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.