My 2 paisas

Fund system followed in my village to share money among businessmen

Posted on: May 19, 2008

I came to know about this when i had gone along with my cousin-brother, Charan, for collection of money from his clients to whom he supplies banana as a wholesale dealer. After collecting money from some of his clients, he parked the bike near a hardware store. I went along with him inside the store which was packed with all sorts of electrical appliances. After looking around for a while, I saw that 2 men were sitting in a corner and another person was standing beside them. After listening to them for a while, i came to know that they were bidding on something and one of the person sitting was the auctioneer. He was increasing the amount as either the other person sitting or the person standing would make some indication. The bid amount had reached around Rs. 7500. The bidding process was going on very quietly and only the auctioneer was mentioning the amount very slowly. This made me very suspicious as to what they were bidding for. However Charan called me and said that we had to go to one more of his clients. I asked him what the 2 persons were bidding for. He told me that they were bidding for Rs. 1 lakh. He explained to me that the system is called FUND SYSTEM. A group of people, exactly 40, who are basically businessmen and who know each other very well, together make the fund system. Each one of them agrees to deposit Rs. 2500 every week which totals up into Rs. 1 lakh. So now anyone of them can borrow that money and use it for his business. He has to return it compulsorily after a stipulated time. All this happens on the basis of trust on each other. However if there are more than one person who wants that money for that week,which always happens(any businessman would want more money in his pocket), a bidding process takes place where both of them can bid for it in front of some other member of group who volenteers to become the auctioneer and the maximum bidder wins. For example, if a person bids at Rs.7500, it means that he is going to get only Rs. 92500, and still payback Rs. 1 lakh after the stipulated time. Charan told me that he also was a member of that fund sytem and he had actually gone to that store to pay his weekly dues, Rs. 2500. I asked him if he also takes out money from the Fund. He told me that he normally takes the money only when the bid price is very low. He added that the maximum bid varies from Rs. 800 – Rs. 8000. And then we reached one of his client’s shop and so he stopped the bike and he went to the store to collect money.
I still have lots of doubts about the Fund system like:

  1. What happens to Bid price?
  2. What is the stipulated time?
  3. When does he get back the money he has invested?

I will ask him when i next go to village and clear all the doubts. This surely looks like a very system where local businessmen can help each other but as i had mentioned earlier a lot depends on trust on each other.

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