association or ROSCA. 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 this similar kind of system called HULOGA. The group members decided to pay an amount, then you can lend the money and pay it for an interest rate. Do sounds like a loan?

marketing plan

Paluwagan is allegedly guaranteed members high returns without supposedly any risks. Is it really possible? If a member is too skeptical about it, then there's really a problem.
In connection with, Paluwagan it is quite a common topic among Filipinos, commonly referred to as a local saving method. Just recently, the Department of Trade and Industry (DTI), Paluwagan, issued a warning 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 in the family members, wherein they plan to use the total amount of money collected from the members. 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 which has similar to Pyramid Schemes. But they say it's a way of saving with no talk of interest.

How PALUWAGAN works?

Paluwagan is mostly common with a group of friends, officemates, neighbors, and families/relatives.

A group of members decides to pay either 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 assured members to 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. Mostly at the end of the year. My mother joined somewhat like this system in our neighborhood, they pay an amount, but they will get not cash, 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, it has a total of Php 3,000.00 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, in the third week, the same process, now, Diego will get the POT. That's how Paluwagan works; now, in social media, they tweak it as an investment. Here is an example:

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...
The question, is there a problem here? Basically, there is none. However, the first member will enjoy the POT first. What if in the next week, he/she will not pay?

Reason Why People Join Paluwagan

1. Trusted members (of course, people greatly 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

1. Problem with members not paying on time
2. If a particular member stops in the middle of the Paluwagan journey, it affects greatly other members and its 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. Well, this is a good try or factor to consider. 
2. Determine if they have ESTAFA cases in the past; if they had, then 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.

If you really want to invest and make your money grow, try with Mutual Funds, UITF, stocks, or business.

Trust is really a magic ingredient with this Paluwagan system. If you think you and those members are qualified for the system, then take risks.


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

Updated: February 21, 2021. Fix error links and hunt like a grammar nazi!

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Mabzicle: Is 'PALUWAGAN' System A Good Or Bad Method?
Is 'PALUWAGAN' System A Good Or Bad Method?
Paluwagan is allegedly guaranteed members high returns without supposedly any risks.
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