Chit funds are the Indian equivalent of the Rotating Savings and Credit Associations (ROSCA) that are famous throughout the world. ROSCAs are a means to “save and borrow? Simultaneously. It is considered one of the best instruments to cater to the needs of the poor. It enables poor people to convert their small savings into lump sums. The concept of chit funds originated more than 1000 years ago.
Edith JemminaSimcox an Victorian Era Scholar and reformer (1844-1901) in her book “Primitive civilizations, or an outline of the history of ownership in Archaic communities” wrote the Kuri system itself has very ancient connections to KavuTattakam’s and other monetary schools practiced in various primitive civilizations, the system as such was social banking, created for the good of the needy. Dr NM Nampoothiri in his work ‘Legacy of Nila’ refers that the Village Banking system known as Kuri has its origins from the ‘Kaavutattakam’ social group system. ‘Kavutattakam’ refers to the territorial jurisdiction of a ‘kaavu’ or temple to a specific area. There were many such Thattakams and all ‘KaavuTattakams’ were finally linked to Zamorin’sTirunavayaMamankam. There are usually four kinds of chits. The ‘Simple Kuri’, the ‘LelamKuri or Auction Chit’, the ‘Sahaya Chit’ and the ‘Prize Chit or Lottery’ where a certain amount of gambling is involved. In Travancore, the usual term used is ‘Chitty’ from where ‘Chit’ comes whereas ‘Kuri’ or ‘PanamPayattu’ is the name employed in Cochin and Malabar regions.
First let us take a look at the standard ‘Kuri” system. It is usually associated with the need by a person to raise a substantial amount on money in a short time, for a specific occasion such as a daughter’s marriage. The organizer or receiver sets up a luncheon or dinner wherein his friends participate by attending and by contributing a certain amount of commodity or money. During this event a second event takes place, lots are drawn to decide the next recipient. This thus functions for a certain period of time by rotation with the only uncertainty being the assurance of returning the money received by receivers. Since the event takes place in a tight community, the rules and regulations are determined by the fraternal relations and compulsions. However note that ‘kuri’ does not have a mandated payment period and the amount returned is the principal without interest. The effect of delayed return or non payment is gross humiliation or loss of face in his society.
This morphed into the modern day Simple or ChangathaKuri -which was based around meetings of friends and here the regular contribution was fixed for each member of such a group. Drawing of Lots decided the recipient from the group who hosted the meeting and dinner, with the Kuri period fixed in advance. The cost of the dinner is supposedly not more than 10% of the collections. Now note here for example that if the Chit period is 25 months, the persons who get drawn in the first lots are the bigger beneficiaries as compared to the one who gets drawn in the later lots e.g. in the 23rd month. The head of the group is called KuriMoopan and he gets the privilege of being the first to draw the loan and is the proprietor of the system, responsible for the Kuri management and overdue collection.
Writers like Edith Jemma Simcox (Primitive Civilizations) believe that the coupling of this monetary event with a ceremonial eating event may go all the way to ancient Cretan and Carthaginian clubs. It was also found in ancient Babylonia, Egypt and of course China. In China it developed to what is popularly known today as the Chinese lottery.
Chit comes from chitty and this is the usual term in Travancore whereas Kuri or PanamPayattu is the name employed in Cochin & Malabar. It became very popular later in the 19th century in church going congregations, with the Chit business soon becoming very popular in Trichur. SakthanThampuran, the Cochin King in the eighteenth century, according to records show that he settled 64 Syrian Christian families in the town from their business centres in adjoining areas. These businessmen, with their traditional flair for trade soon built up Thrissur into the most flourishing centre for internal trade in Kerala. Their financial acumen has been mainly responsible for founding and building up the Kurisystem of financing which has now become an all India institution. This has also made Thrissur the most important banking centre in Kerala.