The full form of JLG is Joint Liability Group.
Understanding Joint Liability Groups
A Joint Liability Group (JLG) is an informal group, typically made up of 4 to 10 individuals. These groups are primarily formed to secure bank loans, either for individual members or as a collective. The key feature of a JLG is that members provide a mutual guarantee for each other's loans.
Key Features of JLGs
- Group Size: Generally, JLGs consist of 4 to 10 members.
- Informal Structure: These groups are not formally registered entities.
- Mutual Guarantee: Each member guarantees the loans taken by other members within the group. This shared responsibility is central to the JLG concept.
- Loan Purpose: The loans obtained by JLGs can be used for individual or collective purposes, depending on the needs of the members.
- Accessibility: JLGs provide access to credit for individuals who might otherwise find it difficult to obtain loans on their own.
How JLGs Work
- Formation: A group of individuals comes together with the intention of obtaining a loan.
- Application: The group, or individual members, applies for a loan from a bank or other financial institution.
- Guarantee: Members provide a mutual guarantee, meaning they are collectively responsible for the repayment of the loan.
- Disbursement: The loan is disbursed to the group or individual members, depending on the agreement.
- Repayment: Members are responsible for repaying their portion of the loan. If one member defaults, other members are responsible for covering that portion.
Benefits of JLGs
- Increased Access to Credit: JLGs can access loans that might not be available to them individually.
- Reduced Risk for Lenders: The mutual guarantee reduces the risk of non-payment for financial institutions.
- Financial Inclusion: JLGs promote financial inclusion by enabling vulnerable or marginalized communities to access banking services.
- Social Collateral: The group dynamic and peer pressure encourage timely loan repayment.
In summary, a Joint Liability Group is a group of individuals who come together to secure a loan based on the mutual guarantee of all members.
