A STUDY ON CHALLENGES AND OPPORTUNITIES OF CHIT FUND

1. Submitted by
Name of the Candidate : SUSHMITA GHOSH
Registration No. : 224-1221-1529-13
Name of the College : SETH ANANDRAM JAIPURIA COLLEGE
College Roll No. : 64
C U Roll No. : 1224-51-0231

2. introduction
In the old days, common people had saved their money in some
containers made by clay which known as piggy bank in Nepal.
There was always a risk of thefts and they did not get any
interest on their savings but now days there is so many financial
institutions where people can save or invest their money. It is
appreciating that the Nonbanking Financial Intermediaries are
supplementingthe functions of the Banking Institutions without
having Banking license.
In this Financial Intermediaries I am highlighting the concept of CHIT FUND
Companies.
Chit Funds have been a popular savings scheme in several parts of India. It is a
convenient finance option among businessmen, small scale industrialists, and other
small time investors. Though there is realizing many news of fraudulence, but they
have still managed to retain their popularity. They continue to be well accepted by
society and there is again arising interests in them. They attract thousands of
investors every year and crore of rupees, despite the expansion of banking into the
remotest parts of the country.
Now it should be clear that chit fund does not mean cheat fund. Because there is
a rumor in some peoples mind that
chit = cheat , which is completely wrong.
‘Chit fund’ means ‘small savings’.

3. OBJECTIVES
Methodology:
The study is based on primary and secondary data. Primary data have
been collected from 55 respondents through a structure
questionnaire covering different groups of Investors and common
public of cities and also village areas. Here I introduce 3 different
types of questionnaire for ‘Customers’, ‘Agents’ and ‘Chit Managers’.

4. WO
R
K
S
O
F
C
H
I
T
F
U
N
D

5. DEFINITION OF CHIT FUND
As per Section 2 (b) of the Chit Funds Act 1982, chit means “a
transaction whether called chit, chit fund, chitty, kuri or by any
other name by or under which a person enters into an
agreement with a specified number of persons that every one of
them shall subscribe a certain sum of money (or a certain
quantity of grain instead) by way of periodical installments over a
definite period and that each such subscriber shall, in his turn,
as determined by lot or by auction or by tender or in such other
manner as may be specified in the chit agreement, be entitled to
the prize amount.”

6. 1) It is very easy to join.
2) It makes the habit of compulsory
regular saving.
3) It provides High Promised Return.
4) Small deposit schemes.
5) For any unexpected financial
requirement, subscribers can bid at
auction for the lump sum amount,
could prove to be a better option
than going through the hassles of a
loan.
6) The rate of interest of borrowing is
low.
7) Door to door collection by agents.
8) Develop the micro-enterprises.
9) Enhance income-earning capacity
of people & help to reduce poverty.
10) Improve the quality of life.
1. High transaction cost.
2. Barriers for conventional
banking.
3. Investment for agricultural and
rural development.
4. Understanding with public.
5. Creation of faith in commons.
ADVANTAGES CHALLENGES
ADVANTAGE
S
CHALLENG
ES

7. ARE THE CHIT COMPANIES TAKING ANY STEPS TO INCREASE
EMPLOYMENT?
Yes No
93.33% 6.67%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Here the respondents are positively answered that they are taking steps to
increase employment which indicates their thinking of stability and their
concern towards the development of society. Through this they are also
helping to reduce poverty.

8. CUSTOMER’S SATISFACTION TOWARDS THE SERVICE
PROVIDES BY CHIT FUND :-
70%
30%
Satisfied
Unsatisfied
70% respondents (customers) are totally satisfied with the
services provides by chit funds. This is really good impression of
chit funds for giving a major impact on the market.

9. Yes No
85% 15%
0%
20%
40%
60%
80%
100%
DOES INVESTING IN CHITS GAIN MORE PROFIT THAN ANY
OTHER FINANCIAL INSTITUTION AS PER CUSTOMERS?
In the respondents 85% customers gains more profit from chit
funds than any other institutions. This is favorable for chit fund
industries.

10. WOULD PUBLIC INVEST THEIR MONEY IN CHIT FUND IN THIS PRESENT
SITUATION?
In the recent situation where fraud companies are effecting the faiths of customers
on chit funds, an average percentage of customers are agree to invest their
money in chit funds. It is quite good but the other same percentage of customers
are not agree to invest. so it’s not completely a safe situation. But most of the chit
managers are thinking that publics are willing to invest their money.
NO. OF RESPONDENTS
(customers)
NO. OF RESPONDENTS
(chit managers)
YES 50% 73.33%
NO 50% 26.67%
0%
10%
20%
30%
40%
50%
60%
70%
80%

11. DO YOU THINK THAT A CHIT FUND INSTITUTION SHOULD BE
MORE FAITHFUL AND CLEAN TOWARDS CUSTOMER?
Here only 26.67% chit managers think that a chit fund institution should be more
faithful and clean towards customer but 55% agents and in a huge rate (75%) of
customers think that a chit fund institution should be more faithful and clean
towards customer. Here the point of view of chit managers and customers are
not same which indicates a fault.
0%
10%
20%
30%
40%
50%
60%
70%
80%
NO. OF
RESPONDENTS
(customers)
NO. OF
RESPONDENTS
(agents)
NO. OF
RESPONDENTS
(chit managers)
75%
55%
26.67%25%
45%
73.33%
YES
NO

12. 1.Through the collection of data I found that a huge percentage of customers and agents also
have just no idea about the actual works of the chit fund. (chart no. 4)
2.Customers prefer to take loan from chit funds instead of money-lenders.(chart no. 8)
3.Most of the people investing in chit funds because chit funds are more familiar than banks.
High return opportunity is not only the way to attract customers as per customers and chit
managers. (chart no. 9)
4.Chit managers are taking steps and trying to increase employment through chit fund
industry. (chart no. 10)
5.Most of the respondents think that investing in chits gain more profit than any other financial
institution.(chart no. 11)
6.As per the respondents, customers are satisfied with the service provided by chit funds.(chart
no. 12)
7.Chit fund companies attract new customers mainly through small savings opportunities, easy
investment procedure, not only through the high returns. The agents do not hide anything
about schemes from common customers to attract them.(chart no. 13 & 14)
8.Here the ponzi schemes are creating negative impact on chit funds as per customers. And chit
managers and agents are also supporting this comment. But along with this a huge percentage
of customers just dont have clear concept about ponzi schemes.(chart no. 15 & 16)
9.An average percentage of customers are agreeing to invest their money in chit funds. but I
also found that a huge percentage of customers are thinking that a chit fund institution should
be more faithful and clean towards customer and agents also think so but not in the same rate
where a most of chit managers are thinking the opposite. Here the point of view of chit
managers and customers are not same which indicates a fault.(chart no. 17 & 18)
OVERALL FINDINGS

13. saving cum borrowing
the performance of the Chit Fund
industry is satisfactory, several difficulties and problems prevent its
healthy growth.
The objective of the study being a depth study of the chit business
operation and risks involved in such business.

14. 1) The company can introduce lower amount chit schemes and tap the
large lower middle income group people based on a survey and thus
making the company more attractive or beneficial to the members.
2) The risk perception of subscriber can be overcome, by the company
by making its transaction more transparent.
3) Open some enquiry counters at the branches which relates with the
public every times and public will get know anything and clarify their
quires.
4) The stuffs of the companies need to be trained and well behaved to
customers.
5) Human Resource Development programmes for the staff will enhance
efficiency and enable speedy and better service. It will also help in
maintaining good customer relations. Information on the changing
norms and rules of various schemes and computer literacy
programmes can be provided as part of scientific training.
6) Proper care and attention could be offered to the customers due to
the less burdensome work of the staff because of computerization. An
enquiry section operating with an updated computer can give
guidance and quickly clarify the genuine doubts of the customers.