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Solomon's Knot by Robert Cooter, Hans-Bernd Schäfer

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Chapter 8

Giving Credit to Credit—Finance and Banking

In Afghanistan the wives of Pashtu herdsmen traditionally wear heavy silver bracelets to show off their beauty and to store the family’s savings. Robbing a woman provokes clan revenge feared by thieves, so women are good protectors of wealth. In India poor people developed another way to save—the “chit fund.” A small group of friends, say twelve of them, agree to meet each month for a year. At the first meeting in January, each one contributes $10 into a pot, receives a chit, one chit is drawn at random, and the winner gets the pot of $120. In February the twelve people repeat this process, except January’s winner is ineligible to win. The process repeats itself each month until December, ...

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