How Chit Funds Work
A chit fund is an arrangement where a company (the Foreman) makes an agreement with a group of people
Foreman
Chit Agreement
20 Members x ₹ 5000
Each person agrees to contribute a fixed amount of money in regular intervals over a specific period of time.
Monthly Subscription
₹ 5000
Period
20 Months
Chit Amount
₹ 1,00,000
Each person will have a chance to win the chit amount by participating in the Auction/Draw.
Chit Amount
₹ 1,00,000
Discount
(Say 30%)
Prize Money
₹ 70,000
This Discount amount is distributed among all the subscribers after giving a fixed amount to the foreman towards his fee/remuneration
Discount
(30%)
5%
25%
Foreman's Fee 5%
of the Chit Value
₹ 5000
Distribution of Discount
₹ 25,000 / 20 = ₹ 1250
