Group liability
Also called: Joint liability · Topic: Rural Credit, Microfinance and Financial Inclusion · NCERT: Class 10, Ch 3 "Money and Credit"
Meaning
Group liability means a self-help group (SHG) as a whole is responsible for repaying its bank loan. If any member does not pay, the group itself follows up with that member. This shared responsibility takes the place of collateral, so banks can lend to poor women who have no assets to pledge. It is the key idea that makes SHG lending work.
Example
An SHG of 15-20 women saves regularly, each member putting in ₹25 to ₹100 or more. After a year or two, the group gets a bank loan in its own name. If one member misses her instalment, the others press her to pay, because the whole group owes the bank (Class 10, Money and Credit).
Don't confuse with
- Joint liability group (JLG): this is a group of 4-10 borrowers who take individual loans and guarantee each other's repayment. Unlike an SHG, the members do not first save together.
- Collateral: an asset pledged against a loan. Group liability replaces collateral with the group's shared responsibility.