1. JOINT LIABILITY GROUPS
Regional Office, Ahmedabad
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2. Background
Inspite of proactive policy, lack of access to credit is a cause for major concern;
As per the RFAS, 87%of marginal farmers and 69% of small farmers have no loan account with formal financial institutions;
Especially the client groups like tenant farmers, share croppers, oral lessees and the rural poor are the most vulnerable;
Recent innovations in rural finance like SHGs and KCC have not reached the above client groups;
Against this background, NABARD had conceived and piloted the JLG methodology in based on BAAC, Thailand experience with JLGs for over 40 years;
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3. 7 success factors of BAAC’s JLG Concept in Thailand
Responsibility for each loan lies with the individual client, but the liability lies with the group;
Concept depends heavily on mutual trust , peer- pressure and common neighbourhood;
Farmers must be involved in and only borrow for similar types of production;
Group leadership is critically important;
Groups are not multi-function groups and have no role in extension, post-harvest or marketing activities;
The relationship between groups and their bank should be good, trusting and clearly understood;
Clients should be small-scale farmers, borrowing small amounts.
गाँव बढ़े तो देश बढ़े /nabardonline Taking Rural India >> Forward

4. Definition of JLG
Joint Liability Group (JLG) is an informal group comprising 5 to10 individuals coming together for the purposes of availing bank loan either singly or through the group mechanism against a mutual guarantee. The JLG members offer an undertaking to the bank that enables them to avail loans. Unlike SHGs, which are more process oriented, the management of the JLG is simple with little or no financial administration within the group.
गाँव बढ़े तो देश बढ़े /nabardonline Taking Rural India >> Forward

5. Joint Liability groups
Designed to meet farm/non-farm credit needs
SF/MF, share croppers and oral lessees with no access to formal credit due to absenceof title deeds
Credit product but savings encouraged
No specific ratio of loan and savings
6.96 lk JLGs promoted and rs.6,158 crore (cumulative) credit disbursed
SHG members needing higher credit graduate to JLGs
Five Lakh JLGs of landless farmers to be financed in
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6. JLG – Product Features A JLG must fulfil the following features:
It has between 4 and 10 members;
Its group members should be small or tenant farmers aiming at small loans;
The JLG is homogenous, with members from the same neighbourhood and socio-economic background;
All members must have similar crop production as a main activity and use the loan there for;
The JLG has a simple and lean structure and does no financial administration;
JLGs are not multi-function groups and have no role in extension, post- harvest or marketing activities;
गाँव बढ़े तो देश बढ़े /nabardonline Taking Rural India >> Forward

7. JLG – Leadership Tasks Strengthen and foster unity among JLG members;
Motivate members to attend group meetings and repay regularly and punctually to the bank;
Recommend the individual member loan proposals;
Coordinate the repayment;
Distribute “reminding letters” to borrowers and speed up loan repayment;
Assist in promoting individual deposits with the bank;
Inform members about news from the bank;
Oversee and maintain disciplines of JLG.
गाँव बढ़े तो देश बढ़े /nabardonline Taking Rural India >> Forward

8. Duties and Responsibilities of JLG Members
The group monitors and provides support to each other in carrying out occupational and social activities;
The group schedules meetings which are attended by all members regularly and punctually;
JLG members repay their individual loan according to the repayment schedule;
JLG members identify new members;
As an option, the JLG can define rules for their own functioning.
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9. Duties and Responsibilities of JLG Members
4-10 individuals (sharecroppers, tenant farmers or oral lessees) per group;
JLG members offer joint undertaking to the bank (JLG agreement);
Simple JLG management with little or no financial administration within the group;
Members engage in similar economic activities, come from the same neighbourhood.
Model - B
Group as borrowing unit, combined credit requirement of all members
Maintaining joint books
SHG documentation
Model - A
Individual loan with mutual guarantee
Credit plan for individual members
गाँव बढ़े तो देश बढ़े /nabardonline Taking Rural India >> Forward

10. Findings of Studies on JLGs
Smaller groups are preferred as JLGs
Facilitating Institutions useful and helpful in mobilisation and linking resulting in successful banking relationships
Homogeneity is an important factor for sustainibility, coherence and successful lending to a group
Preference of bankers to exclusive women JLGs owing to their experiences in lending to women
JLGs formed out of SHGs
Meetings of members contribute to better performance and regular savings contribute to better solidarity
Training of JLGs in operational and technical aspects resulted in better performance
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11. Main Challenges in JLG Finance
Clarity of the JLG concept among branches and clients;
Ambiguity in differentiating between SHG and JLG;
Group formation and dynamics are a decisive factor for the credit relationship with the bank;
Need for more convinced promoters of JLG financing in banks’ head offices and branches;
JLG product is often presented as group not individual loan
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12. Increasing Fragmentation – ignored by banks
Comparison of SF/MF and OF financing – Change over
41 Million new small farmer holding not covered
Other farmer accounts exceeded the number of holdings
20.7 mn holding, but 21.2 mn loan accounts
Increase in no. of SF holdings
50.87
Million
Increase in area operated
27.64
Million ha
Increase in no. of SF accounts
9.55
Increase in loan amount
882
Rs. Billion
Increase of OF holdings
-19.93
Increase in area operated
-32.25
Million Ha
Increase in OF accounts
17.61
Increase in Loan amount
2187
Rs. billion
गाँव बढ़े तो देश बढ़े /nabardonline Taking Rural India >> Forward

13. JLG financing – Way forward
JLG financing – one step towards financial inclusion;
Joint liability is an effective collateral substitute ;
Joint liability is a cost-effective delivery model;
Transferring initial screening and selection of peer members to the JLG leader, but systematic supervision by field staff;
Cooperation with JLG facilitating institutions (FCs, PRIs, federations, NGOs) with focus on JLG formation stage;
Adjust interest rate through a risk based pricing model (rebate);
A successful and sustainable product with substantial outreach
गाँव बढ़े तो देश बढ़े /nabardonline Taking Rural India >> Forward

14. JLG financing – Way forward
The JLG mechanism is an individual loan with a group approach (joint liability) offers a collateral substitute
Simple documentation procedures make the loan product more effective for the bank and hassle free for the client.
The loan size limit should be treated flexibly to avoid underfinancing and over financing
A risk based pricing model is effective and helps in cost recovery as also prompt repayment of loans
This product should be fine tuned and mainstreamed with all the support required on the capacity development including incentives for JLG promotion agencies.
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15. THANK YOU
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