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The following guidelines shall govern the implementation of AGRIKULTURANG MakaMASA — Hybrid Corn Production Guarantee Program, which is a joint program of the Department of Agriculture and Quedan and Rural Credit Guarantee Corporation (Quedancor).

1.         RATIONALE

A major objective of the Agrikulturang Makamasa Corn is to increase productivity and production of quality corn for human consumption, feed and individual user, as well as improve farmers’ income. One strategy to carry out this objective is through the establishment and development of farm cluster in prime corn lands located in municipalities within the Strategic Agricultural & Fishery Development Zones (SAFDZs).

However, higher corn production is anchored on the promotion of a conducive environment for better credit access by corn farmers which will enable them to support their production needs.

Thus, to further improve credit accessibility in the farm cluster, the DA in coordination with Quedancor designed the Agrikulturang Makamasa - Hybrid Corn Production Guarantee Program, which will encourage private entities (seed producers, input suppliers, traders, feed millers, etc.) to lend to small farmers, farmer association and cooperatives by providing risk-reducing mechanism in the form of guarantee.

2.         OBJECTIVES

1.  To increase the production of quality corn.
2.  To promote the farmer’s adoption of yellow/white corn hybrid technologies.
3.  To encourage the participation of the private sector particularly the input supplier in the corn development program.

3.         LEGAL BASES

3.1           RA 7393, dated 13 April 1992, which mandated Quedancor to establish a credit support mechanism and guarantee system for the benefit of farmers, fisherfolk and other agricultural enterprises.

3.2           RA 8435, dated February 9, 1998, which mandated Quadancor to be the credit guarantee institution for the Agri-fishery sector.

3.3           Memorandum of Agreement dated April 24, 2000, between the Department of Agriculture and Quedan and Rural Credit Guarantee Corporation (QUEDANCOR).

4.         DEFINITION OF TERMS

4.1           SAFDZS — Strategic Agricultural & Fishery Development Zones.

4.2           Corn Farm Cluster — small farmholder and coops within at least 400 hectares of contiguous corn lands with a cropping intensity of 200%, and adequate agricultural extension service and commitment of the LGU to implement the program.

4.3           Cooperative — 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.

4.4           Quedan Operations Officer (QOO) — Quedancor’s field personnel duly authorized to implement the Agrikulturang MakaMASA for Sugar Farm Modernization Program.

4.5           Corporation — a juridical person, created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incidental to its existence.

4.6           Farmer/Planter — any natural person whose primary livelihood is cultivation of land for corn production, either by himself or primarily with the assistance of his immediate farm household or worker, whether the land is owned by him or another person under a leasehold tenancy agreement or arrangement with the owner thereof.

5.         SCOPE

The guarantee program shall cover the loans extended by input suppliers to farmers/sole proprietor/farmers federation/cooperative/association in municipalities within the SAFDZs.

6.         STATEMENT OF POLICIES

6.1       Purpose of Loan

To finance the purchase of hybrid corn seed by farmer/sole proprietor/farmer’s federation/cooperative/association.

6.2       Eligibility Requirements for Farmers/Sole Proprietor/Farmers’ Federation/Cooperative/Association

6.2.1 Must be indorsed by DA.
6.2.2 Must be duly accredited with Quedancor.
6.2.3 Must be located in areas with available input supplier.
6.2.4 Must have members who are qualified to participate in the program and adapt recommended technologies, if applicable.
6.2.5 Must meet the qualification criteria set by the concerned input supplier-lender.

6.3       Loanable Amount

The loanable amount shall be maximum of P600,000 per cluster.

6.4       Interest Rate

The interest rate shall be at the discretion of the input supplier-lender.

6.5       Term of Payment

Maximum of 130 days.

6.6       Guarantee Fee

A guarantee fee of 2.5% per annum based on the loan amount shall be paid by the input supplier to support its application for guarantee cover.

6.7       Guarantee Coverage

Quedancor’s guarantee cover is on the loan per se. The guarantee cover shall be 80% of the outstanding principal plus accrued interest up to maturity date or demand for full payment, whichever comes first.

6.8       Leveraging Ratio

Quedancor’s total guarantee exposure on outstanding loans shall not, at any given period, exceed five (5) times the amount of available guarantee fund established therefor.

7.         MECHANICS OF IMPLEMENTATION

7.1       Program Promotion

Quedancor, with the assistance of the Department of Agriculture, shall promote the program with prospective input suppliers and borrower-clients to orient them with the program’s objectives, features and mechanics of implementation.

QOO shall promote the program through meetings and dialogues with prospective clients and use of promotional materials such as posters and brochures.

7.2       Input Supplier Accreditation

Input suppliers intending to participate under the program shall sign a Guarantee Agreement with Quedancor, pay a non-refundable accreditation fee and submit the following documents:

7.2.1        Board Resolution authorizing the company to participate and designating the officer(s) with specimen signatures who shall represent the company and sign all documents pertaining to its accreditation;

7.2.2        List of Key Officers;

7.2.3        Latest Audited Financial Statements;

7.2.4        Copy of SEC registration (for corporation ), DTI registration (for sole proprietorship/partnership);

7.2.5        Articles of Incorporation/By-Laws; and

7.2.6        Endorsement letter from DA Regional Director concerned.

7.3       Clientele Accreditation

Any farmer/sole proprietor/farmer cooperative/federation/association intending to apply for a loan under HCPGP shall submit an Application for Accreditation, pay a non-refundable accreditation fee of P2,000.00 for coops/association/federation and P100.00 for individual borrower and submit the following:

7.3.1        General Requirements

a.    Duly accomplished Application for Accreditation;
b.    Two 2x2 photos of individual applicant or authorized representative(s); and
c.    Duly certified Financial Statements for the last two years.

7.3.2        Additional Requirements

For Federation/Cooperative/Association

a.      Certificate of Registration or Confirmation from CDA/SEC;
b.      Copy of Articles of Cooperation and By-Laws, and amendments, if any;
c.       Board Resolution and Secretary’s Certificate authorizing the cooperative to participate in the specified program and designating its authorized representative(s) to transact business and to act as jointly and severally liable for the loan with specimen signatures; and
d.      List of names and addresses of current key official and members.

The QOO shall conduct a background/credit investigation of applicant, accomplish the Evaluation Sheet and forward the application together with the required documents to the Regional Assistant Vice-President (RAVP) for review, approval and issuance of Certificate of Accreditation.

7.4       Loan Application and Approval

7.4.1        Application for loan shall be submitted by accredited applicants to the input supplier together with the following requirements:

a.      Two copies of the farm plan and budget, for individual borrower or list of members qualified in the cluster program together with the farm plan and budget, for cooperatives/federation/association;
b.      Certification from the DA/MA concerned; and
c.       Two qualified co-makers for individual borrower and Comprehensive Surety Agreement of at least 3 officers/Directors for the cooperative/association/federation in favor of Quedancor.

7.4.2        QOO shall authenticate photocopies of the above documents.

7.4.3        The input supplier shall review the documents submitted by the borrower and conduct its own investigation and evaluation, if deemed necessary. Input Supplier has the final discretion to approve/disapprove the loan application.

Any loan from a farmer/sole proprietor/farmers’ federation/cooperative/association not favorably recommended by DA and which did not pass Quedancor’s accreditation procedures shall not be guaranteed by Quedancor.

7.5       Preparatory Clearance for Guarantee Coverage (PCGC)

Using the prescribed form (Exhibit 1 *), Input Supplier shall secure a written clearance from QUEDANCOR Central Office either through fax, telefax, radiogram, telegram or letter. This is to ensure that QUEDANCOR maintains a total guarantee exposure on outstanding loans under the program of not more than five (5) times the amount of available guarantee fund. The loan shall be released within ten (10) calendar days upon receipt of the PCGC.

7.6       Loan Release and Documentation

7.6.1        The loan proceeds shall be in the form of seeds to be supplied by the input supplier corresponding to the approved farm plan and budget.

7.6.2        Proper loan documentation shall be the sole responsibility of the input supplier. This shall cover the LAF, PN, as the case may be.

7.6.3        Original copies of loan documents shall be retained by the input supplier. Quedancor shall receive two copies and the borrower, one copy.

7.7       Payment of Loan

The borrower shall remit the loan payment directly to the input supplier on maturity date as specified in the PN.

7.8       Project Monitoring

During the term of the loan, periodic inspection and reporting shall be undertaken by the QOO and DA representatives to closely monitor the project. The QOO shall submit to Quedancor C.O. a monthly Accounts Status Report.

Spot inspection shall be conducted at any time by Quedancor/DA and/or input supplier representatives to check the project.

7.9       Certificate of Loan Settlement (CLS)

Upon full settlement of the loan, input supplier shall submit to Quedancor Regional/Head Office, at the soonest possible time, a CLS (Exhibit 2 *). Failure or delay in submission of CLS will affect input supplier’s pending request for guarantee cover.

8.         APPLICATION FOR GUARANTEE COVERAGE

8.1       Nature of Guarantee Cover

Quedancor’s guarantee cover is on the loan per se.

8.2       Requirements/Procedure for Guarantee Coverage

8.2.1        The input supplier applying for guarantee coverage must submit within thirty (30) days from the date of loan release, two copies of the Request for Guarantee Coverage (RGC), Exhibit 3*, together with its guarantee fee payment.

The aforementioned requirements, shall be submitted directly to the nearest Quedancor District Office Cashier.

8.2.2        The date of acknowledgment by Quedancor District Office on the copies of the RGC, shall be considered as the date of filing or submission.

8.3       Issuance of Guarantee Certificate

A Guarantee Certificate, duly signed by the authorized Quedancor representative, shall be issued upon submission by the input supplier of the required documents pursuant to the procedures outlined in the preceding paragraphs and shall last until the maturity date of the loan which in no case be beyond Quedancor’s recommended loan term.

8.4       Claim for Guarantee Payment

8.4.1        Input supplier may claim for guarantee payment when the loan account is not settled upon maturity.

8.4.2        The following are the documents required in filing a guarantee claim:

a.    Claim for Guarantee Payment - Exhibit 4*;
b.    Affidavit of Non-Payment executed by the duly authorized officer of the input supplier — Exhibit 5*;
c.    Statement of Account;
d.    Certified copy of the loan ledger updated as of filing of guarantee claim; and
e.    Copy of duly received demand letter issued by the input supplier.

8.5       Processing of Guarantee Claim

Claim for guarantee payment shall be submitted by input supplier to the QOO, who shall then verify its completeness. The District RAVP shall review the guarantee claim and forward it to POD/FFAD for processing and payment. An acknowledgment letter shall be sent by POD/FFAD to input supplier. If defects/deficiencies are discovered in the claim documents while being processed input supplier shall accordingly be informed in writing to make immediate correction/completion.

Quedancor shall pay the input supplier within sixty (60) days after having submitted/completed all proper documents.

8.6       Subrogation of Rights

Input supplier shall, on the same day of receipt of guarantee payment, surrender the original copy of the Certificate of Guarantee Coverage and provide Quedancor with a Subrogation Receipt (Exhibit 6 *) assigning and transferring to Quedancor the claim and demand against the defaulting borrower arising from or connected with the said borrower’s loan obligation. Original copies of PN and documents listed in Paragraph 7.4.1 shall now be required for submission.

8.7       Recoveries

Recoveries refer to any amount collected from the date a guarantee claim is filed by input supplier with Quedancor.

Any recovery collected from the borrower shall be remitted to Quedancor.

8.8       Grounds for Cancellation/Nullification of Guarantee Coverage

Any of the following shall be ground for cancellation or nullification of guarantee coverage and/or non-payment of guarantee claim:

8.8.1        Collusion between and/or among the borrower, QOO and input supplier in the extension of credit such as but not limited to the following:

a.      When the borrower and the officer(s) and/or employee(s) of Quedancor/input supplier enter into an agreement for fraudulent purposes or whenever said parties conspire to defraud Quedancor; and

b.      When an input supplier/representative/employee acquiesces, consents, or agrees with anyone to the granting of loan to unqualified borrower.

8.8.2        When input supplier makes false statement, misrepresentation, omission or concealment in the guarantee claim filed with Quedancor; and

8.8.3        When input supplier releases a loan that is beyond the prescribed amount or term or has incomplete or defective documentation.

Any aforementioned provisions shall not preclude Quedancor from cancelling or nullifying its guarantee coverage for violation of this Circular or for other causes involving fraud, bad faith or for other causes involving fraud, bad faith or other machinations.

9.         SPECIAL PROVISIONS

9.1       There shall be periodic consultation among the officers of Quedancor, DA, input supplier and clients for the purpose of enhancing the effectiveness of the program.

9.2       The Quedancor reserves the right to promulgate such rules and regulations (including exemption thereto) and adopt other measures as may be incidental to, appropriate and necessary for the attainment of the objectives of the AGRIKULTURANG MakaMASA-HYBRID CORN PRODUCTION GUARANTEE PROGRAM.

10.       EFFECTIVITY

This Circular shall take effect immediately.

Adopted: 19 May 2000

(SGD.) GALO B. GARCHITORENA
President & CEO