What is the joint liability group

A Joint Liability Group (JLG) is a concept established in India by the rural development agency, National Bank for Agriculture and Rural Development (NABARD), to provide institutional credit to small farmers. Here are the key features of a JLG:

  1. Composition: A JLG typically consists of 4 to 10 people from the same village or locality. These individuals share a homogeneous socioeconomic background.
  2. Purpose: The primary purpose of forming a JLG is to avail loans from a bank without any collateral. Unlike traditional loans that require collateral, JLG members collectively guarantee each other’s repayment.
  3. Eligibility Criteria:
    • Common Activities: Members should engage in common activities.
    • No Land Titles Required: Members are not required to have land titles.
    • Same Village: All members should belong to the same village.
    • One Family Member per JLG: Only one family member can join a JLG.
    • No History of Loan Defaults: Members cannot have a history of defaults on bank loans.
    • Regular Meetings: JLG members should hold regular meetings.
  4. Promotion and Formation:
    • JLGs can be promoted by various entities, including business facilitators, NGOs, farmers’ clubs, agricultural universities, and more.
    • JLGs can be formed by banks directly financing the group or by financing individual members within the group.
  5. Difference Between SHG and JLG:
    • Self-Help Groups (SHGs) are primarily saving-oriented groups, whereas JLGs are credit-oriented groups formed specifically to avail loans from banks or formal credit institutions.
  6. Models of Financing:
    • Banks can finance a JLG either by providing loans directly to the group or to individual members within the JLG. In both cases, all JLG members share the responsibility for repaying the loan.
  7. Documents Required by Banks:
    • JLGs should be first promoted by individuals or institutions (JLG-promoting institutions).
    • Banks typically require Know Your Customer (KYC) documents, loan applications, inter-se agreements, and Demand Promissory Notes (DPN) from JLGs.
  8. NABARD’s Support:
    • NABARD supports the formation of JLGs in project mode across India through its offices.
    • Success stories of JLGs are available on NABARD’s website.

What is the limit of joint liability group

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