A Chit Fund Application

Chit funds are the Indian equivalent of the Rotating Savings and Credit Associations (ROSCA) that are famous throughout the world.1 ROSCAs are a means to 'save and borrow' at the same time. It is considered one of the best instruments to cater to the needs of the poor.

A chit scheme generally has a predetermined value and duration. Each scheme admits a fixed precalculated number of members (generally equal to the duration of the scheme), who contribute a certain sum of money every month (or everyday) to the 'pot'. The 'pot' is then auctioned out every month. The highest bidder (also known as the prized subscriber) wins the 'pot' for that month. The bid amount is also called the 'discount' and the prized subscriber wins the sum of money equal to the chit value less the discount. The discount money is then distributed among the rest of the members (or the non-prized subscribers) as 'dividend' and in the subsequent month, the required contribution is brought down by the amount of dividend.