AZIM PREMJI UNIVERSITY

Study of Joint Liability Groups

Submitted to:

Submitted by:

Dr. Aparna Sundar

Akbar
MAD14015

M.A Development

ACKNOWLEDGEMENT

I am extremely grateful to M I Ganagi, Chief General Manager, National Bank for Agriculture
and Rural Development, Karnataka Regional office, Bangalore who enabled me to work in
their organization.

My heartfelt gratitude to J C Das, General Manager and Sushila Chintala, Deputy General
Manager at National Bank for Agriculture and Rural Development, Karnataka Regional
office, Bangalore who enabled me to work in the organization and for their kind consent in
permitting me to pursue my project in this organization.

My deep sense of gratitude is to B B Sahoo, AGM, Department of Economic Analysis and

Research, NABARD, Karnataka Regional office Bangalore who has been my mentor and has
given constant support and guidance throughout my work.

I am also thankful to Uma Bharati, Asst. Gen. Manager, MCID and Mr. Aditya, DDM of
Belgaum district and Mr. Vasant Kumar DDO of Ramanagara District, who rendered me
constant support and guidance during the field visit. I would like to extend my gratitude to the
officials of the Agriculture Department, Lead Bank Managers, Managers of Ratnakar Bank,
Canara Bank, Vijaya Banks and Corporation Bank in Belgaum and Ramanagara districts for
their cooperation and support in conducting my field study.

I would like to extend my gratitude to Prof Ms. Aparna Sundar and Mr. Ashok Sircar, Azim
Premji University Bangalore for guiding me and for having given me the opportunity to do
my project work at National Bank for Agriculture and Rural Development, Karnataka
Regional office, Bangalore.

Above all, I thank God for his support and guidance in completing my internship.

Introduction

National Bank for Agriculture and Rural Development is an apex development bank in India.
This bank was established on 12 July 1982 by RBI under the chairmanship of Shri B.
Sivaraman and is headquartered in Mumbai. NARABD has regional branches spread all over
the India. The major functions of NABARD are:
To uplift rural India by increasing the credit flow for development of agriculture & rural
Non-farm sectors.
Form policy, planning and operations in the field of credit for the development of agriculture
and rural areas in India.
To develop a financial inclusion policy and is also a member of the Alliance for Financial
Inclusion
About JLG scheme

Joint Liability Groups (JLGs)

The SHG-Bank linkage, spearheaded by NABARD, has proved to be successful in providing
access to financial services from the formal banking sector for the asset less or Marginal
sections of farming community. In order to develop effective credit products for
small/marginal/tenant farmers, oral lessees, sharecroppers, as also entrepreneur engaged in
various non-farm activities, NABARD has launched the scheme for promotion of Joint
Liability Groups in 2004-05.

Features of JLG
A JLG is an Informal group in which 4 - 10 individuals come together and form a group
All the members agree and avail the loan in group through a formal agreement
Generally, the members of a JLG would engage in a similar type of activity in
agriculture/allied/non-Farm sector.
JLG members are expected to provide support to each other in carrying out occupational
and social activities.

Types of JLG models:

1) Model A/ Individuals JLG

2) Model B/ Group Model

Model A/ Individuals JLG

All members would jointly complete the loan document, making each one jointly and
severally liable for repayment of all loans taken by individuals belonging to the group. All
the members mutually agree for the loan and sign the mutual note. After that, each member
will open their individual account and the loan amount will be transferred in their respective
accounts. However, the leader collects the repayment amount from all members of the group
and repays the amount received to the bank. If one member is not able to repay his/her due
installment at time then other members of the group arrange the amount and ensure
repayment without credit default.

Model B/ Group Model

In this model all members of a group come together and open one group account on mutual
agreement. Then loan amount is transferred to the group account and the members distribute
that amount among themself equally or as per their need. During repayment the group
leader collects the amount from all members and repays it to the bank. If one member is not
able to repay his/her due installment at this time then other members of the group arrange the
amount and ensure repayment without credit default.

Credit to JLGs for the initiation of the business

The maximum amount cannot exceed Rs. 50,000 per borrower. But the amount will be
credited on the basis of activities.

Who can form JLGs?

Organizations, institutions and societies can form and can also help in the formation of JLGs.
The organizations, institutions and societies which facilitate JLGs are under:
Business Facilitators, NGOs, farmers clubs, Farmers associations, Panchayat Raj institution
(PRIs), Krishi Vikas Kendras (KVKs), State agriculture Universities (SAUs), Agriculture
Technology Management Agency (ATMA), Bank branches, PACS, other cooperatives, Govt.
dept. Input dealers, and Documents writers (in cooperatives banks). MFIs / MFOs etc.

Incentive for promotion of JLGs

To facilitate the promotion and formation of JLGs by the banks. NABARD provides the
financial grant assistance to the banks. For each JLG formation, NABARD provides Rs. 2000
in three installments. In the first installment, the bank will receive Rs. 1000 after sanction of
the loan by the bank. Second and Third installment would be released on the basis of the
performance of the JLG members.

Objectives of the study

To study different models and the variations thereof those are adopted in the field

To study the extent of coverage of target beneficiaries

To study the procedure followed for financing the JLG members and understand how it
is different from individual financing

To study the nature and extent of benefits derived by banks from financing JLGs

To study the extent of social capital accumulated by JLGs and its linkage with the JLGs
performance

To study the efficacy of JLGs in promotion of livelihood activities

Methodology

Study area
Belgaum and Ramanagara districts were selected for the study. The profiles of districts are
represented below:
Belgaum district, located in the northwestern part of the Karnataka state sharing the borders
with neighbor states Goa and Maharashtra. The total geographical area of Belgaum district
is 13454 Sq. Km. 17% of which is covered by forests. The district has a total population of
47.78 lakh with the rural population of 35.68 lakh as per the 2011census. The overall
literacy rate of the district is 63.86 %. The district is predominantly agrarian but also has
large, medium and small-scale industries. The total sown area of Belgaum district is 2.46
lakh ha. Around 40% of the gross crop area is under cereals, 19% under pulses, 19% under
oilseed crops and 21% under commercial crops. Plantation and horticulture cover 9% of the
total geographical area with major crops cashew, mango, banana and vegetable.

Ramanagara district is situated in the southern part of Karnataka which comes under Eastern
dry Zone. The total geographical area of the district is 3576 Sq. Km., the district has a total
population 10.83 lakh as per the 2011 census, and the overall literacy rate of the district is
69.2%. The economy of the district is predominantly agrarian, but also has large, medium
and small industries. The net sown area of the district is 174287 ha. Ragi is the main crop
followed by paddy, sugarcane, pulses etc. Ramanagara is known as silk city because most
of the farmers engaged in silk production i.e. sericulture.

Why were Belgaum and Ramanagara districts selected for the JLG study?

Karnataka with about 50000 Joint Liability Groups is one of the leading States in
promoting JLGs in the country. Belgaum district and Ramanagara are two major districts in
the State in terms of the JLG groups. Further, most of the JLGs promoted in Belgaum were
JLG-Individual financing model and those in Ramanagara were JLG-Group financing
model.

Methods

For the data collection mix methodology was used i.e. Qualitative and Quantitative
methodology. Through these methodologies, both primary and secondary data were
collected. I began with discussing my study and my objectives with bank officials, NGOs,
BCs and followed it up with focused group discussions with JLG members while also
recording this data. The secondary data was obtained from the Bank and included the
number of JLGs formed in last three years, Loan disbursement status and transaction
records in pass books of JLG members. Different aspects of the scheme, lifestyle, and
attitudes of the respondents, banking details, activities undertaken by the members and other
details were collected based on a structured questionnaire.

Data collection
The necessary information was collected from 5 banks (Ratnakar Bank, Canara Bank, Vijaya
Bank, corporation Bank), 1 NGO (SACRED), 1 BC, and 209 group members (43 JLGs) and
were suitably analyzed and discussed.

Limitation
At some places, it was difficult to continue the interaction with members because of the
language. But I made an effort to try and communicate with farmers, bankers and NGOs
members in Kannada.

Findings
The results established positive changes in lifestyle, income-expenditure pattern, activities
undertaken and employment of the members after joining the JLG groups. The awareness
level of the members with respect to different schemes and their benefits has increased.
Intimacy level among the members has improved. As a result, they are in a position to
discuss various socio-economic issues, the scope of employment, bank loan and agricultural
practices among each other. With a bank loan, they have expanded their business and
activities. As a result, income-expenditure-net income has improved. All the members of
the select JLGs in Belgaum were ladies and the main jobs of the members are tailoring,
saree-making and small shops. While in Ramanagara district the select JLG members were
men and women and the main occupation is agriculture.

Areas of concerns

Awareness Issue: The awareness about the model of JLGs was found low, which restrict
the impact of the program. Most of the members have taken individual loan so members are
not able to take a unified decision on a new activity.

Structure issue: In each group, there is a group leader but for a single leader, it is very
difficult to manage a large group.

Reach and Impact: Further, it was found that along with the Below Poverty Line
households Above Poverty Line households also availed loan under this scheme.

Diversion of purpose: It was noticed that, above poverty level people used the loan amount
for a different purpose rather than the purpose for which it has taken.

Unequal coverage of Farm & Non-farm sectors: It was found that banks and NGOs are
not equally forming JLGs in farm and non-farm sectors.

Gender based group formation: Banks are encouraging women for a groups formation
rather than men groups. As a result, men are not getting benefit of JLG scheme.

Funding limits and high interest rate: Banker gives only 75 percent of the loan amount
demanded by the member at a higher interest rate (25%) so most of the members are unable
to scale their enterprise. As a result, savings and surplus generation meeting for emergency
need is limited.

Recommendations
Awareness level on different models of JLGs, i.e., Model A and Model B, and their benefits
were found to be low among the farmers and bankers. Therefore, it is suggested that before
introducing the scheme in new areas, training programs must be conducted for bankers and
farmers.
Most of the members dont know to which groups they are belonging and which type of
activities has taken by other members of a group due to the large size of a group. Hence, it
is suggested that the size of the group must be reduced so each and every member of a
group can identify another member of a group and understand their activities.
It was found that along with the below Poverty Line households above Poverty Line
households also availed loan under this scheme. Hence, it is suggested that before the
formation of a group candidate status must be checked i.e. member belongs to APL or BPL.

It was noticed that above poverty level people used the loan amount for a different purpose
rather than the purpose for which it has taken. Hence, it is suggested that activity
examination or tracking should be there. Which would help for an understanding of either
member utilizing that loan amount properly or not?
It was found that banks and NGOs are not equally forming JLGs in farm and non-farm
sectors. Hence, it is suggested that there should be equal coverage of both farm and nonfarm sectors so all people could get the benefit of this scheme.

 Banks are encouraging women for a groups formation rather than men groups. As a result,
men are not getting the benefit of JLG scheme. Hence, it is suggested that there should be
no gender limits or restriction for the formation of JLGs so each and every individual can
gain the benefit of JLG scheme.

Banker gives only 75 percent of the loan amount demanded by the member at a higher
interest rate (25%) so most of the members are unable to scale their enterprise. As a result,
savings and surplus generation meeting for emergency need is limited. Hence, it is
suggested that the loan amount should be increased and interest rate must be reduced.
References
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Study of Southern Region of India. Euro-Asian Journal of Economics and Finance.
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AND PROSPECTS. Centre for Microfinance Research, Bankers Institute of Rural
Development & Chandragupt Institute of Management, Patna.
3) https://www.nabard.org/. (n.d.).
4) NABARD. (2013-14). PLP Projection. Belgaum.
5) NABARD. (2013-14). PLP Projection. Ramnagra.
6) ai, S.A., & Sjostrom, T. (2004) Is Gramin Lending Efficient? Repayment
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