While several issues of political
affiliation in association to the recent bankruptcy of Saradha Chit-fund
organization are widely discussed, one of the basic issues, i.e. why people
invest in chit funds is not getting the attention it deserves. Rational Choice
minded scholars would argue that since these organisations project a lucrative
rate of interest, people applying their rational mind choose to invest here
instead of nationalized banks. In this process the investors either undermine
or are unaware about the risk involved. This is perhaps only one of the reasons
applicable especially in urban and semi-urban places where people have options
to choose between banks and chit funds. Several places of rural West Bengal represent
a considerably different story.
The most evident problem which rural
West Bengal, perhaps the entire rural India faces is the lack of people’s
access to formal banks. In rural West Bengal most of the nationalised banks are
strategically located near block offices and near major road and railway connections;
hence, the distribution of banking service is extremely uneven. If a person
with little banking knowledge has to do banking s/he will lose a-man-day of
employment the cost of which is often too high to bear. Understaffing and poor
infrastructure in many rural banks make it a hard task to manage the workload
which delays the services, eventually making people disinterested in bank. In
2009 when MGNREGS initiates direct bank transfer of money I do fieldwork in
Bardhaman, Murshidabad, Purba Medinipur and Purulia to find out huge crisis
that the banking staff and Panchayat people face in opening up the bank
accounts. Several Post Offices and Banks simply refuse to open more than a
stipulated number of accounts because of staff shortage. Banks and PO employees
clearly state their unwillingness to open zero balance accounts for persons who
will not be able to save money and will require regular assistance in banking. In
consequence people see banks as alien place. In fact, it can be said the rapid
expansion of chit funds and people’s lack of interests in banking reflect on the
failure of the development of banking behaviour through MGNREGS fund transfer.
A more recent fieldwork in Gorabari
Panchayat region Bankura where people were displaced due to the construction of
Kangsabati River Dam in late 1950s shows that people could not save the
compensation money because of the lack of banks at that time. The Gorabari
branch of Allahabad bank is no older than 15 years and villagers still avoid
going to banks. The compensation money is spent in different festivals and
rituals. Many reported that they kept a significant amount in terracotta jars
underground – a popular method of saving cash earlier, which was lost because
of monsoon flood. The only asset they could create is livestock. While people
from 60 years back have lost cash because of lack of banks, in 2013 people from
more than a dozen villages around the acquired land of Jindal Steel Works (JSW)
in Salboni invested a considerable amount in chit funds via several known agents.
The rest of the money is used to purchase luxury goods like motor cycles,
televisions, etc. Similar trend is also noticed in Manipur in 2007, where
people earning extra money from a hybrid variety of pigs, have invested in chit
funds and purchased luxury items. However, in Manipur with NGO intervention the
ill effect is minimised.
While going to bank means loss of a
man day, chit fund agents come directly. When banks in the form of chit funds come
home, it becomes a phenomenal event in a place where getting assistance in
petty tasks like filling up a withdrawal form in a bank is a serious constraint.
Reflections such as “I have kept my money
to Saradha bank because Mr. X of our locality told it will give return”
show people’s trust on person rather than organisation – a feature which has a
long history in agriculture based rural society. After Saradha bankruptcy
several agents are absconded which reflects that chit fund organisations often take
advantage of the social capital (social networks) of their agents based on
trust to expand their business. People’s interest in chit funds, hence, is not
always the calculation of profit and loss. To understand the actual fact behind
the growth of chit funds, it is important to look at the means of information
flow in villages, and people’s savings behaviour. Most of the people I have
interviewed told that they have invested because somebody else has. The
decisions for investment often have a friendship and kinship base. When people
from the villages around the JSW project got their compensation package, agents
from all over the investment companies came and convinced them to invest. When
one villager is convinced others follow.
In sum, it is important to note that
although bringing a legal provision for regulating these organisations would certainly
make things better, meanwhile in-depth study of rural people’s savings
behaviour and making policies accordingly should be given adequate attention. With
strict regulatory mechanism, adequate understanding of people’s savings
behaviour aided by a spread of banking services in rural places the rise and
ill effects of chit funds can be stopped.
