It can surprise you that chit funds have been actively functioning in India and other parts of Asia even before the word ‘Bank’ was defined in the English dictionary. Chit fund, also known as Chitty, had its origins more than a thousand years ago during the reign of Raja Rama Varma, the erstwhile ruler of Cochin State. In those days, it was also referred to as Kuri. Moreover, there are references to the Malabar Kuri in various ancient books as having existed during the Dravidian times. But why is Chitty trending on social media today? Let us explore the reasons in this article.
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Chitty – An ideal investment resource for the low-income group
The chit fund concept is simple.
- A group of homogenous people decides to open a chit fund for mutual benefit. The homogenous nature of the group binds the members together. Usually, they form a group of ten or twenty people. Hence, the origin of the word ‘Beesi’ also represents ‘twenty.’
- Each member agrees to contribute a fixed sum every month. Usually, the tenure equals the number of people in the group.
- The neediest person can claim the pooled money monthly through reverse bidding. So, the person ready to make the maximum sacrifice gets the bid amount. The balance amount is shared among the other members as interest. The organizer of the chit fund takes his share accordingly.
- The process continues every month until every member gets a share of the pooled money.
It is one of the most reliable investment resources because the members know each other and have a high trust factor.
Even today, the chitty concept is popular in villages and towns across India. Besides, registered chit funds like Shriram Chits, Gokulam Chits, etc. and digital chit fund platforms like the Money Club, etc., have contributed to the popularity of Chitty.
The Registered Chit Fund
- The users register themselves on the Money Club platform. Then, the company does the proper KYC verification before admitting each member.
- The member can choose their investment amount and tenure. Money Club has an advanced algorithm that matches the investment amount and term with other members to form a group.
- The functioning of the Chitty is the same as in the traditional chit fund network. However, the best aspect of Money Club is that the investor does not part with their share until the bid amount is finalized.
- On finalizing the bid amount, Money Club forwards the winner’s account credentials to each group member and directs them to pay their contribution directly to the members online. Then, the members must update their payment status on the Money Club platform.
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Why is Chitty trending all over social media today?
While platforms like Money Club are safe for operations and investments, scammers are available in plenty in the chit-fund scenario. Every second day, we hear of some chit-fund scammers cheating people of their hard-earned money. The most recent case is the arrest of the accused Jagjit Chahal from Gujarat by the Haryana Police for cheating investors to the tune of nearly Rs 10K crore. He has been on the Most Wanted List of fraudsters in almost all police jurisdictions. The Punjab Police has clubbed more than 300 FIRs to investigate the case. This news is trending all over social media. The hashtag, ‘Chit funds or Cheat funds,’ is a hot topic of discussion on social media.
Chit funds are excellent avenues for investment, especially in the smaller towns in India where the banking facilities are not yet available properly. However, people like Jagjit Chahal and others give Chitty a bad name by indulging in unscrupulous activity leading to mistrust among people. It attacks the core of Chitty built entirely on the trust factor between the members and the chit fund organizers.