Economics of Chit Finance

The economics of Chit Funds — the factors of costs and returns — need to be understood in the proper perspective. The analysis of the financial implications revealed that the aspects of saving and borrowing converge in the economics of Chit business. Chit finance has been influenced to a significant extent by the prevailing rate of interest — both for deposits and loans. The present study estimates real costs and returns on Chits by employing various formulations like Net Present Value (NPV), Profitability Index and Internal Rate of Return (IRR). The book also examines the regulatory framework of Chit Funds, problems and issues related to the various Chit Acts including the Central Act of 1982 and the Kerala Chit Fund Rules 2012. A performance evaluation of KSFE — the first public sector Chit Fund Company in India — was found relevant and is incorporated in the book. An appraisal of the prospects and challenges of the Chit Fund Industry has also been attempted in the book. It is hoped that this volume would be useful to researchers, Chit foremen, subscribers and to the different categories of participants in the Chit Fund industry.