Joint Liability Groups (JLG): Exploring Their Significance


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A Joint Liability Group can be defined as a group of 5 – 10 individuals who purposefully come together to avail of bank loan facilities either individually or through group formation against some mutual guarantee. The individual seeking these loans can either engage in both farm and non-farm activities and offer a joint undertaking to the bank that makes them eligible to avail loans from these banks.

In this blog, we are going to discuss in depth the significance and importance of the Joint Liability Group in empowering loan activities within the country.

Main Objective Behind Creation of Joint Liability Groups

These types of loans are availed mainly by small, marginal farmers; tenant farmers; oral lessees, and sharecroppers /individuals taking up farm activities. Since they don’t have the necessary assets to obtain a loan against collateral, the Joint Liability Group mechanism empowers them to avail of collateral-free loans.

Joint Liability Group Model

Who can be a member of Joint Liability Groups

  • Business Facilitators, 
  • NGOs, 
  • Farmers’ Cubs, 
  • Farmers Associations, 
  • Panchayat Raj Institutions (PRIs), 
  • KrishiVikasKendras (KVKs), 
  • State Agriculture Universities (SAUs), 
  • Agriculture Technology Management Agency (ATMA), 
  • Bank Branches, 
  • PACS, 
  • Other Co-operatives, 
  • Government Departments, 
  • Individuals, Input dealers, 
  • MFIs / MFOs, JLPI etc.

Criteria for Membership 

  • Members should belong to similar socio-economic status, background, and environment carrying out farming and Allied activities and who agree to function as a joint liability group. This way the groups would be homogeneous and organized by like-minded farmers/ individuals and develop mutual trust and respect. 
  • The members should be residing in the same village/ area/neighborhood and should know and trust each other well enough to take up joint liability for group/ individual loans. 
  • Members who have defaulted to any other formal financial Institution, in the past, are debarred from the Group Membership. 
  • More than one person from the same family should not be included in the same JLG. 

Nature of loans offered

Generally, these are short-term loans or a term loan depending upon the nature and duration associated with the purpose of taking a loan. Cash credits are also provided to the borrowers.

Loan limit under Joint Liability Groups

As the loan to be granted is against the mutual guarantee offered by the group, the 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.

Significance of Joint Liability Groups

Financial Inclusion: 

JLGs play a crucial role in promoting financial inclusion by providing access to credit for marginalized communities, particularly in rural areas where formal banking infrastructure may be lacking.

Risk Mitigation: 

One of the key features of JLGs is joint liability, where each member of the group is responsible for the repayment of loans taken by any other member. This shared responsibility helps mitigate the risk for lenders and encourages responsible borrowing behavior among group members.

Social Capital: 

JLGs foster social capital by promoting trust and cooperation among members. The group dynamic encourages peer support and monitoring, which can improve loan repayment rates and overall financial discipline.

Skill Development: 

Beyond financial benefits, JLGs often provide opportunities for skill development and capacity building through training sessions on financial literacy, entrepreneurship, and livelihood enhancement activities.


By providing access to credit and fostering financial literacy, JLGs empower individuals, particularly women, to take control of their financial lives and pursue entrepreneurial ventures, thereby contributing to poverty alleviation and economic development.


JLGs have proven to be scalable and adaptable to various contexts, making them a sustainable model for expanding financial services to underserved populations.

Policy Implications: 

Recognizing the significance of JLGs, policymakers may incentivize their formation through supportive regulatory frameworks and financial incentives, further enhancing their impact on financial inclusion and socio-economic development.


In conclusion, Joint Liability Groups (JLGs) offer a multifaceted solution to the challenge of financial inclusion. By leveraging the power of collective responsibility, social capital, and skill development, JLGs provide marginalized communities with access to credit, fostering economic empowerment and poverty alleviation. The significance of JLGs extends beyond financial services, as they also promote social cohesion and entrepreneurship. As policymakers and financial institutions recognize the potential of JLGs, supportive measures can further enhance their impact, ultimately contributing to more inclusive and resilient economies. JLGs stand as a testament to the potential of innovative financial models to address complex socio-economic challenges and pave the way for a more equitable future.