Joint Liability Group
Also called: JLG · Topic: Rural Credit, Microfinance and Financial Inclusion · NCERT: Beyond NCERT
Meaning
A Joint Liability Group (JLG) is a small, informal group of 4-10 borrowers. Each member takes a separate loan, and all members promise to repay if any one of them fails to. This shared promise is called joint liability, and the lender accepts it in place of collateral, which is an asset such as land that a lender can sell if a loan is not repaid. NABARD started a scheme for JLGs in 2006. JLGs help people who own no land, such as tenant farmers and sharecroppers, to borrow from banks and microfinance institutions.
Example
Six tenant farmers in a village form a JLG, and each takes a separate bank loan for seeds and fertiliser. When one member's crop fails, the other five follow up and help make sure the loan is repaid. The bank lends to all six even though none of them owns land.
Don't confuse with
- Self-help group (SHG): An SHG has 10-20 members who first save together for some time, and the bank lends to the group as a whole. A JLG does not save first, and each member gets their own loan.