Financing through Joint Liability Groups - Case Studies in Select States

Despite the increasing credit flow to the agricultural sector in the recent past at the aggregate level, the number of agricultural loan accounts with the banking sector has not been keeping pace. This symptom coupled with the increasing average loan size per loan account, possibly points to inadequate credit access to small, marginal and tenant farmers who constitute a majority of the farmers in the country. In order to contain the increasing transaction costs while dealing with larger number of small value accounts, the group mode of financing has been focussed by NABARD and policy and operational guidelines for financing of Joint Liability Groups (JLGs) of farmers especially the tenant and oral lessee farmers as well as sharecroppers have been issued by NABARD. Banks should position JLG financing as a good business proposition in view of the simplified documentation, group dynamics, good repayment culture and prospects of credit enhancement to quality clients. Continued and hassle-free access to credit coupled with support from the state government and other extension and promotional agencies in terms of forward and backward linkages will facilitate graduation of these target groups. Specialised JLGs of farmers in potential areas would start contributing positively to the agriculture value chain and thereby enhance agriculture production and productivity besides ensuring food security to the vulnerable sections. Banks may support this national initiative in right earnest for facilitating credit flow to target farmers through the JLG mode in the ensuing cropping season.