Title_Joint Liability Groups: Theory, Practice and Implications for Poverty

Author_ Eric Henry Yeboah and Alhaji Abdulai

Pages 97-123

Abstract_ While joint liability groups (JLGs) are fundamental to MFIs, theoretical knowledge on JLGs seems to have overtaken the empirical evidence available. The effect of JLGs on poverty is unclear. Employing a mixed method approach, this paper examines JLGs in two MFIs, NWEP and SAT, in a rural community in Ghana. This study showed that, contrary to theory, JLGs are essentially top-down strategies because of MFIs’ determination to control the JLG implementation process. Peer monitoring was irrelevant in the situation where the use of loans for non-business purposes was widespread. Regarding the effect of JLGs on poverty, consensual decision-making within groups yielded positive benefits to service users. Service users who benefitted the most from MFIs disliked JLGs suggesting that they inhibit poverty reduction. This is perhaps an indication that it is time MFIs looked for other innovative ways of providing financial services that is acceptable and fair to poor service users.

Keywords_ joint liability groups, microfinance institutions