Introduction
Chit Funds is a Non-Banking Financial Institution originated in India which comes under the RBI Act 1934. These companies are governed by the Chit Fund Act 1982. “Chit” as characterized by the act, implies an exchange by the method of which a foreman goes into a concurrence with various subscribers that all of them will buy in a specific amount of cash in periodical portions over some period of time i.e.
Chit funds are a traditional means of savings and borrowing in which members or subscribers agree to contribute a fixed amount of money for a fixed duration of time. The total amount collected (by foreman) is then auctioned and given out as prize money to the member or subscriber in need. So, this allows the members to save a part of their earnings for the times when needed.
"Chit", as characterized by action, implies an exchange by means of which a foreman enters into an agreement with various customers who will all purchase a certain amount of cash in periodic portions over some period of time i.e. a Chit fund is a traditional savings and loan facility in which members or customers agree to donate a fixed amount of money for the duration of time.
This framework, with a variety of built-in preferences, namely, simple openness, easy to understand administration; and exempt from idle fees, occasional inclination interest, extravagant pre-conclusion fees, is the most preferred alternative, for those, who intend to reserve a limited amount.
The concept of chit funds is exactly the same as Kitty Party except that the part in the chit fund auction is not a raffle. Chit Fund is beneficial not only for large scale industries but also small industries that need financial support to grow their business.
These institutions have played an important role in the National Financial Inclusion program even before banks
come play. They are not required to be registered under the RBI Act but are instead regulated as Miscellaneous Non-Banking Companies (MNBCs).
There are mostly two types of Chit Funds in India:
- State Government Chit Fund: It is run and managed by the state government and is fully transparent.
- Private Chit Funds: These are registered under the Chit Funds Act 1982 and are private assistance by companies or financial institutions.
There are also many small unregistered chit funds that can be found throughout the country that are made up of small groups of people usually friends, neighbors and relatives. Although, running unregistered chit funds is illegal. This is commonly referred to as the 'unorganized chit funds sector' and is not regulated by any law.
Chit Funds stats and future
A study conducted by the Institute of Financial Management and Research under the direction of Dr.Mudit Kapoor, Indian School of Business, Hyderabad and Dr.Antoinette Schoar, MIT. The Sloan School of Management, USA recommends that Chit Funds is an innovative access to support low-income families.
The estimated size of the Chit Fund industry is INR 35,000 crore (nearly 5 billion dollars) and growing. Overall ranking of preferred saving modes according to research:
The perfect blend of Uma Chit Fund with Blockchain Technology What makes Uma Chit Funds stand out from other chit fund projects in the market is the fact that the platform is powered by trending blockchain technology along with smart contracts enabled. By engaging our platform with blockchain technology, we will be able to serve chit holders with unmatched transparency, scalability and several additional member benefits (which will be available at maturity of each successful chit term). Smart contracts are lines of code that are stored on the blockchain and executed automatically when pre-defined terms and conditions are met.
The benefits of smart contracts are most clearly seen in business collaborations, where they are typically used to enforce some type of agreement so that all participants can ensure the outcome without the involvement of intermediaries. So, this will ensure full transparency and assure users/members that our final agreement will be fulfilled without any intermediary involvement. All records and history will be stored digitally and linked together in a distributed ledger (blockchain). Each record is also encrypted to provide an extra layer of security. Blockchain is said to be “immutable” because records are immutable and transparent as all trading participants have access to the same version of truth.
Therefore, Uma Chit funds will allow you to deposit and borrow funds easily without having to look at financial documentation. Apart from that, we hope to provide various other opportunities that will make it convenient and beneficial for our users/members to pay weekly/monthly/yearly EMI with our utility tokens (UCF) which will indeed help increase the demand and use cases for our coins on the platform. .
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