Identify and explain the concept from the given illustration:
Sara makes a monthly contribution to a fund jointly created by her friends. The collected fund is then given to a chosen member through lucky draw.
Concept: Chit fund
- Chit fund is an unregulated non-banking financial intermediary in which members make regular contributions to the fund. Bids/ draws are made based on some criteria mutually agreed upon by members. Accordingly, the collected fund is given to the chosen member.
- Hence, this illustration relates to the concept of ‘chit fund’ as Sara makes a monthly contribution to a fund created by friends and the collected fund is given to a chosen member through lucky draw.
Concept: Structure of Money Market in India - Unorganized Sector
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