FINANCING TO JOINT LIABILITY GROUPS (JLGs)

  • OBJECTIVES:
    • a. To augment flow of credit to farmers, especially small, marginal, tenant farmers, oral lessess, share croppers/ individuals taking up farm activities.
    • b. To serve as collateral substitute for loans to be provided to the target group.
    • c. To build mutual trust and confidence between bank and the target group.
    • d. To minimize the risks in the loan portfolio for the banks through group approach, cluster approach, peer education and credit discipline.
    • e. To provide food security to vulnerable section by enhanced agriculture production, productivity and livelihood promotion through JLG mechanism.
  • GENERAL FEATURES OF JLG:
    • A Joint Liability Group (JLG) is an informal group comprising of 4-10 individuals coming together for the purpose of availing bank loan on individual basis or through group mechanism against mutual guarantee.
    • Generally, the members of a JLG would engage in a similar type of economic activity in the Agriculture and Allied Sector.
    • The members would offer a joint undertaking to the bank that enables them to avail loans.
    • JLG members are expected to provide support to each other in carrying out occupational and social activities.
  • CRITERIA FOR MEMBERSHIP:
    • a. Members should belong to similar socio-economic status, background and environment carrying out farming and Allied activities and who agree to function as a joint liability group. This way the groups would be homogeneous and organized by likeminded farmers/ individuals and develop mutual trust and respect.
    • b. The members should be residing in the same village/ area/ neighbourhood and should know and trust each other well enough to take up joint liability for group/ individual loans.
    • c. Members who have defaulted to any other formal financial Institution, in the past, are debarred from the Group Membership.
    • d. More than one person from the same family should not be included in the same JLG.
  • JLG MODELS:
    • JLGs can be financed under any of two models.
    • Model A: Financing Individuals in the JLG
    • Model B: Financing the JLG as a Group.
  • EXTENT OF LOAN: Need based both under Model A & B.
  • MARGIN, INTEREST AND SECURITY NORMS: Margin, Rate of Interest and Security norms shall be as applicable to individual Agriculture scheme under which finance is extended.