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Joint Liability Groups [JLG]
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SCHEME FOR JOINT LIABILITY GROUPS
 
The SHG Bank Linkage has been proved to be successful in providing access to financial services from the formal Banking Sector to the poorest of the poor. In order to develop effective credit products for small / marginal / tenant farmers, oral lessees and share croppers, as also entrepreneurs engaged in various non-farm activities, the scheme for Joint Liability Groups was launched. The salient features of the scheme are as under.
 
  1. Objective
    • To augment flow of credit to farmers, especially small, marginal, tenant farmers, oral lessees, sharecroppers /individuals taking up farm activities
    • To extend collateral free loans through JLG mechanism
    • To build mutual trust and confidence between Banks and the borrowers
    • To minimize risk in the loan portfolio for the banks through group approach, cluster approach, peer education and credit discipline
    • To provide food security to vulnerable sections by supporting the cause of enhanced agriculture production, livelihood promotion


  2. What is JLG
    • A Joint Liability Group (JLG) is an informal group comprising preferably of 4 to 10 individuals coming together for the purposes of availing bank loan either singly or through the group mechanism against mutual guarantee
    • The JLG members are mostly engaged in similar type of economic activity in the Agriculture/Allied/Non-Farm sector
    • The JLG members offer a joint undertaking to the Bank that enables them to avail loans
    • The management of the JLG is simple with little or no financial administration
    • JLG members are expected to provide support to each other in carrying out occupational and social activities


  3. Who can form JLG
    • Business Facilitators, NGOs, Farmers' Cubs, Farmers Associations, Panchayat Raj Institutions (PRIs), Krishi Vikas Kendras (KVKs), State Agriculture Universities (SAUs), Agriculture Technology Management Agency (ATMA), Bank branches, PACS, Other Co-operatives, Government Departments, Individuals, Input dealers, MFIs / MFOs etc.


  4. Selection of JLG members
    • JLGs can be formed primarily consisting of tenant farmers and small farmers cultivating land without possessing proper title of their land
    • Members should be of similar socio economic status, background and environment carrying out farming and allied activities agreeing to form a JLG so that the group would be homogeneous and organised and to develop mutual trust and respect
    • The members should be residing in the same locality and should know & trust each other
    • The members should be engaged in agricultural activity for a continuous period of not less than 1 year within the area of operations of the Branch
    • None of the group member should be a defaulter to any formal financial institution
    • A JLG should not have more than one person from a family
    • JLG should select a good/able/active leader for the JLG to ensure leadership role for the benefit of all the JLG members. However, care should be taken to ensure that benami loans are not cornered by the group leader


  5. Size of the JLG
    • The group should be ideally of 4 to 10 members to enable the group members to offer mutual guarantee
    • While informal group of upto 20 memebers could also be considered, such large groups are found to be not effective in fulfilling mutual guarantee obligations in the case of farmers. therefore smaller groups of farmsrs (4-10 members) are recommended for effective functioning of JLG.


  6. Group Approach
    • All members of JLG should be active enough to assume leadership role. The leader should foster a sense of unity, maintain discipline, share information and facilitate repayments. For the Bank, he is the focal point for group activities
    • Regular meetings should be held and attended by all members to discuss issues of mutual interest and to emphasize on the roles and expectations from the members and the benefits of group dynamics
    • JLG can act as a conduit for facilitating training and technology and disseminating market information
    • The JLGs for specific activity, e.g. production of pulses/vegetables/fruits or weaving may be federated at village/block level for development of the product
    • On stabilisation JLGs could come together in the form of cluster federation forming an entire value chain, thereby achieving economies of scale in procurement, processing and marketing


  7. Saving by JLG
    • Primarily JLG is intended to be a credit group therefore, savings by the members is voluntary and the members should be encouraged to save
    • All the JLG members may be encouraged to open an individual "No Frills" account
    • In case JLG chooses to undertake savings along with credit operations then they should open a savings account in the name of JLG with atleast two members authorised to operate the account on behalf of the group
    • The quantum of loan to be given to the group should be related to the credit needs and not to the quantum of savings


  8. JLG Models
    • Model A – Financing Individuals in the Group:
    • Each member of the JLG should be provided an individual UGC. The financing branch should assess the credit requirement, based on the crop to be cultivated, available cultivable land and the credit absorption capacity of the individual
    • All members would jointly execute one inter-se document (making each one jointly and severally liable for repayment of all loans taken by all individuals in the group)
    • There has to be mutual agreement and consensus among all members about the amount of individual debt liability that will be created. Any member opting out of group or joining the group will necessitate a new loan agreement
    • Model B – Financing the JLG as a Group:
    • The group would be eligible for accessing one loan, which could be combined credit requirement of all its members
    • The credit assessment of the group should be based on the available cultivable area of each member of the JLG/activity to be undertaken
    • All members would jointly execute the document and own the debt liability jointly and severally
    • The mutual agreement needs to ensure consensus among all members about the amount of individual debt liability that will be created. Any change in composition of the group, will lead to a new document being registered by the bank branch
    • JLGs that undertake savings apart from credit are required to maintain books of accounts
    • Members may also be graded by Branch on the basis of performance parameters
    • The credit requirements for the group may be worked out based on combined credit plan and needs of individual members and need not be linked to group's savings.

  9. Branches can finance JLGs by adopting any of the two models:





  10. Purposes of credit

  11. The finance to JLG is to be a flexible credit product addressing the various credit requirements of its members including crop production, consumption, marketing and other productive purposes.

  12. Type of loan

  13. Cash credit, short-term loan or term loan depending upon the purpose and tenor of loan.

  14. Loan Limit

  15. As loan to be granted is against the mutual guarantee offered by the group, maximum amount of loan may be restricted to Rs.1.00 lac per individual without margin / security for agricultural loans and up to Rs.50000/- per borrower for composite loans

  16. Margin

  17. Loan limit Margins (in %)
    Up to Rs.1.00 lac Nil
    Above Rs.1.00 lac 10-15%

  18. Collateral Security

  19. No collaterals.

  20. Documents
    • Model A:
    • Introduction form
    • Application cum appraisal form
    • Letter of guarantee
    • Joint liability agreement and
    • DP Note.



  21. Model B: Documents as applicable to SHGs are to be obtained.

  22. Rate of Interest
    • Rate of interest as applicable to Agriculture Advances.
    • Short term loans sanctioned to a JLG, the per member cap of Rs.3.00 lacs be considered while determining ROI under the interest subvention scheme and not the aggregate amount sanctioned to a JLG


  23. Personal Accident Insurance

  24. Branches should cover individual members of JLG under Personal Accident Insurance, applicable for Union Green Card.

  25. Crop Insurance
    • National Agricultural Insurance Scheme (NAIS) i.e. Rashtriya Krishi Bima Yojana extends crop insurance cover to all farmers including tenant farmers, sharecroppers growing notified crops.
    • Branches to work out the premium payable by the JLG members availing of crop loan and pay the same to the insurance company.


I Anup Kumar Das, Son of Late Jiban Krishna Das, residing at Vill.- Paschim Nandabhanga, P.O.- Bakhrahat, P.S.- Bishnupur, Dist.- South 24-Parganas, West Bengal
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