To study the means to improve financial access to the low income households through chit funds, the All India Association of Chit Funds (AIACF) is working with the Bill and Melinda Gates Foundation on the feasibility of designing chit schemes for the poor.
AIACF is a registered body functioning for the last three decades, co-coordinating the activities of the states and district organisations representing nearly 20,000 registered chit fund firms in India.
Bill and Melinda Gates Foundation has entrusted the study in India to the Indian School of Business, Hyderabad, who in turn has roped in The Small Enterprise Finance Centre (SEFC) at the Institute for Financial Management and Research (IFMR) in Chennai and the Professor Antoinette Scholar of MIT, Cambridge.
As part of the data collection for the research survey, Karnataka Chitsters Association had called all its district-level office bearers and associations to interact with representatives of AIACF, ISB-Hyderabad, SEFC and MIT, Cambridge.
“The meet in Bangalore will discuss potential models aimed at improving the livelihood of low income population and evaluate a suitable region-specific model,” said P J Krishna Murthy, president, Karnataka Chitsters Association.
“Looking into the magnitude and seriousness of the issue at hand, it was agreed to conduct an all India survey on the role of chit funds in our economy,” said Mudit Kapoor, a professor at ISB, while addressing chit funds organisations based in Karnataka.
“The initial research in a few states have stimulated ideas for further research,” he said and added “A number of companies have volunteered to participate in the effort as apart of meeting its corporate social responsibility; and this opens up a great business opportunity.”
Lower and middle income groups and small businesses are often wedged between the exorbitant interests charged by money lenders and the stringent procedure of the bank.
In this backdrop, “The chit fund is also seen not merely as an investment but a drop-by-drop plan to get lump sum financing for future consumptions such as marriage, education and housing,” said Kapoor. “The chit funds are of a self-liquidating nature and partake the character of mutual benefit schemes. They act as a saving-cum-borrowing instrument which is unique when compared to other financial systems,” he added.
