Concept of Chit Fund

The Chit Fund concept is a totally Indian concept but the system has now won universal acclaim. It is a fraternity fund which is a ‘2 in1’ savings cum lending instrument.

History of Chit Fund

‣   Chit funds were first started in India more than a thousand years ago. The first attempt to regulate the sector was made by the government of Travancore in 1914. This was followed by the Tamil Nadu Chit Funds Act of 1961, Andhra Pradesh Chit Funds Act of 1971, and Maharashtra Chit Funds Act of 1974.

‣   The concept of chit fund has been around for over 10 centuries now. Hugely popular in developing countries, such as India, China, Pakistan and Central Africa, chit fund is one of the best sources of saving money for low income groups, salaried people and the self-employed and business man. In the book written by Edith Jemima Simcox, there is reference to the Malabar Kuri system that existed from ancient Dravidian times and is somewhat similar to the systems in China. In China it developed to what is popularly known today as the Chinese lottery.

‣   Erstwhile ruler of Cochin State, Raja Rama Varma gave loans to Syrian Christian traders and retains a certain portion of the loan for administrative and other expenses. Later, to manage the increasing numbers of loan seekers, he ordered a cast of lots and gave the accumulated amount to those who drew the lot on the principle of equity. Gradually the practice spread to other parts of the country and even abroad, includes Myanmar and Sri Lanka. But real streamlining of operations was somewhere between 1830 and 1835, when the Chaldean Syrian church started Kuries under its name and issued passbooks to subscribers as evidence of enrollment. Another interesting version of the origin of chits is linked with Portuguese missionaries from China, who visited Muziris (Kodungalloor) off and on for evangelization and established a seminary at Vypeencotta village in 1577. Muziris (now known as Pattanam near Cochin) was the important entry port. They reportedly encouraged promotion of chits in Kodungalloor. The practice of holding chits was also in vogue in China in the 14th century, to meet the financial needs of the poor and downtrodden.

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