Chit is the Indian equivalent of Rotating Savings and Credit Association (ROSCA) which is famous all over the world. ROSCA or Chit is a cash management system which entities the participant to “save and Borrow” at the same time. This is considered one of the best instruments to cater the needs of a common man.
Chit is a mechanism that combines credit and savings in a single scheme. In a chit fund scheme, a group of individuals come together for a predetermined time period and contribute to a common pool at regular intervals for example in every month. Up until the end of the tenure of the scheme, the collected pool of money is loaned out internally through a bidding mechanism to the most deserving member. Thus the beauty of the scheme is that the people who are in need of funds and those who want to save meet their requirement simultaneously. In the bidding mechanism the amount foregone by the successful bidder from the chit value is called discount. This discount is divided among the group of individuals as dividend. In the subsequent month, the required contribution is brought down by the amount of dividend. The person who conducts the chit is called foreman and he receives a fixed fee @ 5% of the chit value as commission for his services. In the subsequent month, the required contribution is brought down by the amount of dividend.
Chit is a mechanism that combines credit and savings in a single scheme. In a chit fund scheme, a group of individuals come together for a predetermined time period and contribute to a common pool at regular intervals for example in every month. Up until the end of the tenure of the scheme, the collected pool of money is loaned out internally through a bidding mechanism to the most deserving member. Thus the beauty of the scheme is that the people who are in need of funds and those who want to save meet their requirement simultaneously. In the bidding mechanism the amount foregone by the successful bidder from the chit value is called discount. This discount is divided among the group of individuals as dividend. In the subsequent month, the required contribution is brought down by the amount of dividend. The person who conducts the chit is called foreman and he receives a fixed fee @ 5% of the chit value as commission for his services. In the subsequent month, the required contribution is brought down by the amount of dividend.
