The National Bank for Agriculture and Rural Development (Nabard), has extended its financing scheme through Joint Liability Groups (JLGs ) to the non-farm sector, to cover the micro entrepreneurs and artisans among others. The scheme was earlier available to small and marginal farmers and tenant farmers and small farmers cultivating land without possessing proper title of their land.
“The move would help augment credit flow to the micro entrepreneurs segment and would also help build mutual trust and confidence between bank and the target group. It would also minimise the risks in the loan portfolio for the banks through group approach, cluster approach, peer education and credit discipline,” according to a press release by Nabard.
A JLG is an informal group comprising preferably of four to ten individuals coming together for the purpose of availing bank loan, either singly or through the group mechanism against mutual guarantee.
The members offer a joint undertaking to the bank that enables them to avail loans.
“Rural Non Farm Sector (RNFS) provides alternative employment and income generation opportunities in rural areas in a sustainable manner. RNFS covers all non farm activities in the secondary and tertiary sectors of the economy and is a highly labour intensive sector.
However, the activities in this sector are constrained by inadequate access to institutional credit because small artisans are not able to provide tangible collateral security to financing banks. With the launching of this scheme, these potential micro enterprises can be pursued by accessing institutional credit through JLGs,” the release added.
The finance to JLG is expected to be a flexible credit product addressing the credit requirements of its members including crop production, consumption, marketing and other productive purposes. Banks may also consider cash credit, short-term loan or term loan depending upon the purpose of loan.
Banks can finance JLG by either financing individuals in the group, or financing the entire group.
