A Study on Problems of Chit Fund Companies and The Satisfaction Level of the Customers

Headnote

Abstract

The southern states of Kerala, Tamil Nadu, and Andhra Pradesh, where the MFI crisis got precipitated, account for l/3rd of the chit fund industry in India. The total size of the industry in the countiy is estimated at Rs. 35,000 crore. The total number of registered companies in the country is 30,000 and the unregistered sector is 100 times bigger than the registered one. The industry grew around 20 percent last year, against a usual growth of 10-15 percent. Typically, these companies cater to middle-income group clients, due to the high cost of operations and cap on revenue. However, with the crisis in the micro finance sector, chit fund companies are now eager to tap lower income group households. Thus, over the past year, chit fonds of lower denomination, with a higher number of participants, fuelled the growth of the industry in the southern states. Today chit fund in India is highly institutionalized and stand in the status of a financial industry. The money circulated in the registered chit fund industry ranges from 10-50 percent of the bank finance. But, the number of chit fund schemes registered has been on the trend of decline over the years ending 2012. It is as evident from the fact that the rate of decline in the number of chit fund schemes, registered between 2005 and 2012 are around 12 to 15 percent. This is indicative of the problems and crisis haunting the chit fund industry. In this paper it is attempted to identify the various problems and difficulties faced by the chit fund companies and also to assess the extent the chit fund industry succeeded in fulfilling the requirements and expectations of the subscribers. The data is collected from the chit fund operators of 12 registered chit fund companies and 6 unregistered chit fund companies and opinion of chit fund subscribers for a sample of total 1220 subscribers has been collected in the state of Andhra Pradesh.

Key w'ords: Microfinance institutions, registered chit fund companies, unregistered chit fund companies.

1. Introduction

A countiy like India, which is most predominantly agricultural country, and is industrializing itself, the trade, communications and transport needs of the country are increasing on a massive scale. This situation increased the credit...