Innovations in Agricultural Microfinance - Study of JLG Financing by Banks in India

The hypothesis of the present study, namely "The approach of JLG financing contributes to financial inclusion in India's rural areas" was affirmed. Nevertheless, challenges at all levels of the loan cycle have been encountered: in the group formation process, loan appraisal, product design, monitoring and enforcement. General challenges are ambiguity about the concept as well as an insufficient management information system. The best practices witnessed in the course of the present assessment are:

* Differential pricing of JLG loans;

* Promotion of a strong repayment culture through a rebate, based on earlier repayment;

* Form JLG groups out of SHGs;

* Engagement of a farmers' club as bank facilitator and technical support provider to the group;

The assignment of specialised loan officers with an agricultural background, one for a group of branches, responsible for the JLG portfolio in the bank.

In order to mainstream the financing of JLGs through the banking system, the following recommendations may be pursued

* Provide individual loans with a group approach;

* Involve JLG facilitating institutions, such as PRIs, NGOs and farmers' clubs pre- and post-sanction of the loan;

* Introduce a risk based pricing approach for JLGs;

* Link product the JLG technology/methodology with other existing loans products such as KCC;

* Develop capacity for banks, JLG facilitating institutions and JLGs, continuously.