When we hear about a chit fund investor, we tend to visualise a conservative housewife or a rural householder with no access to modern banking. It is true that women and rural folk were the major patrons of chit funds in earlier days. That’s because they needed an avenue for monthly saving and anytime withdrawal. And chit funds provide that without any procedural hassles. But there is growing awareness that chit funds are equally attractive to the urban salaried class and business owners, especially the youth! How, you may ask? Just read on.
Monthly savings and anytime withdrawal
These very same features are now making chit funds an attractive and convenient financial instrument for people of all walks of life. The newly employed youth especially in their 20s and early 30s are likely to have a lot of surplus money every month. When they are unmarried and free of family obligations, they are in a very good position to save that surplus income.
One reason why a young adult hesitates to lock in his surplus into savings instruments like FDs is lack of liquidity. When I want to buy a super bike or plan a foreign holiday, I want easy access to my money, that’s their perspective. Chit funds happen to be a very suitable solution for this. Invest the monthly surplus into 2-3 year tenure chit fund scheme. Withdraw the entire lump-sum as soon as a specific need arises. So chit funds work as both an investment and credit instrument.
Government of India has passed a landmark legislation – Chit Funds (Amendment) Bill – in November 2019. It is aimed at setting up a mechanism to ensure transparency in chit fund schemes, protect subscribers and regulate the industry. It also gives a great push towards rebranding and modernising chit fund companies.
Chit funds can add a tag line under their names “A ROSCA Institution”. ROSCA stands for ‘Rotating Savings & Credit Association’. This move would help companies build a common identity and brand across the industry. They can also rename themselves as “fraternity fund”, “rotating savings” and “credit institution”. Even presence of subscribers through video-conferencing is being encouraged. These steps will help build credibility and brand value among the youngsters. Once the industry gets more formalised, investment base is likely to increase rapidly.
Fin-tech Chit fund start-ups
Sweeping legislative changes have particularly attracted several financial sector start-ups to operate in the chit fund space. These start-ups are trying to revamp traditional chit fund processes by sensitising younger generations.
Kyepot is an entirely digital approach to chit funds – customer on-boarding, group assignment, payments and bidding can all be done through a mobile app. Pune-based Finlok allows users to leverage their social networks for group savings. Another fin-tech start-up, CredRight, offers loan against chits to micro and small entrepreneurs. ChitMonks is building India’s largest blockchain network for savings and borrowings. They synergize chit fund companies, regulators, subscribers, banks, service providers, ecosystem enablers to drive the largest trusted network of savers and borrowers platform.
With the introduction of online operations, chit funds can greatly penetrate the customer segment of young investors. Smart and user friendly web-sites and mobile apps are the first step. Good investor advice in the form of emails or blogs can help build awareness. This blog itself is a step in that direction.
Starting new schemes, making monthly payments, bidding and withdrawals can be supported through online operations wherever possible. This would help young investors adopt chit funds as a quick and convenient investment choice. Many reputed chit fund houses are taking steps in this direction. In collaboration with fin-tech start-ups, the online presence of chit funds is going to undergo a rapid and welcome change in the near future.
Shantala Chits has long been a pioneer in the chit fund business. We are a Government approved chit fund company with a 24 year successful track record and thousands of satisfied customers. Shantala Chits is registered under the Chit Fund Act of 1982, Government of Karnataka. We are one of the most popular chit fund houses based out of Bengaluru, known for our prompt customer support and secure investments.
We are making a conscious attempt to spread the message about the suitability of chit funds to the young Indian. We believe that chit funds will help the youth get into the saving habit and stay debt free. Keeping pace with the modern times, we are also adopting several customer friendly online practices. Our customers can make their monthly contributions online. We have also tied up with ChitMonks, a fin-tech start-up for building a stronger chit fund eco-system. We are already able to see the average age of our investors reducing over the years, it is now around 40 years. We endeavour to be a preferred investment partner for both the young and the old.