Chit Funds and Informal Credit in India
ROSCAs and Kitty Groups Around the World
Rotating savings clubs exist in many countries, showing that people everywhere invent ways to save and borrow together.
The chit is one version of a global idea.
The idea
A rotating savings and credit association, or ROSCA, has members pay in regularly and take turns receiving the pot.
Names
They are called tandas in Mexico, susus in West Africa, and kitty or committee groups in India.
Why they work
Social pressure and trust support repayment, so no formal collateral is needed.
Limits
They lack deposit insurance, and the group can fail if the organiser disappears.
A kitty party
Friends contribute monthly and each hosts a party where one wins the pool.
Assuming informal clubs are irrational
They solve real problems.
Key takeaways
- ROSCAs are found worldwide.
- They rely on trust.
- No collateral is needed.
- Failure risk exists.
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