(L to R) Malla Reddy, Pavan Adipuram and Sridhar Reddy, Co Founders of ChitMonks.
TheNFAPost Podcast
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ChitMonks, a blockchain startup, aims to onboard over 200 companies in the next fiscal. These companies will conduct their entire operations on its platform.

Hyderabad-based ChitMonks, started in 2016, by Pavan Adipuram, Malla Reddy and Sridhar Reddy, is currently working with the Telangana government to help them regulate Chit Funds in the state. They are aiming to work with more state government in the near future. It has built an AI-based platform to help government and subscribers regulate the Chit Fund industry in India.

“Chit funds are one of the oldest and still relevant financial instruments for the low and middle-income bracket,” says ChitMonks Co-founder and CEO Pavan Adipuram.

He adds, “We also noticed that Chit funds as an investment tool is understood by a majority of the population, but they choose not to associate with it as this space seemed to lack trust, structure and transparency. We believe that by leveraging blockchain technology, chit funds could play a significant role in financial inclusion.”

The startup works with Registered Chit Fund companies in order to help them build trust in their operations through blockchain technology and embrace digital transformation. ChitMonks connects all Registered Chit Fund companies on one platform making their services more streamlined, efficient and inclusive, the founders said.

Talking about the chit fund industry, Adipuram told the NFAPost that chit fund as an asset class has a large customer base across the country.

“According to our research, there are about 30,000 registered chit fund companies in India, which are operating registered chit fund businesses with approximately Rs 1,50,000 crore AUM (Asset Under Management). Chit Funds have been seen under a shadow of doubt but the challenges go beyond that. There is a general lack of awareness, digitisation, trust and transparency,” the co-founder says.

He points out that another major shortcoming seen by this industry is the poor management of all stakeholders involved in making sure the system operates smoothly, both to protect the interest of subscribers and to make chit fund companies more credible.

Blockchain technology is a beneficial solution for any system which holds immutable data and shares information across different parties. The technology provides the ability to keep your data intact with no scope for manipulation, which can be changed only after consensus with the relevant stakeholders, he adds.

Chit Funds in India is administered by the state governments as per the rules prescribed in the act of 1982 by the Central Government. Since multiple parties are responsible for every single transaction, blockchain helps track the chain, emphasises the immutability aspect and serves as the single source of truth at the same time. Implementation of such an emerging technology without completely impacting the existing operating model is especially beneficial for governments and chit fund companies.

T-Chit platform

T-Chit powered by ChitMonks, a blockchain-based product developed for the Telangana government, allows the state government regulators to administer chit fund operations on a private permissioned blockchain network.

Since the launch, over 1600 Chit fund companies, 1.3 million subscribers, 28,550 Chit groups, 1,30,000  Blocks, 7,00,000 transactions have been conducted so far on T-Chit’s platform.

With support from the central and state governments, such as passing of the Chit fund (Amendment) Bill, 2019, and interest to digitise the governance of the chit fund administration, the startup expects the emerging fintech space surrounding chit funds to get a boost in the near future.

“New generation chit fund companies are looking at a Digital First approach keeping customer delight as priority. Most of these players provide a full stack digital experience from onboarding to collection to disbursement of the funds when compared to traditional players who still struggle to adopt emerging technologies,” the co-founder says.

“We have noticed that Digital First chit fund companies are actively targeting the tech-savvy new age subscribers who find it difficult to work with the traditional companies for all good reasons. Over the last 3 years, we have seen many new players coming into business with both grit and passion to make this instrument a true replacement for many small time loan applications,” he adds.

Unorganised chit fund operations are risky. The operators are not accountable for any mismanagement of the funds and there is no transparency in their processes. As per the law, it is illegal for an individual to deal in chits without a licence. While money lending at a personal level is still allowed, the risk is high for both the parties, it is always wise to utilise legal financial services to help mitigate risks, the founders say.

“If certain changes in policies can bring about ease in doing business with strict guidelines for Chit fund companies then there is no reason for operations to remain unorganised,” they add.

Since July 2020, ChitMonks has launched three new products for the chit fund industry – ChitFunds 2.0, ChitPe and ChitInsure.

ChitFunds 2.0, is an extension of the previous product that was designed for regulators. Along with taking care of a chit fund company’s complete digitisation needs, ChitFunds 2.0 also brings other entities such as banks and financial institutions onto the platform in order to serve the chit fund firms.

ChitPe, is an online collection platform wherein chit fund companies and customers can pay their dues and keep track of their payments in a simple and hassle-free manner using Internet Banking, Debit card and UPI through the platform.

ChitInsure is FIRST of its kind Insurance product specially designed to protect the subscribers of registered Chit Fund companies. It offers different products to companies on the platform to attract, retain and protect the subscribers and their subscriptions.

ChitMonks recently raised $6,50,000 from Unicorn India Ventures.

ChitMonks is currently working towards building India’s largest blockchain network for Savings and Borrowings. The startup synergise Chit Fund Companies, Regulators, Subscribers, Banks, Service providers, EcoSystem enablers to drive the largest trusted network of Savers and Borrowers platforms.

The startup at present employs 18 people and over a period of last quarter, it has onboarded about 20 companies on the platform. In the next fiscal, the startup is looking at onboarding over 200 companies.

 

 

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