How Chit Funds Evolved

Chit funds have a history dating back a thousand years in India. The concept was initially developed by the government of Travancore in 1914. Subsequently, various states adopted it and formulated their own Chit Fund Acts in the early centuries. However, in Kerala, the concept was officially introduced in 1982 by the central government.
Before the 20th century, a small group of farmers initiated an ideal scheme in the southern region of India. They contributed a fixed quantity of their crops to a selected trustee at regular intervals. After retaining a portion, the managing person distributed the remainder among group members to meet their requirements. The farmer who received the lot earlier continued the process until every member of the group acquired their share.
This system persisted, with some members willing to forgo a portion of their share (offering a discount) for an earlier opportunity. This practice opened the door, and the lot went to the lowest bidder. This gave rise to what we now know as the 'Chit Fund Scheme.'