An Empirical Study on Chit Fund Crisis in Tripura

Abstract

The study examines the motivating factors of the respondents for investment in chit funds, perception towards chit fund companies and strategies to properly manage chit funds of Tripura. It obtained primary data from 160 respondents from all the eight districts of the state using quota and convenient sampling technique through questionnaire and personal interviews. Different statistical tests like Mann-Whitney U test, Pearsons Chi-square test, factor analysis like Principal Component Analysis were performed to assess support for the hypotheses. The reliability of the questionnaire and sample adequacy test was also carried out. The results of data analysis reveal that exorbitant rate of interest offered by chit fund companies, lack of industrialization, financial illiteracy and rigid banking formalities are the key motivating factors for investment. The study indicates that excessive greed, absent of Governments small investment schemes, multi-regulations, political patronage, weak Chit Fund Act are the causes behind scams and frauds. The study further emphasizes on provision of CAG audit, proper coordination among regulators, inclusion of Governments nominees in the Board of Management of chit funds, exercising control in the scope of operations as well as investors education.

Keywords: Collective Investment Scheme (CIS), Chi-Square Test, Mann-Whitney U Test, Descriptive Statistics, Rotated Component Matrix

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