Innovative chit schemes

Principal Investigators: Prof. Mudit Kapoor (ISB India); Prof. Antoinette Schoar (MIT USA)
Research Team: Preethi Rao, Arindam Jana, Sumit Gupta
LEAD Centre: Small Enterprise Finance Centre (SEFC)
Focus Area: SME Finance
Project Geography: Tamil Nadu, Andhra Pradesh, Karnataka, Delhi and Maharashtra
Partner: All India Association of Chit Funds
Status: Ongoing

Background:

The Chit fund model is an easy and innovative method of access to finance; it caters to the needs of different sections of the society, mainly in the lower income-generating households and small businesses. Our prior research shows that there are large differences across regions as to whether these funds include the very poor or whether they mainly reach the lower middle class. These differences seem to be driven by differences in regulation and best practices across states and chit fund companies. We are currently undertaking pilot studies that aim to test some of the most important constraints to the efficiency and reach of chit funds to find innovative ways of increasing the financial inclusion of the underserved low-income population and to provide best practice ideas to the chit fund industry as a whole.