Money Talks

Money Talks

The latest Sharada chit-fund based collapse in West Bengal, of the fund itself, and of newspapers, TV channels etc. promoted by it, underlines the longing for high returns on investment among the Bengali poor and the lower middle class.

TV shows us the over a 1,000 canvassing agents for the fund running scared of the irate depositors and begging the TMC Government to bail them out.

Broadly speaking, whether one is victim to this debacle or not, being so poor for so long is just not happy-making. 

It is another matter that entrepreneurship is not too common amongst Bengalis. So, passive avenues for ostensible advancement such as subscribing to a Chit Fund hold a special attraction.

These are a people hemmed in by lack of capital, connections, being sometimes uneducated too.They cannot generally qualify for kosher loans. They cannot hope to change their circumstances, short of winning a sizeable amount in a lottery. Or becoming a celebrity, a politician, a para dada, adept at honeyed extortion, a goon for hire, a criminal. Or pulling off a large white-collar scam.

When the state economy has been in the doldrums as long as memory serves, what are the alternatives?  West Bengal has fallen far behind other more prosperous states. The choices are stark. You can depart. 

Many Bengalis live elsewhere. The ones who stay are vulnerable to exploitation.

In the chit fund game, the investors are lured in to risk money they cannot afford to lose, because of the high interest rates offered. And like all schemes that have no solid business model, for a while, quite often a long while, one can rob Peter to pay Paul.

Meaning, that the returns can be financed by receipts from the growing number of subscribers or new investors. In this instance, it also underscores how difficult it is to make media ventures deliver a financial return anywhere near commensurate with the money it takes to set it up and run it. Particularly when very large, possibly unjustified payments for personnel and services are taken into account also.

And according to the Sharada Group’s recently apprehended chief, influential politicians from the ruling party from West Bengal and a number of other states, have purloined large chunks of the liquid capital raised by Sharada. They have allegedly simply helped themselves to it using criminal intimidation.

There is, of course, no return on investment from being looted or allowing plunder. And, savaging the money tree itself, tends to kill it.

In a state that has had a bleak economic performance for nearly forty years, the desperation of ordinary people to find a way to get ahead despite lack of opportunity is understandable.

This latest debacle only reminds us of another in the seventies. Then, a certain Mr. Chatterjee who built Kolkata’s first 24 storey building in Middleton Row, Chatterjee International, also ran a chit fund scheme. Straight into the ground. This singed the hands of many of his, largely middle-class housewife investors, who could, and did, make bigger outlays.

Then, in the eighties, it was the notorious turn of Sanchaita Chit Fund, one that targeted the poor and went bust with about 120 crores outstanding.

Currently, Sharada, which has downed shutters, and other chit funds still operating in the state, are said to have collected over Rs.30,000 crores. When and whichever ones fail, there can be little chance of recovery, because the money is always siphoned off first.

Chief Minister Mamata Banerjee on her part, plans to restore some Rs. 500 crores of the depositor money, a drop in the bucket, by imposing an 10% additional cess on the sale of cigarettes in the state.

For small depositor money in a moribund state, this scam involving part of that  Rs. 30,000 crores, is large. And while a good deal of the focus at present is on the effects, the larger picture tempts one to ask why these chit funds are such a draw in West Bengal.

Ms. Banerjee blames the Left Front and the Centre, the former for encouraging their proliferation, and the latter for failing to regulate and supervise them. Chit Funds are a central matter she says. But the anguish of the people who have lost their money in West Bengal is very real. It is after all, not the operation of the chit funds that is at fault, but the profligacy with the money collected.

Most damagingly, the promised “poriborton” or transformation of West Bengal after the TMC victory has failed to materialise beyond a few cosmetic touches. That is why every piece of bad news is magnified into an indictment of the TMC Government.

(748 words)

April 25^th, 2013

Gautam Mukherjee