Working of joint liability groups and Self Help groups in chittoor district of Andhra Pradesh
Dr. M. Rama Mohan, Dr. G. Prathap, M. Chinnaswamy Naidu
Micro-finance brought with it, an exclusive exemption for that part of society that was from institutional, unbanked or was left out for credit want of collateral. It acts as a source of fund based financial service for entrepreneurs and small businesses which lack access to banking and allied services. Muhammad Yunus is accredited for bringing changes in social, cultural, economic and personal Spheres through microcredit operation. The expected success was basically attributed to the non-traditional characteristics of the collateral, specifically social collateral used. In the sense that social collateral of borrowers takes the place of traditionally accepted forms of physical collateral, joint liability lending relied upon social capital of the group. Under such lending conditions, the group took the liability for the individual loans of members and by that solved the problem of lack of traditional forms of collateral. By delegating the function of screening, monitoring, and enforcement of loans to the group members, banks in their turn overcome the problem of asymmetric information and accordingly the problem of prohibitively high transaction costs. However, if the JLG chooses to undertake savings as well as credit operations through the group mechanism, such groups should open a savings account in the name of JLGs with at least two members being authorized to operate the account on behalf of the group. Financial position of SHGs members is better as compared to JLGs members because ability to save regularly is a pre-condition to become a member of SHGs and hence women can afford to learn new skills or complete education. Due to all these factors, SHGs members are seen to be educated as compared to JLGs members. In case of JLGs also, all the members have unanimously said that their activities are benefited due to JLGs model. The form of benefit received by JLGs members is different as compared to the benefit received by SHGs members. Due to JLGs mechanism they have started getting loans without collateral and as such the problem of working capital has been solved at least to some extent. JLGs concept has given stability to their business due to assured supply of funds and now they can think of expanding the activities.