Thiruvananthapuram: Looking for cash to tackle major infrastructure projects in the state, the Kerala government has unveiled a programme to tap NRI funds to bridge the gap for capital expenditure.

The idea is to float a Pravasi Chit Fund, a traditional fund-raising option practised widely in Kerala. In a typical chit fund, there are a specified number of subscribers who contribute an agreed amount of money each month, and by turn the subscribers get to take the prize money through a process of auction, tender or such other process.

The government’s plan is to run a chit fund exclusively for NRIs, which will be a tool for NRIs to save part of their earnings for the future, and simultaneously participate in the infrastructure developments back home. The chit will be run by the state-owned Kerala State Financial Enterprises (KSFE).

The money raised through the chit fund will be passed on to the Kerala Industrial Infrastructure Fund Board (KIIFB), which will then utilise the money for infrastructure development.

State finance minister T.M. Thomas Isaac said the Pravasi Chit Fund will substantially improve the funds availability for capital expenditure in the state.

Some of the projects in the pipeline include a cycling track that connects important ports in the state, and a waterway development that will open up a whole new transportation option. Both projects are expected to give a direct boost to the state’s tourism sector. Other projects that will be funded through the chit fund money include a hill highway.

A key advantage for the government is that funds raised through a chit scheme are relatively cheaper than funds raised through bank loans or many other routes. To make the chit scheme attractive to the NRIs, it will carry some additional benefits including an insurance backup.

KSFE chairman Peelippose Thomas said NRIs who subscribe to the chit scheme and later lose their NRI status will be allowed to continue participating in the scheme. KIIFB CEO K.M. Abraham said one of the biggest challenges in rolling out the product was the creation of a strong IT infrastructure for it.

Finance minister Isaac said the chit scheme would be launched sometime in late July or early August in the UAE.