of 2002, they were less popular in North India, except in Delhi, Gujarat, Maharastra and Haryana. According to All Kerala Kuri Foremen's Association, Kerala has around 5,000 chit companies, with Thrissur district accounting for the maximum of 3,000. These chit companies provide employment to about 35,000 persons directly and an equal number indirectly. In Pakistan seventy percent of rural population is involved in this kind of funds. This funding is most famous in Pakistan's lower and middle class and sole business community. Methodology A chit fund comprises a group of members, called subscribers. An organizer, a company or a trusted relative or neighbor, brings the group together and administers the activities of the group. For their efforts, the organizer is either compensated each month or at withdrawal time. (The fee may be omitted in informal situations.) The fund starts at an announced date and continues for the number of months equal to the number of subscribers. Each month, the subscribers put in their monthly installments into the pot. Then, an open auction is conducted to determine the lowest sum a subscriber is willing to take that month. For example, if the monthly installment is ₹1000 and there are 50 members, the pot in the first month will contain ₹50,000. If the auction determines a winner who is willing to accept ₹45,000 for that month, the surplus ₹5,000 is distributed to the other 49 members, after subtracting fees paid to the organizer. The subscriber who won the auction was able to access ₹45,000 in the first month and the others benefited in their share of the ₹5,000 surplus. The process repeats, distributing the auction amount to one member each month. All of the other subscribers, including the ones who took their share in a previous month, continue paying the monthly installments. The system acts as a borrowing scheme, because subscribers are able to access large sums of money before they've paid the full amount. It also acts as a savings system, because each subscriber contributes every month and may retrieve a large sum in the future while receiving their share of the surpluses. Variations of the system omit the auction part, instead drawing a winner by picking a chit out of a box. (The term chit fund comes from such an arrangement.) Risk Both organizers and subscribers in chit funds are exposed to credit risk because subscribers might default on their