Joint Liability Group: All You Need To Know

Joint Liability Group consists of 4-10 individuals (having similar occupation) from the same village that form a group and this group of borrowers then take a loan from a micro-finance institution.

TYPES OF MEMBERS

Landless labourers
Farmer’s association
Small farmers
NGOs
KVK (krishi Vikas Kendras)
Panchayati Raj Institutions (PRI)
Artisans
Bank branches etc.

CHARACTERISTICS

No collateral
Group loan
Members should do a common business
Each member stand as a guarantee for every other member in the group
Like SHGs are for women mostly, JLGs are for men but a woman can also be its member
Each member monitors the other members of the group
It a member fails to give his share the others have to pay for him
The members of the group learn to handle finances with discipline
Meeting are held at regular intervals
Both Above Poverty Line(APL) and Below Poverty Line(BPL) benefit from this scheme
Peer pressure ensures every member in the group pays
Only one member of a family is allowed in a particular JLG
Group dynamics are used within the group

PURPOSE

To provide self employment by providing financial assistance
Loans provided to poorer sections of society i.e landless labourers, small farmers, artisans etc.
Useful to farmers in the areas where average land holdings are decreasing, especially in Haryana and Punjab
Help build confidence in farmers and lowering of credit risk

MODELS

SEPARATE INDIVIDUAL LOANS – Separate loans are given by the bank and each group member has a shared liability that all the individual loans are paid on time. Maximum size is up to 10 members only.

A SINGLE GROUP LOAN- A combined credit loan is given according to the requirements of the group. Maximum size can go up to 20 members.

LOAN LIMIT

Rs. 50,000/- per individual in both the models mentioned above

NABARD – SCHEME OF JLGs

NABARD announced JLGs on 24 February 2014 based on the concept of SHGs
It provides refinance to the banks that give loans to JLGs

DIFFERENCE BETWEEN JLGs AND SHGs

JLGs focus on credit and SHGs focus on savings
JLGs have smaller groups(consisting mostly men) whereas SHGs have larger groups(consisting mostly women)
JLG members directly interact with financial institutions whereas SHGs have a more formal structure like there is a treasurer, secretary etc
SHGs were introduced before JLGs
JLGs put more money in the economy unlike SHGs which are only savings oriented
SHGs don’t help in poverty alleviation whereas JLGs does

LIMITATIONS

Sometimes a high rate of interest is charged and the group is unable to save for the business they are involved in
Sometimes the money lent is used for some other purpose other than the one for which it was sanctioned
Sometimes the maximum limit of members exceeds and it is difficult to manage such a large group of people