A chit fund is a popular rotating saving scheme and an excellent financial instrument for saving and borrowing. Also known as chitty, chit or kuree, chit fund has been a part of India’s financial system for more than a century. This scheme offers a good return on investment and is a reliable source of funds when in need of urgent cash.
A few startups in India have disrupted the Indian chit fund industry to make India’s saving habit digital. Chit funds are now AI-driven for better management, safety, convenience, returns and access.
How AI-based chit funds work to improve performance and scale much faster?
Some of the features of AI-based chit fund platforms that make the whole process of saving and borrowing a lot safer and easier include:
Risk Assessment: The AI-based chit fund platform uses Machine Learning based algorithms to assess risk. The intelligent back-end system draws on individuals’ attributes of demographics and past financial information and enhances them by adding more layers of information to generate a risk score customised to the needs of chit funds.
Identification of Behavioural Patterns: The AI-based chit fund platform is an intelligent system that helps identify behavioural patterns that are common among chit fund subscribers and understand the various segments within them. This not only gives insights into consumer behaviours but also saves time spent on manual work through the automation of repetitive tasks. Additionally, automation ensures the reliable processing of information without any scope for human error.
Group Optimisation: Every chit group should have a good balance of savers and borrowers for the benefit of everybody involved. The AI-based system studies the patterns of successful as well as problematic groups to make a more informed grouping of subscribers. By doing so, the chit fund is able to minimise the risk of defaults or disappointments.
Recent Development That is Creating Inroads Into Better Chit Fund Administration
Telangana, one of the largest hubs of chit fund investment in the country, rotates over 18,549.12 crores of savings of over 10,08,300 subscribers. These investors are mostly from low-income groups. According to estimates, one office processes data of over 2 Lakh subscribers worth around 200 crores every month.
The challenge: The massive transaction volume and the scope of the ecosystem involved, with several unknown parties such as organisers, subscribers, auditors, banks, regulators, and third-party systems, chit fund administration while maintaining transparency and trust becomes an unfathomable challenge.
How the government of Telangana used technology to minimise the possibility of fraud?
The government of Telangana automated the entire chit fund administration process using AI and Blockchain technology.
This emerging technology creates a network of multiple stakeholders with access for authorising and monitoring the transactions. This generates an audit trail in the system, thus reducing the possibility of fraud.
In phase one (ended in June 2019) of implementation of blockchain technology, Telangana brought the entire operations into the new automated workflow. The implementation helps monitor any violations made by the chit fund companies, and it has also made operations management highly efficient. This AI-based platform processes 1600+ chit fund companies, 28,550+ chit groups, 1.3MM subscribers, 1,30,000K+ blocks and 700K+ transactions.
The state is now ready to roll out the second phase of implementation, which will add more partners to the chain, enabling banks to verify payments, subscribers to directly sign the transactions digitally, and other related activities. This will slowly progress to automate the intermediation that regulator offices carry out on many aspects.
The Telangana government played an important role in ensuring that all chit fund companies undergo training to understand the technological solution and adapt to it. The Telangana government has set an example by having faith in AI-based chit fund platforms, without which it would have been difficult to implement and scale it across the state.
Author Bio
Aatish Khanna works with the Content Marketing team at Money Club – a digital chit fund platform that makes saving, borrowing, and investing your money more efficient. He writes on topics to help his readers understand processes so they can make better financial decisions. He’s the go-to person that his family, friends, and colleagues turn to for all their money matters. He loves to play board games and aspires to one day build his one finance-related board game and app.
