‘Joint Liability Group’ (JLG)
‘Joint Liability Group’ (JLG) means and includes as informal Group of 4 to 10 individuals, but can be up to 20 members under special circumstances, coming together for a specific purpose including for the purpose of availing institutional finance under joint liability in the form of mutual undertaking / joint and / or several personal guarantees. The JLGs can be formed primarily consisting of tenant farmers and small farmers cultivating land without possessing proper title of their land / rural entrepreneurs engaged in non-farm activities. The JLG members are expected to engage in similar type of economic activities like crop production. The management of the JLG is to be kept simple with little or no financial administration within the group. The JLGs members can also serve as a conduit for technology transfer, facilitating common access to market information; for training and technology dissemination in activities like soil testing, training, health camps and assessing input requirements.
- A basic requirement for joint-liability security for Bank loans is that the farmers concerned, form themselves into groups of people who know and trust each other. These groups may normally vary in size from a minimum of 4 to a maximum of 10 farmers depending on the need and circumstances;
- Each year the group members who want to borrow for seasonal production costs sign a contract in which they accept liability not only for their own individual loans, but also for the loans borrowed by other members of their group. Hence the term 'joint-liability'.
- The loans are made by the CFAs through PACS to individual farmers or to the group collectively. The amounts borrowed by each person depend on his or her individual needs, subject to a maximum of certain prescribed amount in the policy which can be borrowed with this form of security.
- The JLGs should necessarily comprise the farmers or entrepreneurs (undertaking production of the same crops or group of crops or undertaking non-farm activities to ensure cohesive functioning and facilitate procurement of inputs, processing, marketing, etc.)
- All the members of the JLG should be residing in the same village / compact area and not drawn from different / distant places.
The CFAs can finance JLG by adopting any of the two models. Model A – Financing Individuals in the Group: Model B – Financing the Group:
The JLG would prepare a credit plan for its individual members and an aggregate of that is submitted to the CFAs through PACS. The individual members of JLG would be eligible for bank loan after the bank verifies the individual members’ credentials.
Purposes of credit
The finance to JLG is expected to be a flexible credit product addressing the credit requirements of its members including crop production, consumption, marketing and other productive purposes. The CFAs may consider cash credit, short-term loan or term loan depending upon the purpose of loan.