TO	The Governor, Central Bank of the Philippines
	The Minister of Budget and Management
	The Secretary-General, KKK National Secretariat
	The National Treasurer of the Philippines

To implement the KKK Guaranty Fund established under Letter of Instruction No. 1308 dated April 12, 1983 the following guidelines are hereby issued:

1.  Purposes: The KKK Guaranty Fund ( œFund ) shall be used primarily to guaranty uncollectible KKK loans released through duly accredited banks and the loans that will be guaranteed by this Fund will be considered as non-risk assests of the accredited banks.

The Fund may also be used to support the establishment of a liquidity system, interest subsidy system, an insurance system, possible losses on the trading of mortgages evidenced by asset-backed bonds, and other KKK projects as may be approved by the President upon recommendation of the KKK Pambansang Lupon and KKK National Secretariat.

Projects completely or partially financed by KKK Project Development and Management Fund (PDMF) shall also qualify under this Fund and for this purpose, PDMF shall be authorized to open project accounts categorized as 70-300 under the auditing/accounting code for all PDMF projects.

2.  Rediscounting Eligibility: KKK loans extended by duly accredited banks shall be eligible for Central Bank rediscounting, following standard criteria on bank rediscount applications and subject to the following conditions:

a. For rediscounting purposes, the loans shall be considered as ex-ceiling.

b. The rediscounting proceeds shall be credited immediately to the account of the originating bank with the Central Bank.

c. The rediscounting term shall be co-terminus with the maturity of the loan.

The National Government Budgetary releases used for KKK loans may be used as bank seed funds for purposes of initiating the rediscount process.

3.  Fund Viability: The Fund shall be used to guarantee payment for part of bank KKK loans extended from the seed fund and from rediscount proceeds.

The percentage of KKK loans guaranteed by the Fund shall be set at such a level as is likely to be supported by the earnings of the Fund without impairing the principal.

Projects other than KKK guarantees also supported by the Fund shall be limited to such levels as is warranted by Fund earnings after payments on guarantees made good.

4.  Finances: The Fund shall be supported by the National Livelihood Support Fund and/or budgetary provisions not used for lending or for operational expenses subject to Special Budgets provided for under P.D.1177.

The Fund shall be the Central Bank in Treasury instruments or in Central Bank Certificates of Indebtedness and the earnings therefrom shall accrue to the Fund.

The operational expenses attendant to the administration of the Fund shall be charged to the Fund and shall not exceed five percent (5%) of Fund income.

Payments on guarantees made good shall be charged to the income of the Fund and when necessary, to the principal.

5. Fund Administration: The KKK National Secretariat shall oversee the operations and administration of the Fund within these guidelines, in coordination with the Central Bank, the accredited banks and other entities concerned. The KKK Processing Center Authority is hereby empowered to operate the KKK Guaranty Systems and accordingly is hereby authorized to establish working relationships with the public and private financial institutions for the implementation of the program.

These instructions shall take effect immediately.

DONE IN THE CITY OF MANILA, this 22nd day of September, in the year of our Lord, Nineteen Hundred and Eighty-Three.

(Sgd.) FERDINAND E. MARCOS

By the President:

(Sgd.) JUAN C. TUVERA
Presidential Executive Assistant