Whereas, Administrative Order (A.O.) No. 225-A was issued by the President on May 26, 2008;

Whereas, RA 10000 or œThe Agri-Agra Reform Act of 2009  provides that 90% of the penalties collected due to non-compliance shall be allocated between the AGFP and the PCIC;

Whereas,  under  AO  No.  225-A,  the  Department  of  Agriculture  (DA),  in coordination with the Land Bank of the Philippines (LANDBANK), was directed to draw up the mechanics and administrative arrangements as well as issue the implementing guidelines for the AGFP;

Whereas, the DA, in coordination with LANDBANK, issued Department of Agriculture   Administrative   Order   (DA-AO)   No.   23,   series  of  2008  and amendments thereto through DA-AO No. 23-A s. 2008, DA-AO No. 23, s. 2009, DA-AO No. 24 s. 2013, and DA-AO No. 11, s. 2015;

Whereas, the AGFP Governing Board deems it necessary to amend the AGFP Implementing Rules and Regulations (IRR) to improve the over-all effectiveness of the AGFP;

Now, therefore, the DA, in coordination with LANDBANK, hereby issues this Revised  Implementing  Rules  and  Regulations  (IRR)  to  govern  the implementation of the Agricultural Guarantee Fund Pool (AGFP).

This  guideline  considers  the  expanded  coverage  of  the  AGFP  to  include livestock, fisheries, and other food crops as defined under items 2.1 and 2.2 of this Revised IRR.

1.0 PROGRAM DESCRIPTION AND PURPOSE

The Administrative Order No. 225-A stipulates, among others, that Government Financial  Institutions  (GFIs)  and  Government  Owned  and  Controlled Corporations (GOCCs) shall allocate and contribute five percent (5%) of their 2007 surplus for projects in palay and food production, and as contribution to the AGFP. The AGFP shall be used to mitigate the risks involved in agricultural lending thereby facilitating the provision of credit to the agriculture sector.

The AGFP shall encourage partner lending institutions (PLIs) to lend to small farmers and fisherfolk (SFF) or their organization by providing guarantee coverage to unsecured loans for agricultural food commodity production, thereby mitigating the risks involved the risks involved in lending to the agri-agra sector.

2.0 DEFINITION OF TERMS:

2.1     Agriculture and Agrarian Reform Credit - shall refer to loans granted for the following activities:

2.1.1  Agriculture and fisheries production including processing of fisheries and agri-based products and farm inputs;
2.1.2  Acquisition  of  work  animals,  farm  and  fishery  equipment  and machinery;
2.1.3  Acquisition of seeds, fertilizers, poultry, livestock, feeds and other similar items; and
2.1.4  Rehabilitation of farms resulting from natural calamities.

2.2     Agricultural Food Commodity Production - refers to agricultural and fish production including processing of agri and aqua-based products, farm inputs and/or processes across the food commodity value chain.

2.3    Amount to be guaranteed - refers to eighty five percent (85%) of the principal loan disbursed to the borrowers by the PLI as indicated in the promissory note (PN).

2.4     Collection  Agreement  -  an  agreement  that  binds  the  PLI  or  other collecting agents to collect from the borrowers on behalf of the AGFP.

2.5    Guarantee Agreement - is an agreement where:

2.5.1  One party (AGFP) agrees to pay the loan obligation of the borrower to the PLI if the borrower fails to pay the loan after its maturity;

2.5.2  The PLI transfer/subrogates its rights of claims from the principal debtor to the AGFP; and

2.5.3  The PLI is bound to collect from the borrowers on behalf of the AGFP.

2.6    Guarantee Fee - amount paid by the PLI to AGFP to enroll loan to SFF or their organization for guarantee coverage.

2.7  Partner Lending Institutions (PLIs) - are Banks, Cooperatives, Corporations, Micro-Finance Institutions (MFIs), Non-Government Organizations (NGOs) or Farmers/Fisherfolk Organizations (FOs) with juridical personality, whose loans to small farmers, fisherfolk or their organizations are guaranteed by AGFP.

2.8    Past Due Ratio, net - PLI ™s total uncollected principal loan amount after the loan maturity net of valuation reserve against the total loan portfolio of the PLI net of valuation reserve.

2.9    Program Institutional Manager - refers to Land Bank of the Philippines.

2.10  Related Interests - shall refer to the following:

2.10.1 Stockholdings of Family Groups or Related Interests - Stockholdings of individuals related to each other within the fourth degree  of  consanguinity  or  affinity,  legitimate  or  common-law, shall be considered stockholdings of family groups or related interests (Circular 332 s. 2002);

2.10.2   Corporate Stockholdings - Two or more corporations owned or
controlled by the same family group or same group of persons shall be considered related interests (Circular 332 s. 2002);

2.10.3   Related Non-Governmental Organization (NGOs)/Foundations
- those NGOs/Foundations that are incorporated by any of the stockholders and/or directors and/or officers of the PLI shall be considered related interests (Circular 725 s. 2011)

2.11  Small Farmers - refer to small crop growers and small livestock and poultry raisers as defined below:

2.10.4 Small Crop Growers - refer to owner-cultivator, tenants, leaseholders, etc. who are tilling not more than five (5) hectares of agricultural lands (RA 6657).

2.10.5   Small Poultry and Livestock Raisers - refer to those having the following maximum hog, poultry and livestock inventory at the time of accreditation by the PLI:

a.   Poultry - 2,000 layers or 5,000 broilers;
b.   Swine - 10 sows or 50 fatteners;
c.   Goat/Sheep - up to 50 heads for meat and/or dairy;
d.   Cattle - 10 fatteners or 5 breeders;
e.   Dairy - 10 milking cows/carabaos

2.12   Small Fisherfolk - refers to the following:

2.11.1  Coastal Fisherman - owns or operates a fishing boat, including paraphernalia with total weight of not more than three (3) gross tons and conducts fishing activities within fifteen (15) kilometers from the shoreline.

2.11.2  Fishpond Operator - owner/operator of fishpond(s) of not more than five (5) hectares including those under fishpond lease agreement (FLA).

2.11.3   Fishcage Operator - owner/operator of fish cage(s) with total area of not more than 400 square meters.

2.11.4   Those engaged in aquaculture, which covers all form of raising and culturing fish, shellfish, seaweed production, and other fishery species in brackish and marine areas of not more than five (5) hectares.

2.13  Seed Fund - refers to the total contributions to the AGFP from GOCCs and GFIs (AO No. 225-A), National Government and share in penalties for non-compliance  by  banks  to  RA  10000  (The  Agri-Agra Reform Act of
2009).

2.14  Unsecured Loan - refers to the amount of loan not covered by Real Estate Mortgage (REM), chattel mortgage, and/or deposit hold-out.

2.1 ORGANIZATION AND MANAGEMENT

The Department of Agriculture (DA), through a Governing Board, shall exercise direction  and  supervision,  oversee  implementation,  and  adapt  strategies  to ensure sustainability of the AGFP.

3.1 Guarantee Fund Governing Board (Governing Board)

3.1.1  The Governing Board shall be composed of the following:

Chair - DA Undersecretary Members - Representative, DAR     (at least Assistant Secretary)     Representative, DOF     (at least Assistant Secretary)     Representative, NAPC     (at least Assistant Secretary)     Representative, LANDBANK     (at least Vice President)     Representative, ACPC     (at least Deputy Executive Director)     Representative, Academe     Representative, Partner Lending Institution (PLI)     Program Executive Director (Ex-Officio, Non-voting)
The members of the AGFP Governing Board coming from government agencies shall be officially designated by the heads of their respective offices. Representatives from the Academe and PLI shall be appointed by the Secretary of Agriculture. GB Members shall appoint their respective Technical Assistants.

3.1.2  The GB shall set policy directions and oversee the implementation of AGFP. Specially, the GB shall:

Exercise Authority and Supervision and Supervision over the PMO through the Program Executive Director;

• Approve the Organizational Structure and staffing complement of the PMO;
  
  
• Set and approve policies, programs, and procedural guidelines that will govern the program implement;
  
  
• Define  approving  authorities  for  guarantee  line(s)  and guarantee claim payment(s);
  
  
• Approve the AGFP Annual Work and Financial Plan;
  
  
• Set guarantee line limits, guarantee fees, and credit ceilings per hectare/commodity;
  
  
• Approve the leveraging ratio in coordination with the Bangko Sentral ng Pilipinas (BSP);
  
  
• Oversee the utilization and investment of the AGFP Fund;
  
  
• Submit annual reports of the status of the Fund to the DA Secretary;
  
  
• Authorize  the  Institutional  Manager  or  the  Program  Executive Director to enter into contracts as it may deem necessary;
  
  
• Create  Committee(s)  and  working  group(s)  as  it  may  deem necessary;
  
  
• Delegate   approving   authorities   for   the   guarantee   line   and/or guarantee claims to the PMC/PMO as it may deem necessary;
  
  
• Confirm approvals by the delegated authority; and
  
  
• Approve guarantee line and claims beyond approving limits of the delegated authorities.

3.2 Internal Audit Committee of the GB

3.2.1 Internal Audit Committee (IAC) of the GB shall be created by the GB.

The IAC Chair and two (2) other members of the committee shall be appointed by the GB Chair from among members of the GB.

3.2.2 The IAC shall review the reports of the Internal Audit Division (IAD) of the PMO and shall report the results of the review to the GB on a regular basis.

3.3 Program Institutional Manager

3.3.1 Pursuant to Section 3.4 of the DA Administrative Order No. 23, series of 2008, LANDBANK shall act as the Program Institutional Manager (PIM) for all guarantees extended by AGFP. The PIM shall:

• Act as administrator of the PMO
• Provide office space to the PMO
• Provide the PMO with the facilities required for its operations
• Book and disburse operational expenses based on the GB approved work and financial plan/resolutions
• Enter into agreement with concerned parties as approved by the
• Governing Board;
• Issue instructions to the LANDBANK Trust Banking Group and Cash Department to effect withdrawals from the AGFP Accounts, as approved by the Governing Board or its designated approving authorities.

3.3.2 In case where LANDBANK itself is the institution being guaranteed, the LANDBANK Representative in the GB shall inhibit from discussion, deliberation and approval.

3.4 Program Management Committee (PMC)

The Program Management Committee (PMC) shall assist the GB in the execution of its functions.

3.4.1  The PMC shall be composed of the following:

Chair   - LANDBANK Representative (1) Vice-Chair   - DA-ACPC Representative (1) Members   - LANDBANK Representative (1)   - DA Representative (1)   - DAR Representative (1)

3.4.2 The Chair of the PMC shall come from the Program Institutional Manager and shall be designated by the President of Land Bank of the Philippines. The Vice-Chair and members of the PMC shall be designated by the heads of their respective offices.

3.4.3  The functions of the PMC are as follows:

• Approved/disapproved   guarantee   lines   and   guarantee   claims payment within its delegated authority;
  
  
• Recommended for GB approval requests for guarantee lines and guarantee claims payment beyond its authority;
  
  
• Perform other tasks/acts as may be assigned by the GB.

3.5 Program Management Office (PMO)

3.5.1 The PMO shall provide technical and administrative support to the Governing Board in carrying out its functions. Specifically, the PMO shall:

*  Execute policy decisions of the Governing Board (GB);
* Prepare annual work plan and operating budget of the AGFP for review by the PMC and endorsement to the GB for approval;
*  Recommended policies and procedures for GB approval;
*  Prepare monthly financial statements, and other reports to the GB;
*  Conduct  activities  to  promote  awareness  and  interest  among targeted partners of the AGFP;
*  Facilitate  and  conduct  meetings,  conferences,  workshops,  and training activities;
* Process, evaluate, approve/disapprove guarantee lines/claims and elevate  those  that  are  beyond  its  approving  authority  to  the PMC/GB;
*  Validate guarantee claims;
*  Process request for claims payment within the prescribed period;
* Manage  the  guarantee  portfolio  of  the  AGFP  and  make recommendations to the GB for the utilization/ investment of the Fund;
*  Perform other tasks as may be assigned by the GB.

3.5.2 The PMO shall be headed by a Program Executive Director (PED) appointed by the GB. The PMO shall have four (4) Divisions:

*  Marketing and Accounts Management Division (MAMD)
*  Claims and Recovery Division (CRD)
*  Finance and Administration Division (FAD)
*  Internal Audit Division

The GB shall exercise supervision over the Internal Audit Division.

3.5.3 The staffing complement of the PMO shall be subject to approval by the GB.

4.0 POLICIES ON GUARANTEE COVERAGE AND CLAIMS

4.1 Guarantee Coverage

The guarantee cover shall be up to 85% of the principal balance at the time of claim but not to exceed the amount of credit ceiling per commodity.

Ceilings per commodity/activity type shall be based on the average cost of production per commodity used by Land Bank of the Philippines in its credit evaluation or as may be set by the Governing Board.

4.2 Eligible Borrowers and Loans for Guarantee Cover

4.2.1  Eligible Borrowers for Guarantee Cover

Eligible borrowers for guarantee cover are small farmers and fisherfolk (SFF) or farmers/fisherfolk organizations whose majority of members are SFF.

4.2.2  Eligible Accounts for Guarantee Cover

Accounts eligible for guarantee coverage must meet the following conditions:

a.    Unsecured loans/accounts of eligible borrowers not covered by real  estate  mortgage  (REM),  chattel  mortgage  (CM),  and/or deposit  hold-out.  If  secured  partly  by  real  estate  mortgage  or chattel mortgage in favor of the partner lending institution, only the unsecured portion which shall be not less than 50% of the loan shall be eligible for guarantee coverage;

b.   Loan purpose is to finance:

• Palay and other food crops/commodities production such as agriculture and fisheries production including processing of fisheries and agri-based products and farm inputs;
• Other food production-related activities such as:
• Acquisition of work animals, farm and fishery equipment and machinery;
• Acquisition of seeds, fertilizers, poultry, livestock, feeds and other similar items; and
• Rehabilitation of farms resulting from natural calamities.

c.    Accounts which were released to the borrowers by the PLIs not more  than  sixty  (60)  calendar  days  prior  to  enrolment  for guarantee coverage, provided there is no damage to the crop and object of financing at the time of enrolment for guarantee cover.

4.3 Guarantee Fee

The PLI shall pay the guarantee fee based on the amount loan as indicated in the PN and the guarantee fee rate of the crop/commodity.

The GB may review/adjust the rates, loan ceiling and guarantee period from time to time.

4.4 Eligible PLIs

The following are eligible PLIs:

Cooperative Banks, Thrift Banks)
4.4.2 Cooperatives
4.4.3 Corporations that lend to SFF
4.4.4 Non-Government Organizations and Farmers ™ Organizations

4.5 Eligible Requirements for PLIs

The PLI must pass the following:

4.5.1  Banks

a.    Satisfactory credit standing with creditors, if any;
b.    CAMELS Rating of at least 3;
c.    Past due ratio net of valuation reserve, of not more than 15%;
d.    At least two-year track record in lending;
e.    Capital adequacy ratio of at least 10%;
f.    Adequate reserve requirements;
g.    Profitable on the year preceding the application and as of time of application for guarantee line;

4.5.2  Cooperatives

a.    Registered with Cooperative Development Authority (CDA);
b.    Satisfactory credit standing with creditors, if any;
c.    Past due ratio net of valuation reserve, of not more than 25%;
d.    At least two-year track record in lending;
e.    Risk asset ratio (for credit cooperative) of not less than 10%;
f.    Complete core management team;
g.    Profitable on the year preceding the application and as of the time of application for guarantee line;

4.5.3  Corporations that lend to SFF

a.    Registered with the Securities and Exchange Commission (SEC);
b.    Must have authority to engage in lending activity from appropriate government authority;
c.    Must have Certificate of No Derogatory Record from SEC;
d.    No ownership and/or labor dispute for the past three (3) years; e.    Past due ratio net of valuation reserve, of not more than 15%; f.    Satisfactory credit standing with creditors, if any;
g.    Profitable on the year preceding the application and as of the time of application for guarantee line;
h.    At least 60% Filipino-owned;
i.    Debt-equity ratio of not more than 80:20;
j.    At least two-year track record in lending.

4.5.4  Non-Government Organizations

a.   Registered with Securities and Exchange Commission (SEC);

b.   Past due ratio net of valuation reserve, of not more than 25%;

c.   Satisfactory credit standing with creditors, if any;

d.    Complete core management team;

e.    Net Surplus on the year preceding the application and as of the time of application for guarantee line;

f.    At least two-year track record in lending.

4.5.5  Farmers ™/ People ™s Organizations other than Cooperatives

a.   Registered with a registering entity (e.g. SEC, NIA, etc.);
b.    Operational and with satisfactory credit standing with its creditors, if any or with supervising government agencies/entities such as NIA, DOLE, DAR, etc;
c.    With functioning Board of Directors or its equivalent and presence of core management team (e.g. manager, bookkeeper and treasurer or officially designated officers to manage the lending program);
d.    Positive net worth on the year preceding the application and as of the time of application for guarantee line;
e.    With  lending  policies  and  guidelines  and  with  basic  recording system (e.g. loan disbursement and collection systems, etc.);
f.    At least two-year track record in lending;
g.   Past due ratio net of valuation reserve, of not more than 25%.

4.6 Guarantee Line Approval and Renewal

4.6.1 A guarantee line shall be established for an eligible PLI, subject to the approval of the AGFP approving authorities.

The  approved  guarantee  line  shall  be  the  maximum  amount  of guarantee cover that can be extended to the PLI at any given time.

A guarantee line shall be valid for a period of one year or as may be set by the Governing Board.

4.6.2 The single Guarantee Limit (SGL) shall be twenty five percent (25%) of the seed fund.

Guarantee Line of a PLI and its related interests shall not exceed the SGL.

Approving authority for guarantee line of PLIs with related interests shall be based on the aggregate amount of guarantee line of the group it belongs to.

4.6.3 Renewal shall be subject to the satisfactory performance of the PLI based on the criteria set by the GB.

4.6.4 All PLIs with approved guarantee line shall execute a guarantee agreement with the AGFP.

4.6.5 The AGFP may terminate or revoke the guarantee line of the PLI due to fraud or willful misrepresentation on the guarantee coverage and/or guarantee claims.

The PLI whose guarantee line has been revoked may apply for reinstatement of guarantee line not earlier than one (1) year after revocation subject to regular documentation and processing. In case of Banks, CAMELS rating shall be based on the BSP Audit conducted after the revocation of guarantee line.

Reinstatement  of  guarantee  line  in  consideration  of  meritorious reasons  shall  be  subject  to  the  GB ™s  evaluation  and  approval regardless of the amount.

4.6.6 The PLI may terminate the same for any justifiable cause upon serving notice to the AGFP at least 15 days prior written notice to such effect notwithstanding any provision herein or in the pertinent AGFP Governing Board Order.

4.7 Request for Guarantee Coverage

All PLIs with approved and unexpired guarantee lines may request for guarantee coverage per batch of promissory notes.

Acknowledgement receipt will be issued by the PMO upon receipt of notice of payment of guarantee fee by the PLI and masterlist of eligible accounts for guarantee  cover.  Guarantee  fees  paid  for  borrowers  whose  notes  were found invalid for claims will no longer be refunded.

AGFP may, for any justifiable cause, refuse any and all applications for guarantee coverage under the approved guarantee line.

4.8 Effectivity/Validity of Guarantee Cover

4.8.1  The guarantee cover shall be deemed effective if:

a.   The guarantee fee is paid within the sixty (60) day period;
b.    There is no damage to the crop/commodity or object of financing at the time of enrolment for guarantee cover; and
c.   Masterlist of eligible accounts for guarantee are submitted.

Non-submission of the masterlist of eligible accounts for guarantee shall make the coverage null and void.

4.8.2 The PLI shall pay the guarantee fee based on the amount of the loan as indicated in the PN and the guarantee fee rate of two percent (2%) per annum.

The guarantee fee rate shall be based on the production cycle of the crop/commodity.

The GB may review/adjust the rates, loan ceiling and guarantee period per crop/commodity from time to time.

For the PLI ™s long term exposures that are related to agricultural food commodity production, guarantee coverage shall be subject to the guidelines to be set by the Governing Board.

4.8.3 AGFP at any time may cancel guarantee coverage of accounts/loans enrolled due to non-compliance with the AGFP eligibility requirements.

4.9 Risks and Events of Default Covered by Guarantee

4.9.1 The guarantee shall cover all risks, from losses due to non-payment of loans including those that are caused by the following, but not limited to:

*  natural calamities (such as typhoons, floods, etc.)
*  pests and diseases
*  market and aberrations

4.9.2 Fraud or willful misrepresentation on the guarantee coverage and guarantee claims on the part of the PLI shall not be covered and which may be used as basis for termination or revocation of guarantee line.

4.10   Guarantee Claim Payments

4.10.1   A guarantee claim shall be filed by the PLI to the AGFP PMO within sixty (60) calendars days after maturity of the Promissory Note (PN), supported by the following:

a.  List of accounts being claimed for guarantee payment;
b.  Copy of duly accomplished promissory notes (PNs);
c.  Copy of Disclosure Statement (for Banks);
d.  PLIs affidavit of non-payment;
e.  Duly received demand/collection letter issued by the PLI to the borrower;
f.    Statement  of  account  of  the  borrower  as  of  date  of  filing of claims;
g.  Reason  for  and  proof  of  occurrence  of  calamity/pest  and/or disease occurrence, if applicable.

4.10.2   Claims shall be paid as follows;

a.  Payment in tranch:

1.    For guarantee claims of less than 300 borrowers:

i.   80% after validation of enrolment of accounts requested for claims payment, and review of complete supporting documents; and

ii.  20% final payment, net of recoveries and/or claims found invalid, after field validation.

2.    For guarantee claims of more than 300 borrowers:

i.   50% after validation of enrolment of accounts requested for claims payment;

ii. 30% net of invalid accounts after review of complete supporting documents; and

iii. 20% final payment, net of recoveries and/or claims found invalid, after field validation.

b.  One-time payment of guaranteed amount (85%):

1.    After   validation   of   coverage   based   on   GB   approved sampling methodology; and
2.    After validation of 20% of accounts being claimed in case claims exceeds 25% of matured coverage for the month.

c.  The  PMO  shall  validate  at  least  20%  of  the  total  guarantee claims of the (CLAIM) batch. Should the invalid guarantee claims exceed 10% of the claims being validated, all claims in the batch shall be considered valid.

d.  Payment of the AGFP shall be applied to the principal of the loan of the SFF.

e.  Guarantee  claims  payment  found  invalid  for  claims  payment shall be treated as accounts receivable of the AGFP from the PLI.

f.    PLIs shall remit to the AGFP the amount corresponding to the invalid claims within thirty (30) working days from the date of notice.

g.  Settlement   of   the   amount   shall   become   a   pre-approval requirement for renewal of guarantee line.

5.0 COLLECTION OF ACCOUNTS

5.1 After payment of the guarantee claim, the PLI/Collecting Agent shall collect from the borrowers for and in behalf of the AGFP.

5.2 Eighty five percent (85%) of any collection made from individual subrogated account shall be remitted by the PLI to the AGFP until the total obligation of such borrower with the AGFP has been fully settled.

Remittance of such collections for the month shall be made not later than the fifteenth (15th) day of the succeeding month from date of collection.

For  guarantee  claims  fully  (85%)  paid  by  AGFP,  a  penalty  of  eighteen percent (18%) per annum shall be charged for late/non-remittance.

5.3 AGFP  shall  have  the  option  to  enter  into  a  agreement  with  Collecting Agent(s) for subrogated receivables in cases such as but not limited to:

a.   PLI ceased operations

b.   PLI is inactive

6.0 MISCELLANEOUS PROVISIONS

6.1 Risk Weight

All loans extended by partner-banks that are guaranteed by AGFP shall have a risk weight pursuant to the guidelines to be issued by the BSP.

6.2 Fund Allocation

The Governing Board shall determine the allocation of the Fund between banks and non-banks, provided that the allocation for banks shall conform to the BSP guidelines on risk-weighting of bank loans.

6.3 Leveraging Ratio

Allowable leveraging ratio of the fund is set at three (3) times the amount of the  seed  fund.  Leveraging  may  be  reviewed  by  the  GB  as  deemed necessary.

6.4 Incorporation by Reference

Except as otherwise provided in this Rules, Administrative Order No. 225-A issued by the Office of the President and Administrative Order No. 23, as amended by Administrative Order No. 23-A, issued by the Department of Agriculture is hereby incorporated herein by reference in answer or partial answer to any other item not herein provided.

6.5 Separability Clause

In the event any provision of this Rules or the application of such provision to any person or circumstance is declared invalid, the remainder of this Rules or the application of said provisions to other persons or circumstances shall not be affected by such declaration.

All previous issuances not consistent with this guideline shall be deemed revoke and superseded.

7.0 EFFECTIVITY

These guidelines shall take effect upon approval.