Gemini Chit Fund 1

This case was an early case in Singapore's history of major fraud.

The idea of a chit fund is simple - a group of persons would contribute a sum of money regularly into a pool eg 10 persons each contribute $100 every month to the pool. The money would then be lent to any of them who was willing to pay the highest interest for the use of the money over a certain period eg 4 weeks. At the end of the period, the succesful borrower would repay the loan together with the interest that he promised. This sum would then be divided among the pool contributors.

I understand that the chit fund company would receive a commission for organising the whole matter.

As you can imagine, without strong regulation, the potential for massive losses is high. Another danger would be that the borrower of the pool will either abscond with the monies or that for other business reasons, he would be unable to repay the loan.