The following guidelines shall govern the implementation of DA-QUEDANCOR-NFA Farm Level Grains Center-Working Capital Loan (FLGC-WCL) Program:

1.         RATIONALE

The Farm Level Grains Centers (FLGC) provide small farmers an opportunity to improve the quality of their grain produce and reduce post harvest losses. Thus, they are able to realize bigger income and enhance their competitiveness.

Recently a number of FLGC projects were financed by the National Food Authority. They are however in need of working capital to make their operations viable. Considering the expertise of Quedancor in handling credit programs, the NFA tapped its services to implement the working capital loan component of the project.

2.         LEGAL BASES

2.1           RA 7393, dated 13 April 1992 which mandates QUEDANCOR to establish a credit support mechanism and guarantee system for the benefit of farmers, fisherfolks and other agricultural enterprises.

2.2           Memorandum of Agreement, dated June 01, 1999, between the National Food Authority (NFA) and the Quedan and Rural Credit Guarantee Corporation (Quedancor).

3.         DEFINITION OF TERMS

3.1           Farmers Cooperative (FC) - a group of farmers who voluntarily form themselves into a business enterprise to promote their common needs through mutual action, democratic control and sharing of economic benefits on the basis of the patronage of members.

3.2           Quedan Operations Officer (QOO) - Quedancor field personnel duly authorized to implement the program.

3.3           National Food Authority (NFA) - a government agency created by virtue of P.D. Nos. 1485 and 1779 whose mandate is to regulate the grains industry.

3.4           Farm Level Grains Center (FLGC) - a small on-farm warehouse operated by a farmer-cooperative.

4.         SCOPE

This program shall cover the working capital loan component of the Farmers Cooperative beneficiaries of NFA Farm Level Grains Centers I, II and III projects.

5.         STATEMENT OF POLICIES

5.1    Purpose of Loan

To finance the working capital of NFA- FLGC projects.

5.2    Eligibility Requirements of Borrowers

5.2.1 Must be duly endorsed by NFA.

5.2.2 Must be duly accredited with QUEDANCOR

5.2.3 Must submit a Project Proposal

5.3    Security/Collateral Arrangements

The loan shall be secured by any or a combination of the following:

5.3.1 Joint and Several Signatures of at least three (3) officers, Deed of Assignment of Cooperative Development Incentive Fee (CDIF) with conformity of the NFA Provincial Director and Hold-out deposit equivalent to at least 10% of the total loan principal.

5.3.2 Real Estate Mortgage

Issuance of post dated checks for their amortization is required.

5.4    Funding and Loanable Amount

Funding for the FLGC-WCL shall come from NFA. The maximum loanable amount shall depend on the project categorized, as follows:

PROJECT CATEGORY	MAXIMUM LOANABLE AMOUNT
FLGC I	P300,000
FLGC II	400,000
FLGC III	500,000

5.5    Loan release

The loan shall be released in full.

5.6    Interest Rate, Term and Mode of Payment

The loan shall bear an interest rate of fourteen percent (14%) per annum, payable in five (5) years in a semi-annual mode of payment. Interest on the first year shall be deducted from the loan proceeds while interest for the succeeding year shall be computed based on diminishing principal balance and shall be imputed in the loan amortizations.

5.7    Service Fee

A non-refundable service fee of 2.5% of the loan amount shall be charged and deducted from the loan proceeds.

5.8    Computation of Interest, Surcharges and Penalties

Interest, surcharges and penalties shall be computed as illustrated in Exhibit 1.

5.8.1 Interest chargeable on outstanding principal after maturity shall be at the same rate stated in the Promissory Note.

5.8.2 Surcharges of 2% per month shall be collected on the unpaid amortization until the date of actual payment but not beyond the maturity date. However, there shall be a grace period of thirty (30) days for the payment of each amortization. Collection of surcharges shall be applied for payment made beyond the said grace period computed from the scheduled date of amortization until the actual date of payment.

5.8.3 Penalty shall be 2.5% per month of the unpaid principal upon demand for payment or maturity date, whichever comes first.

5.9    Application of Payment

Any amortization or payment for loan shall be applied in the following order:

Before Maturity

a.      Surcharges, if any
b.      Interest
c.       Principal

After Maturity

a.      Penalty
b.      Surcharges, if any
c.       Interest
d.      Principal

6.         MECHANICS OF IMPLEMENTATION

6.1  Program Promotions

NFA shall provide QUEDANCOR with the list of FLGC beneficiaries with recommended amount of working capital loan.

6.2  Clientele Accreditation

Any FC intending to apply for loan under the FLGC-WCL shall submit an application for Accreditation together with the documents enumerated below, shall pay an accreditation fee of P2,000.00 and subscribe at least P500.00 of Quedancor shares of stocks.

6.2.1 Photocopy of Articles of Cooperation and By-Laws and all amendments thereto;

6.2.2 List of key officials and members with corresponding hectarage tilled;

6.2.3 Photocopy of latest duly certified Financial Statements;

6.2.4 Board Resolution/Secretary ™s Certificate authorizing the FC to participate under the FLGC-WCL program and to subscribe with the capital stock of Quedancor and designating the group ™s principal and alternate signatories with their specimen signatures;

6.2.5 Board Resolution/Secretary ™s Certificate designating at least (3) officers to be the Joint and Several Signatories;

6.2.6 Two 2x2 photos of the authorized representative/s; and

6.2.7 Police/Court Clearance of the authorized representatives

The QOO shall conduct a background/credit evaluation of the applicant, accomplish the BI/CI report and forward the same together with all the required documents to the Regional Assistant Vice President (RAVP) for review and approval.

Upon approval of application, the RAVP shall issue a Certificate of Accreditation to the applicant which shall be valid for five (5) years.

6.3    Processing of Loan

6.3.1 Application for FLGC-WCL shall be submitted by accredited applicant directly to the QOO together with the following documents:

-      Project Proposal (PSF 3)

-      Certificate of Accreditation

-      Applicable Security/Collateral documents pursuant to Section 5.3 herein

For Section 5.3.1

a.      Comprehensive Surety Agreement
b.      Deed of Assignment of CDIF
c.       Hold-out Agreement

For Section 5.3.2

a.      Transfer Certificate of Title (TCT)
b.      Tax Declaration
c.       Official Receipts (OR) of latest realty tax payment for land and improvement, or tax clearance
d.      Lot Plan and Vicinity Map
e.      Insurance Cover on improvement, if applicable

6.3.2 QOO shall evaluate the project proposal, prepare Appraisal Report (if applicable) and check the submitted documents and if found in order, shall prepare the Credit Evaluation Report (CER), Promissory Note (PN) Loan Proposal Memo (LPM) and the documentation of applicable collateral which shall be reviewed and recommended for approval by the RAVP.

6.3.3 The RAVP shall endorse the loan application to Central Office for approval of concerned authorized officer.

6.4    Loan Documentation

Proper documentation shall be the responsibility of the Quedancor Regional Office. This shall include the Loan Application Form (LAF), CER, PN, LPM, Comprehensive Surety Agreement, Deed of Assignment of CDIF, Hold out Agreement, Real Estate Mortgage and other applicable collateral documentation.

The RAVP shall ensure that the original loan documents shall be received at POD within three (3) working days from release of loan for safekeeping by Custodian in accordance with the SOP on Centralize Filing and Safekeeping of Loan and Collateral Documents.

6.5           Loan Repayment

FC shall issue ten (10) post-dated checks covering the loan amortization to the Quedancor ™s Regional Office.

6.6           Account Monitoring

During the term of the loan, periodic inspection and reporting shall be undertaken by the QOO to closely monitor the account.

The QOO shall conduct a spot inspection to check the account under the FLGC-WCL and shall submit an Account Status Report (ASR 2).

6.7           Loan Renewal

In case of loan renewal or re-availment, the procedure from Item 6.3 to 6.5 shall be followed.

6.8           Loan Default

In case of non-payment of any installment or delay of at least 180 days, the loan shall become due and demandable.

6.9           Restructuring of Loans

A loan which is in-arrears or past due may be considered for restructuring subject to Circular No. 014 on Remedial Account Management.

6.10         Release of Mortgage

The mortgaged property of the borrower shall be released upon full settlement of the loan. The Release of Mortgage document shall be duly signed by the authorized signatories. Simultaneously, the borrower shall execute an Agreement for Compliance to Audit Findings requiring him/her to settle any deficiency as a result of audit.

7.         SPECIAL PROVISIONS

7.1           Periodic consultation among the officers of QUEDANCOR and NFA shall be undertaken for the purpose of revising/improving the policies and mechanics of FLGC-WCL program.

7.2           QUEDANCOR reserves the right to promulgate such rules and regulations and adopt other measures as may be incidental to, appropriate and necessary for the attainment of the objectives of the FLGC-WCL program.

8.         EFFECTIVITY

This Circular shall take effect immediately.

Adopted: 10 June 1999

(SGD.) GALO B. GARCHITORENA
President and CEO