JLG – some important features :
Members residing in the same village/ area, agree to function as a join liability group. One of the important requirement is that each member should have trust among the members to accept the joint liability for individual and group loans. One person from a family can become a member of a JLG. The members should be practicing agricultural activity at least for a continuous period of not less than one year, within the area of operations of the bank branch. Such members should not be a defaulter to any other formal financial institution
Joint Liability Group – Banks give two types of loans to JLGs (i) individual loans (ii) group finance.
Model I: Banks can give individual loans, and all members would jointly execute one inter-se document (i.e., every member is jointly and severally liable for repayment of all loans taken by all individuals in the group. In this case, banks need to assess the proposal based on the individual member’s activities and credit absorption capacity. Banks should also ensure that there is a mutual agreement and consensus among all members in respect of the amount of individual loan amount that would be created.
Model II: Banks can finance the JLG on group basis, in this case 4 to 10 individuals would form a group and function as one borrowing unit. The group would be sanctioned one loan, which could be a combined loan requirement of all its members. In case of crop loan, the bank would assess the loan amount based on crop/s to be cultivated and the available area to each member of the JLG. All members would jointly execute the document and takes the responsibility of the debt liability jointly and severally. In both models the group would give a mutual guarantee offered by the JLG members for the group and/or individual loan.
NABARD plays an active role in promoting the JLGs.
(a) NABARD provides, grant assistance to banks and other institutions who promote and nurture JLGs.
Such grant assistance is given at different stages.
(b) NABARD provides 100% refinance assistance to all banks for lending to JLGs under investment credit, in similar lines to that of SHG-Bank Linkage Program.
(c) NABARD would also support banks for their capacity building programs in promoting the concept of financing JLGs by assisting banks in their publicity measures.