Financial Inclusion

What is financial inclusion?

Financial inclusion is a broad term used to describe the provision of savings and loan services to the poor in an inexpensive and easy to use form. It includes opening of bank accounts for those that have never had one, and allowing people to send and receive money easily.

The main objective is ensuring access to formal credit for people who depend on informal means for their financial needs and also financial education to ensure that the poor and marginalised make the best use of their money.

Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society, in contrast to financial exclusion where those services are not available or affordable. An estimated 2 billion working-age adults globally have no access to the types of formal financial services delivered by regulated financial institutions.

For example, in Sub-Saharan Africa only 24% of adults have a bank account even though Africa’s formal financial sector has grown in recent years. It is argued that as banking services are in the nature of a public good, the availability of banking and payment services to the entire population without discrimination is a key objective of financial inclusion.

Microfinance Standards and Principles

A group of Indian women have assembled to make bamboo products that they intend to resell.


Poor people borrow from informal moneylenders and save with informal collectors. They receive loans and grants from charities. They buy insurance from state-owned companies. They receive funds transfers through formal or informal remittance networks. It is not easy to distinguish microfinance from similar activities. It could be claimed that a government that orders state banks to open deposit accounts for poor consumers, or a moneylender that engages in usury, or a charity that runs a heifer pool are engaged in microfinance. Ensuring financial services to poor people is best done by expanding the number of financial institutions available to them, as well as by strengthening the capacity of those institutions. In recent years there has also been increasing emphasis on expanding the diversity of institutions, since different institutions serve different needs.


Some principles that summarize a century and a half of development practice were encapsulated in 2004 by CGAP and endorsed by the Group of Eight leaders at the G8 Summit on June 10, 2004


  Poor people need not just loans but also savings, insurance and money transfer services.


  Microfinance must be useful to poor households: helping them raise income, build up assets and/or cushion themselves against external shocks.


  “Microfinance can pay for itself.” Subsidies from donors and government are scarce and uncertain and so, to reach large numbers of poor people, microfinance must pay for itself.


  Microfinance means building permanent local institutions.


  Microfinance also means integrating the financial needs of poor people into a country’s mainstream financial system.


  “The job of government is to enable financial services, not to provide them.”


  “Donor funds should complement private capital, not compete with it.”


  “The key bottleneck is the shortage of strong institutions and managers.”


Donors should focus on capacity building.


  Interest rate ceilings hurt poor people by preventing microfinance institutions from covering their costs, which chokes off the supply of credit.


  Microfinance institutions should measure and disclose their performance—both financially and socially.


Microfinance is considered a tool for socio-economic development, and can be clearly distinguished from charity. Families who are destitute, or so poor they are unlikely to be able to generate the cash flow required to repay a loan, should be recipients of charity. Others are best served by financial institutions.

Chit Better Safe than Sorry


  • In some cases the investor who wins the prized bid makes off with the money and does not contribute his pending share of installments.


  • Always go in for registered companies for chit funds and check their past track records in order to maintain the safety of your investment.


  • Always make sure that you have the capability to pay your monthly installments as any default could result in you making huge interest payments and severe penalties.


  • The group of investors should have the necessary funds to pay their installments so that the operations of the fund are not hindered. Members might be required to maintain a deposit with these funds.


  • There is a risk of the foreman running away with the funds. In order to prevent this from happening to you make sure that the fund is registered under Chit Fund Act 1982.


  • Always check the chit funds you invest in for tall claims such as enormously high rates of return and if there is a statement made that after you get the winning bid no further installments are needed you need to note that they are illegal according to the Chit Fund Act.


What are the sureties to be submitted?

A member can give sureties depending on the future liability of the chit.

Following are the sureties generally submitted by the members.


  1. Personal Surety: Any salaried person working in State/Central Govt./Public Limited Companies/Banks and other Reputed Companies will be taken as surety.


  1. Income Tax Assessor: Any person having I T Assessment for the past three years having business, profession etc will be taken as sureties.


  1. Property Pledge: Deposit of title deeds of urban property can be submitted as surety. Third party property can also be given as surety.



  1. FD Pledge: If a member is having any deposit with Margadarsi Financiers, he can pledge the deposit certificate as surety. Member can also make the deposit from the prize money, which will be accepted as surety.


  1. Bank Guarantee: Guarantee given by the Bank in a schedule format can be submitted as surety.

How good are the chit funds?

It totally depends on the agreement you’ve entered into with the foreman responsible for conducting the chit fund program.

There are varied types of agreements that foreman enters into with different sections. It generally is a continuing installments for certain period and then a lucky draw for the prize winner.

Investing in a chit fund should be done only if you are in need of funds (return on your investment) in near future that a bank cannot give in that period of time. Otherwise, it will be wise not to invest in a chit fund.

Why are chit funds popular?

Chit funds are good vehicles in bringing savers and borrowers in the same platform.  The dire need with which borrowers are there determine the rate of returns for savers. There are checks also that borrowers don’t go overboard in bidding higher rates.

There are further checks and balances like chit funds are regulated, reserve deposits are prescribed and so on.

Chit funds are also in a way unique to India. But if the administrators of the chit funds are unscrupulous or borrowers do not honor their commitments in time, there are bound to be problems.

People who have grown investing in chit funds (pure savers) would vouch safe for the excellent investment vehicle.

So chit funds are very popular,  but should choose long standing chit funds to invest.

Chit Fund Acts

Chit funds in India are governed by various state or central laws. Organised chit fund schemes are required to register with the Registrar or Firms, Societies and Chits.



  • Kerala: Kerala Chitties Act 1975


  • Tamil Nadu: Tamil Nadu Chit Funds Act, 1961


  • Karnataka: The Chit Funds (Karnataka) Rules, 1983


  • Andhra Pradesh: The Andhra Pradesh Chit Funds Act, 1971


  • New Delhi: The Chit Funds Act,1982 and Delhi Chit Funds Rules, 2007


  • Maharashtra: Maharashtra Chit Fund Act 1975

Organised chit funds

In North India, a common type of chit fund uses small paper slips with each member’s name, gathered in a box. When all members are at a monthly or weekly meeting, the one in charge—in front of the other members—picks a slip from the box. The member so selected gets that day’s collection. Afterwards, that persons name slip is discarded. Thereafter, he comes to the meetings and pays his share, but his name isn’t selected again.

Chitfund Scheme

Chit fund Scheme

   Chit means a transaction whether called chit, chit fund, chitty, kuree or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement,  be entitled to the prize amount.

E.g., 1000 * 50 = 50,000/- Where 1000 is the maximum monthly contribution needed from a subscriber, 50 is the duration of the chitty in months and 50,000 is the maximum sum assured. The duration also equals the number of subscribers, as there must be (not more or less) one subscriber to receive the prize money every month.

Websoftex Chit Fund Management Software

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It holds various features, such as it manages add, delete, edit of groups, manages customer information according to the groups in which these have subscribed. Moreover, the auctions are managed by random selection of customers per group, manages accounting part with customer’s payments with cheque details and out standings.
Also generates bills of the customers and several reports for business analysis, hence, our solution is widely demanded in the market.