Introduction to Chit Fund

The concept of chit funds originated more than 1000 years ago.
Initially it was in the form of an informal association of traders
and households within communities, wherein the members
contributed some money in return for an accumulated sum at
the end of the tenure. However, in recent times, there has been
tremendous alteration in the constitution and functioning of chit
funds.

Chit funds are the Indian equivalent of the Rotating Savings and
Credit Associations (ROSCA) that are famous throughout the
world.
Introduction to Chit Fund

Chit funds are a means to ’save and borrow’ at the same time. It
is considered one of the best financial instruments to cater to
the emergency needs

Chit funds are also, more importantly, a means of easy and

profitable access to finance for the Small and Medium
Enterprises (SMEs).

In spite of competitive banking age, chit funds are popularly

increasing.
Why Chit funds are popular?

• Once a person become member of group, he/she gets “right

to loan” which is unlike in rather today’s competitive
banking sector.

• Easy access to loan without irritation of heavy

documentation

• Value for savings and interest for loan according market

value.

• Chit funds are seen as savings for emergency

Demerits of common chit fund

• No freedom of entry or exit

• Chits are closed ended scheme which results in low

demand for loan after certain duration.

• No transparency in out-cry bidding system

• Most of the chits are run by unauthorized persons. Hence

saved amount is vulnerable of fraud. Hence practice of
taking loan by highest discount is rampant.

• Forced loan during low demand duration

Mr. Manohar Maski

• Born in Raichur district of Karnataka State, Mr. Manohar

Maski, an ardent reader who focuses on understanding
different aspects of society, imparts his knowledge and
experience for well being of the community. As a full time
social worker he was involved in several projects in different
districts of Karnataka State.
• A profounder of co-operative sector, has been a key in
establishing “Janatha Bazar” in Sindhanor, SUCO Bank,
Karnataka State Souharda Federal Cooperative Limited, a
regulatory body for Souharda Cooperatives’ in Karnataka.
Mr. Manohar Maski

• Mr. Manohar Maski has experience of more than decades in

different positions like CEO, Director and President of
national and state level cooperative banks and
organizations.
• Has served more than 6 years as member of TAFCUB, a
state level task force on Co-operative Urban Banks, which
was initiated by RBI and Karnataka State Government.
• As a serving member of Karnataka State Legislative
Council, has wide exposure and experience in legal and
political arena.

The designer of EASY MONEY has obtained provisional patent

for the product.
Here comes a unique financial scheme!!................

EASY MONEY (Provisional Patent obtained)

Its Chit Fund !

Its R.D !

Its O.D!
Yes - Banking facilities and Security
No - Demerits of chit fund
What is Easy Money ?

• Its an Open Ended Scheme. (Customer has freedom of entry

and exit at any point of time)

• No groups of particular value. Irrespective of members and

value of pot its one group and one tender.

• Customer decides for himself (saving and duration)

• Transparent tender system instead of out-cry system.

How does Easy Money works?

• A customer joins the group by deciding his savings and duration.

• A member of the group participates in tender for his “Target Money”.

• A member can vote 3 tenders before the box is open.

• A member has flexibility for participating either for full or partial target
money.

• A member can participate again in the tender for the rest of the money
(Just like O.D).

• A member get bonus for his savings (Except for first month).

• A member gets more time to decide the discount because of transparent

tender system.
Advantage of Easy Money

It’s all about freedom and flexibility!!

• Freedom of exit and entry.

• Freedom of deciding for himself the savings and duration.
• Flexibility of tendering for full or partial money.
• Freedom of not participating in tender and deem this as
savings scheme.
Tender and Loan

• To avail loan in tender, a member has to quote minimum

15%+ ‘offer money’.
• Out of 15 %, 5 % goes towards service charge to
organizing institution.
• Total Collected in money in a given month in Easy money
scheme is offered for tendering.
• A member who quotes highest “offer money” is awarded
with first tender. The second highest quote is offered next.
Like this tenders are offered to equivalent of the total
“Tender Money”.
Tender and Loan

• Hence in one tender more than 5 or 6 members can avail

the loan.
• Any money left “untendered” will be transferred to next
month tender.
• If there is “tie” between members in quoting “offer money”
then tender is awarded to that member who’s savings
amount is more in ratio to the tender amount.
• If there is a “tie” in savings ratio also then tender is
awarded by lucky dip.
Bonus
Minimum 15 - 5 = 10 % plus
extra quoted value is issued as
bonus for every 100 Rupees.
Example:
Money for bonus = 1,60,000
Total tender amount for tender =
50,00,000
1,60,00 x 100 = 3.2%
50,00,000
• Rs. 3.20 for every 100 rupee.
If a member’s saving is Rs.
1000/- per month then he
receives Rs. 32 rupees as
bonus.
• Hence a member earns pre-
decided 10% (15-5=10) on
his savings and earns bonus
according to market values.
• Bonus is credited to
member’s account in that
particular month itself.
Membership and eligibility

• Membership
A prospective customer has to fill up the form which will be
verified by concerned office of the ‘Easy Money’ organizing
institution and membership is given.

• Eligibility
A member becomes eligible for tender only after paying
second Installment.

• Interest on saving
First installment is not considered for tender, hence a
competitive interest is given on the money.
Who can run Easy Money?

Any institutions authorized to collect deposits from public can organize

“Easy Money” For Example Banks, Co-operative institutions, NBFCs.

How to start with?

• “SiFiN” - Souharda Integrated Financial Services Ltd., is a public limited
company providing financial services in all terrains of Karnataka.

• SiFiN has 17 branches spread across the state.

• SiFiN has all the rights to manage and market this unique financial
product “Easy Money”
Organization which wishes to run the “Easy Money” Scheme has to enter
into an MoU with SiFiN.
Role of SiFiN

SiFiN
• Legitimizes the organization to run the “Easy Money” scheme.
• Offers all the guidelines and drafts of the documents.
• Conducts the tender and publishes the results.
• Follow-up with customers through SMS in name of organizing
institution.

SiFiN is entitled to receive 1% of Tender Amount as service charge.

Mutually agreed business advance has to be paid to SiFiN without any

interest.
What's YOUR profit?

Out of the 5 % service charge collected from the members 4% is

retained by the organizing institution. Since its Upfront and flat
rate actual rate would be 48% per annum.
What's YOUR profit?
100000

80000

60000

40000

20000

• No Chit fund license is necessary to run the scheme.

• No need to deposit chit equivalent money in the bank.
• Since loan and deposit occurs at same time, ALM would be effective.
• Total turnover and profitability increases (Up Front Profit Booking).
• Increase in Institution brand value because of this unique product.
Easy Money

• More Customers

• More Profit

• More Brand Value

Thank you, Any questions?