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JLG (joint liability group) microfinance model
What it is
The core microfinance delivery model: four to ten borrowers form a group and guarantee each other's loans informally, replacing collateral with peer accountability. Loans are individual but disbursed and collected in group meetings
It is what makes unsecured lending to borrowers with no credit history or assets underwritable at scale
Impact on industries
- Substitutes social collateral for physical collateral, and centre-meeting collection keeps operating cost per loan low enough for very small tickets to work
- Repayment discipline has historically been strong, since default carries reputational cost within the group and cuts off future credit for everyone in it
- The same mechanism transmits stress - one member's distress pulls in the others, and local shocks propagate across a whole centre at once
- It has weakened as the model formalised - bureau-based underwriting and larger tickets diluted genuine joint liability, leaving the group without its enforcement power