Chit Funds: Which path will Gen X take?

To follow or not to follow, that is the question when it comes to Chit Funds today.
There are over 10,000 registered chit funds in India. Most of these chit funds were started 5 to 6 decades ago. The first generation of chit fund owners have entered the management sector hence it will be interesting to see their vision for the future of chit funds. Will they be purists or radicals? Its safe to say that there are pros and cons to each mindset.

If they decide to pursue the traditional path, then there are a few obstacles that they have to face. Family owned businesses are highly regulated which cascades to low margins. Young business-oriented people have a “Quick Results” enthusiasm that needs to be curbed in order to follow traditional methods. It becomes essential to keep the family name and trust intact if one decides to follow in the steps of their fathers and forefathers.

That being said there are multiple positive aspects to following traditional methods. The trust factor which is of utmost importance in the chit fund world will continue to thrive. The sought-after word of mouth method of business development has a higher chance of success due to this trust. It helps to keep the business relevant. Hence, these days many chit funds do a KYC check to make sure they are only offering their services to dependable customers.

If the new captain of the family business decides to steer the business in a new direction, then along with the opportunities would come a few disadvantages. The realisation that family owned businesses need a fresh take on how the company should operate quickly becomes a priority and they take the necessary steps to bring a change to the working procedure i.e introduction of a social media presence and digitisation. This would mean having to convince the older generation to adopt to newer methods.

The main advantage of being an advocate of change in the modern world is that the reach of the company increases 10 fold. Growth can be achieved by opening branches, employing new agents and creating an online presence. There is a new wave of internet users who belong to the 18-45 years category that are heavily dependant on the internet for information. Therefore, making your chit fund online friendly will prove to be an added advantage.

It is safe to say that neither of these methods is right or wrong. It all depends upon what would work for a particular company. Chit fund have been evolving since a long time and there seems to be a stiff competition from alternate saving and borrowing methods but, that does not seem to hamper the influx of people that prefer Chit Funds to any other kind of saving/borrowing for a rainy day.

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