A Role of Joint Liability Group (JLG) in Rural Area: A Case Study of Southern Region of India

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1 Euro-Asian Journal of Economics and Finance ISSN: (print) ISSN: (online) Volume: 2, Issue: 1(January 2014), Pages: Academy of Business & Scientific Research A Role of Joint Liability Group (JLG) in Rural Area: A Case Study of Southern Region of India Dr. Vasantrao D. Rupnawar 1, and Prof. Rahul S. Kharat 2* 1. Principal, SVPM s College of Commerce, Science. & Compter Education, Malegaon (Bk.), Tal: Baramati, Dist.: Pune, India. 2. Assistant professor, Department of Commerce, M.S.K College, Someshwarnagar, Tal: Baramati, Dist.: Pune, India. Micro finance plays an important role for upliftment of rural India. It has emerged in India in late 80 s to fulfill the need of poor families to who Banks & financial institutes denies loan as they don t have security/mortgage. Even today more than 60% population resides in Rural India and they are directly or indirectly depend upon agriculture to fulfill their needs and more than 75% of the farmers are in economically worsening condition. As they don t get financial assistance from Banks & financial institutions, to fulfill their economic needs concept of Micro Finance introduced by socialists & experts in the field of economics & agriculture. And to provide finance to Farmers Joint Liability Groups (JLG) are formed to meet small farmer s financial need. So, this research paper focused on role and performance of Joint Liability Groups in Micro Finance in the uplift of Agriculture and rural India for financial year & Keywords: Micro Finance, Agriculture & Rural Upliftment, Banks & Financial Institutes, Joint Liability Groups (JLG). INTRODUCTION India is an agrarian economy and even today more than 2/3 rd population of the nation depends upon Agriculture either directly or indirectly for their earning. The class which belong to agriculture and its allied activities is resides in rural India. Out of the total farming community more than 80% farmers are small and marginal farmers and they are economically poor. Due to this they are below the poverty line. This is resulted to remain socially & economically backward. As these farmers are poor their bargaining power is also less than other economically sound farmers. So, they don t get the benefits of national economic policies. To improve their status they require economical help from Government, Banks and financial institutes. But even after recommendations of government, Banks & Financial institutes are reluctant to provide loan to them in fear of increase in NPA as they don t get any mortgage and other securities in exchange of loan. To overcome on these barriers, the concept of Micro-finance takes place in India in late 80 s. The Government of India (GOI), RBI and economist of India decided to introduce model of Micro-finance after the success of the same in Bangladesh with *Corresponding author: Rahul Sadashiv Kharat M.S.K. college, Someshwarnagar, (University of Pune) Tal- Baramati, Dist-Pune, Maharashtra, India. srass2006@rediffmail.com. 13

2 A Role of Joint Liability Group (JLG) in Rural Area Rupnawar & Kharat efforts & guidance of Mohammad Yunus. The GOI & RBI has decided to make a special provision of funds in Five years plans and in annual Budgets. It makes mandatory to all Nationalized & Private Banks, Co-operative banks, and other financial institutes to provide financial assistance to such needed class. But they should come together and formed group with different natures like male groups, female groups, group of certain castes or HISTORY OF JOINT LIABILITY GROUP (JLG) In order to provide institutional credit to Small & marginal farmers, tenant farmers and share croppers, The National Bank for Agriculture and Rural Development (NABARD) has launched a Joint Liability Group (JLG) scheme in as a pilot project. This project was introduced as a pilot project by NABARD in 8 States with the support of 13 RRBs. And next two years it spreads to all states and regions in India. JLG is an informal group consist of minimum 4 to maximum 10 individuals members (but with the permission of particular Bank number can be increased to 20 in exceptional case) coming together for the purpose of availing bank loan through group mechanism against mutual guarantee. For providing loans to such groups NABARD will provide grant support to State Cooperative Banks (SCBs) and Regional Rural Banks (RRBs) for formation, nurturing and financing of JLGs over a period of three years at Rs 2,000 per JLG. In addition to banks, NABARD will also provide grant support to farmers clubs, panchayat raj institutions, krishi vikas Kendra s, agricultural universities, primary agricultural credit societies for forming JLGs of farmers and help them access bank loans. The NABARD would provide 100 per cent refinance to banks against their finance to JLGs. The members of a JLG, who would engage in a similar type of activity in the agriculture and allied sector, would sign a joint undertaking to the bank enabling them to avail loans. classes. These groups are popularly known as Self Help Groups (SHG s). The operation of providing funds to such SHG s are performed and controlled by NABARD, an autonomous body of GOI controlled and run by RBI. In addition to this GOI introduced a new type of Micro Financing system in , popularly known as Joint Liability Group. Nature of Joint Liability Group The Banks & various financial institutions may provide finance to JLGs by either financing individuals in the group or financing as a group. According to the size of the group, nature of group activity, NABARD has suggested two models to avail the finance to JLG. Model A - Financing to the Individual in the group 1. Each member of the JLG should be provided an individual Grant Card (GC) from the bank. 2. The financing bank branch should assess the credit requirement of such individual on the basis of land available & land cultivated by him. In addition to this credit absorption capacity of the individual is also assessed. 3. All members of JLG would jointly sign an undertaking/inter se assuring to bank for jointly and severally all the members are responsible for loan provided to individual. 4. Any other member of the group or new entered member applied for the loan, new loan agreement and undertaking should be signed by all members of JLG. Model B Financing JLG as a group: 1. The group will be eligible for accessing loan (i.e. combined credit requirement). 2. The credit assessment of the group should be decided on the basis of total land 14

3 Euro-Asian j. econ. financ. ISSN: (print); (online) Volume: 2, Issue: 1, Pages: available with all group members and total land cultivated by all group members. 3. All members should jointly signed undertaking/inter se about joint liability. 4. Any change in the composition of group will lead new document being registered with bank branch. 5. The JLG who undertake saving apart from credit is require maintaining detailed books of accounts. 6. Each member will be graded by bank on the basis of performance parameter. 7. The need of the credit will be decided on the basis of combined credit plan and need of the each individual in the group. But saving of the group should not be considered while availing loan. LITERATURE It includes review of various books, thesis, Research papers, newspaper which focused on micro-finance. Dr. C. Rangarajan (2006) in his book Microfinance and its future directions focused on SHG through microfinance evolve through in three stages. Robert Peck Christen (2006) in his paper Microfinance and Sustainable International Experience and lesson for India, concentrated on profitability of SHGs and bank also. N. Tejmani Singh (2009), in her research paper, expressed her views on origin and development micro finance through SHGs in India. Bhuvan I.B. (2007), in his thesis performance of Micro-finance provider in Karnataka critically analyzed role of various public & private sector banks, co-operative banks and various intermediaries working to provide funds to SHG and performances of such finance providers and SHGs also. METHODOLOGY To measure the performance of Joint Liability Group s in south region of India. Case study method is used. The required data is collected on the basis of secondary data available with government websites and reports like websites of RBI and NABARD and their annual reports with provisions of five year plans. Data is also collected by using data published in various research papers, newspapers, magazine and Journals etc. Analysis & Interpretation of Data To study the performance of the JLGs, the 30 states of India are classified in six regions an out of these, southern region is selected for the study and data is collected. Following table no.1 shows the six regions: 15

4 A Role of Joint Liability Group (JLG) in Rural Area Rupnawar & Kharat Scheme to finance Joint Liability Groups NABARD has been played a crucial role in popularizing the scheme and detailed guidelines of JLGs has been issued for financing to JLGs to all During the year ended 31 March 2011, JLGs have been formed and Rs lakhs has been disbursed as on 31 March At the end of 31 st march 2012 the no. of JLGs reached to The above table no. 2 & figure no. 2 shows that there is a growth of JLGs in the financial year 2011 & 2011 in all the regions. But south regions has fastest growing in the same period and ranked first as they have contributed 44.52% (148119) of total JLGs in India. East region which includes all the bimaru states stands second with 37% (123132) of total JLGs. And west region is at the last position with 6133 JLGs. Table no. 4 and Figure no. 4 & 5 shows the statewise data of no. JLGs and loan disbursed to them for both the year and show that Tamilnadu is the highest one in no. of JLGs & loan disbursement. FINDING 1. South Region is leading in formation of JLGs and disbursement of loan to JLGs. 2. Tamilnadu is the state who leads not only in South region but leads in all Indian states. 3. East region states like Bihar, Jharkhand etc. are the socially, Economically and politically backward and are called Bimaru states are in the second position in forming JLGs and loan disbursement also 4. Western region i.e. Goa, Maharashtra and Gujarat are left behind in formation of JLGs and Loan disbursements. public sector and private sector banks during Following table no.1 shows the performance of JLGs for the financial year & with a growth of in the same year and loan disbursement reached to with a growth of lakhs in the same year. Above figure no.3 & Table no.3 shows the data of loan disbursed to JLGs for the financial year & The table and figure shows that south region is on first position in disbursement of loan with Rs lakhs (i.e %) of the total Rs lakhs. After that east region stands second with Rs lakhs (i.e %) of the total disbursement. West region stand last with disbursement of Rs lakhs of the total. Tamilnadu has & JLGs in both years which are 46.75% (69250) of the total JLGs i. e Whereas loan disbursed to JLGs in Tamilnadu is 53.16% way of Contract farming, Crop production, and other allied agricultural activities it helps to increase the standard of living of members & family members of the JLGs. JLGs are the changing face of microfinance in rural India and plays important role in positive manner in terms of the ability of microfinance to attract more funds and therefore increase outreach. So the JLGs are the instruments of Micro finance which becomes a powerful tool for rural development. However, for sustainable development of the poor rural economy, focus must be on development of rural infrastructure and rural agriculture based economy, but to ensure that there will requires finance for the same and JLGS are the activities which can contribute to the same. CONCLUSION The micro finance can contribute to solving the problem of finance for agriculture and its allied activities which is an integral part of poverty alleviation programmes. It match the multiple credit requirements of the low income borrowers i.e. specially farmers without increasing cost of monitoring to end use lenders. As JLGs provide loans or composite credit for income generation by 16

5 Euro-Asian j. econ. financ. ISSN: (print); (online) Volume: 2, Issue: 1, Pages: xx-xx REFERENCE 1. Borbora, S & Mahanta, R (2001), Micro finance through SHG and its impact: A case study of RGVN-CSP in Assam Summary paper, Indian Journal of Agricultural Economic Vol. 56, No 3 July-September th Five year plan d-3a0c-4196-a8e8-a1286c4aec Bardoloi, G (2005), Grassroots Institutions, Rural Development and Environment Management in North East India, KB Publication, Guwahati. 3. Ghosh. R. (2005), Micro finance in India A critique, May, Social Science Research Network. 4. Gupta, M.S. (2008), Micro finance through SHGs An Emerging Horizon for Rural Development, Indian Journal of Commerce, Vol. 61, No.3, July-Sept 5. Karmakar, K.G. (1999), Rural Credit and SHGs Microfinance Needs and Concepts in India. Sage Publication, New Delhi. 6. Kanwar, G. et al. (2008), Micro finance in Indian Scenario A study on the existing models, Indian Journal of Commerce, Vol. 61, No. 2, April-June. 7. Tejmani N. (2009), Micro Finance practices in India: an overview, International Review of Business Research Papers Vol. 5 No. pp NABARD 2007, Progress of SHG-Bank Linkage in India & pdf. 10. Annual Reports of NABARD & RBI. 17

6 A Role of Joint Liability Group (JLG) in Rural Area Rupnawar & Kharat APPENDIX Name of the region Table no.1: Region-wise performance of JLGs in India. No. of JLG No. of JLG promoted promoted on on Loan disbursed as on (in Rs. lakh) Loan disbursed as on (in Rs. lakh) Total no. of Total loan JLG disbursed (in lakh) North North-East East Central West South Grand Total Total Table no.2: Region-wise no. of JLGs formed. Figure no.2: Region-wise no. of JLGs formed. Name of the region No. of JLG promoted on No. of JLG promoted on Total no. of JLG North North East East Central West South Total

7 Euro-Asian j. econ. financ. ISSN: (print); (online) Volume: 2, Issue: 1, Pages: xx-xx Figure no.3: Region-wise loan disbursed to JLGs Table no.3: Region-wise loan disbursed to JLGs Name of the region Loan disbursed as on (in Rs. lakh) Loan disbursed as on (in Rs. lakh) Total loan disbursed (in RS. lakh) North North- East East Central West South Total Table no.4: State-wise Grant Support sanctioned in Southern Region to Joint Liability Group Promoting Institutions as on 31 March Name of the region No. of JLG Loan No. of JLG Loan Total promoted disbursed promoted disbursed Total no. Total loan on as on on as on of JLG disbursed (in Rs. lakh) (in Rs. (in Rs. lakh) lakh) Karnataka A. P Tamilnadu Kerala Total Grand Total

8 A Role of Joint Liability Group (JLG) in Rural Area Rupnawar & Kharat Figure no. 4: State-wise JLGs formed in southern region. Figure no. 5: State-wise loan disbursed to JLGs in southern region 20