What is a chit fund?

I know of it as some sort of cash management, but then what is cash management?

A Chit Fund is a kind of savings scheme practiced in India. In a chit scheme, a specific number of individuals come together to pool a specific amount of money at periodic intervals. Usually the number of individuals and the number of periods will be the same. At the end of each period, there will be an auction of the money. Members of the chit will participate in this auction for the pooled money during that interval. The money will be given to the lowest bidder. The bid amount will be divided by number of members, and thus determining per head contribution during that period. Usually the discount will continue to decrease over periods. The person getting money in the last period will receive the full scheme amount.

Such chit fund schemes may be conducted by organised financial institutions or may be unorganised schemes conducted between friends or relatives. There are also variations of chits where the savings are done for a specific purpose.

Chit Funds are also misused by its promoters and there are many instances of the founders running what is basically a Ponzi scheme and absconding with their money. This is especially rampant in South India where Chit Fund fraud is witnessed almost on a yearly basis with atleast one Chit Fund going under.

A Chit Fund is a kind of savings scheme practiced in India. In a chit scheme, a specific number of individuals come together to pool a specific amount of money at periodic intervals. Usually the number of individuals and the number of periods will be the same. At the end of each period, there will be an auction of the money. Members of the chit will participate in this auction for the pooled money during that interval. The money will be given to the lowest bidder. The bid amount will be divided by number of members, and thus determining per head contribution during that period. Usually the discount will continue to decrease over periods. The person getting money in the last period will receive the full scheme amount.

Such chit fund schemes may be conducted by organised financial institutions or may be unorganised schemes conducted between friends or relatives. There are also variations of chits where the savings are done for a specific purpose.

Chit Funds are also misused by its promoters and there are many instances of the founders running what is basically a Ponzi scheme and absconding with their money. This is especially rampant in South India where Chit Fund fraud is witnessed almost on a yearly basis with atleast one Chit Fund going under.

Chit fund is the future of all money. Instead of having dollars they will be called chits. And we will have credit cards that actually say how many chits we have left on the card after we use them. Cool huh? If you steal my idea and create chit cards, I won't mind. If you get rich though send some chits my way.