Tiago Oliva Schietti emphasizes that many people believe that if a consortium reaches its end without a participant being selected in a draw, the money they have paid simply disappears. This misconception discourages potential consortium members who fear joining a group and ending up with nothing after years of making monthly payments.
Understanding why no one completes a consortium group without receiving their letter of credit completely changes the way this concern is perceived by those who have not yet joined a group.
Why do people think that those who are not selected in a draw lose money?
The confusion stems from the very idea of a draw, which suggests luck, chance, and the possibility that someone may never be selected. That makes sense when thinking about a lottery, but it does not reflect how a consortium is mathematically structured from the moment the group is formed.
Each group has a fixed number of quotas and a fixed duration, structured so that every quota is eventually awarded a letter of credit over the total term. Tiago Oliva Schietti reinforces this point: there is no scenario in which a participant is left without receiving their credit, because the group’s structure itself does not allow for that.
A group with one hundred quotas and a term of one hundred months, for example, would need to award an average of one quota per month for the numbers to balance by the end of the term. Although the actual distribution may vary from month to month depending on bids and draws, the total number of awarded letters of credit ultimately corresponds to the number of active participants by the time the group closes.
How does the group ensure that everyone is awarded a letter of credit by the end?
As the months pass and letters of credit are awarded, the number of participants who have not yet received theirs decreases. During the final months of the group, only a few quotas remain in contention, until the number of remaining participants matches the number that still need to receive their letters of credit.
With many consortium administrators, participants who reach the end of the term without having been selected in a draw no longer need to compete in one: they are automatically awarded their letter of credit, since there are no other participants competing against them at that final stage of the group.
This logic explains why reputable administrators have no interest in indefinitely extending the waiting period for a particular consortium member. The group’s own schedule requires all letters of credit to be distributed by the scheduled closing date, with the Central Bank overseeing compliance with these requirements.
What changes for someone who is awarded their letter of credit only at the final meeting?
Being awarded a letter of credit at the end of the term means having paid virtually all installments before receiving access to the credit. In practice, this resembles gradually saving toward a cash purchase, without interest charges along the way. Tiago Oliva Schietti notes that this reality is very different from the idea of suffering a financial loss, which often worries people considering whether to join a consortium group.
The situation in which a consortium member may actually receive back less than the total amount paid is an early withdrawal, when the participant leaves the group before the end and waits for the applicable refund, generally subject to deductions such as the administration fee. This is very different from simply not being selected in a draw while the contract remains active.
Understanding how this mechanism works can change the decision to join
People who hesitate to enter a consortium because they are afraid of “not winning” are often comparing the product to a raffle, when it is actually a form of collective, planned purchasing structured mathematically so that every participant receives a letter of credit within the contracted term.
Tiago Oliva Schietti summarizes this distinction as one of the most important points for anyone considering joining a group: the relevant risk lies in withdrawing before the process is completed, rather than in simply waiting until the end.
