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Pursuant  to Administrative  Order (A.O.) No. 225-A issued by the President  on May  26, 2008  as further  articulated  by the Department  of Agriculture Administrative Order (DA-AO) No. 23, series of 2008, the following Revised Implementing Rules and Regulations (IRR) are hereby issued 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.

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)  by  providing  guarantee  coverage  to  unsecured loans for agricultural food commodity production.

2.0     DEFINITION OF TERMS:

2.1     Agricultural   Food  Commodity   Production   -  refers  to  crop,  fishery, poultry and livestock production.

2.2     Amount  to be guaranteed  - amount  of principal  loan  disbursed  to the borrowers by the PLI as indicated in the promissory note (PN).

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

2.4     Deed of Subrogation  - an agreement  signed by the PLI transferring  its right of claims from the principal debtor to the AGFP.

2.5     Guarantee - is an agreement under which one party (AGFP) agrees to pay the loan obligation of the borrower if the borrower fails to pay the loan after its maturity.

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

2.7   Partner  Lending  Institutions  (PLIs)  -  are  Banks,  Cooperatives, Corporations, Non-Government Organizations (NGOs) or Farmers Organizations (FOs) with juridical personality, which provide financial assistance to farmers and fisherfolk.

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

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

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

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

2.10.2   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

2.11   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 forms of raising and culturing fish, shellfish, seaweed production, and other fishery species in brackish and marine areas of not more than five (5) hectares.

2.12   Unsecured  Loan  -  refers  to  the  amount  of  loan  not  covered  by  Real Estate Mortgage (REM) and/or chattel mortgage, or any other form of acceptable collateral.

3.0     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. Specifically, the GB shall:

• Exercise  Authority  and Supervision  over  the PMO  through  the
Program Executive Director;
• Approve the Organizational Structure and staffing complement of the PMO;
• Approve  policies,  programs,  and procedural  guidelines  that will govern the program implementation;
• Approve the AGFP Annual Work and Financial Plan;
• Set   guarantee   line   limits   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 authority to the PMO as it may deem necessary.

3.2     Internal Audit Committee of the GB

3.2.1     Internal Audit Committee (lAC) of the GB shall be created by the GB. The lAC 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 lAC shall review the reports of the Internal Audit Division (lAD)
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 by   the   AGFP,   approvals   shall   be   made   by   the   GB.   The LANDBANK Representative in the GB shall inhibit himself/herself during  the  discussion   and/or  deliberation   to  avoid  conflict  of interest.

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:

• Confirm guarantee line and guarantee claims payment approvals made by the PMO;
• Approve/disapprove    guarantee   lines   and   guarantee   claims payment within its delegated authority;
• Recommend  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;
• Recommend 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 group of farmers/fisherfolk borrowers who are engaged in agricultural food production.

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) and/ or chattel mortgage (CM), or any other form of acceptable collateral. If partially secured, only the unsecured portion shall be eligible for guarantee coverage;
b.   Loan    purpose    is    to    finance    palay    and    other    food
crops/commodities production; and
c.     Accounts  which were released  to the borrowers  by the PLIs not more than sixty (60) days prior to enrolment for guarantee coverage, provided there is no damage to the crop at the time of enrolment for guarantee cover.

4.3     Guarantee Fee

The PLI shall pay the guarantee fee based on the amount of the loan as indicated  in the PN and the guarantee  period  of the crop/commodity  as defined in Section 4.8.2.

The  guarantee  fee  shall  be  reviewed  and  approved  by  the  Governing
Board on an annual basis.

4.4     Eligible PLIs

The following are the eligible PLIs:

4.4.1     Banks  (e.g.  Universal  Banks,  Commercial  Banks,  Rural  Banks, 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     Eligibility 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 to farmers;
e.     Capital adequacy ratio of at least 10%;
f.     Adequate reserve requirement;
g.     Profitable on the year preceding the application and as of the 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 to farmers;
e.     Risk asset ratio (for credit cooperative) of not less than 10%;
f.     Complete part-time or full-time 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.     No ownership and/or labor dispute for the past three (3) years; b.     Past due ratio net of valuation reserve, of not more than 15%; c.     Satisfactory credit standing with creditors, if any;
d.     Profitable on the year preceding the application and as of the time of application for guarantee line;
e.     At least 60% Filipino-owned;
f.     Debt-equity ratio of not more than 80:20;
g.     At least two-year track record in lending to farmers.

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 part-time or full-time core management team;
e.     Net Surplus on the year preceding  the application  and as of the time of application for guarantee line, if applicable;
f.     At least two-year track record in lending to farmers.

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 to farmers;
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.

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

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

4.6.4     The  AGFP   may  terminate   the  guarantee   line  for  breach   or violation by the PLI of any of the terms and conditions in the guarantee agreement and of the provisions of this IRR.

4.6.5     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.

Acknowledgment  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  at  the  time  of enrolment for guarantee cover; and
c.     Masterlist  of  eligible  accounts  for  guarantee  are  submitted within fifteen (15) calendar days from the date of payment of guarantee fee.

Non-submission of the master list of eligible accounts for guarantee   within   the   prescribed   period   shall   make   the coverage null and void.

4.8.2     The guarantee fee shall be based on the production  cycle of the crop/commodity, as follows:

Ac t i v i ty		Guarantee Period	Guarantee Fee
			Regular		ARB
			No t PCIC Insured	PCIC Insured	Not PCIC Insured	PC IC Insured
Pa l ay Producti on		5 mont hs	0 . 85%	0 . 45%	0 . 45%	0 . 25%
P i neapple (Pl ant)		2 3 mont hs	3 . 85%	1 . 95%	1 . 95%	1 . 00%
(Ra t o on )		2 0 mont hs	3 . 35%	1 . 70%	1 . 70%	0 . 85%
Sugarcan e (Pl ant)		1 4 mont hs	2 . 35%	1 . 20%	1 . 20%	0 . 60%
(Ra t o on )		1 2 mont hs	2 . 00%	1 . 00%	1 . 00%	0 . 50%
Cor n		6 mont hs	1 . 00%	0 . 50%	0 . 50v	0 . 25%
Cassav a		1 4 mont hs	2 . 35%	1 . 20%	1 . 20%	0 . 60%
O t her short t erm crops/ commod iti es		7 mont hs	1 . 20%	0 . 60%	0 . 60%	0 . 30%
F i shpond/ fishcage operations	Bangu s	8 mont hs	1 . 35%	0 . 70%	0 . 70%	0 . 35%
	T il apia	7 mont hs	1 . 20%	0 . 60%	0 . 60%	0 . 30%
	Praw n	8 mont hs	1 . 35%	0 . 70%	0 . 70%	0 . 35%
	Cra b	8 mont hs	1 . 35%	0 . 70%	0 . 70%	0 . 35%
	Ca tfi sh	8 mont hs	1 . 35%	0 . 70%	0 . 70%	0 . 35%
Poultry/ Livestock	Layer	2 0 mont hs	3 . 35%	1 . 70%	1 . 70%	0 . 85%
	Bro il er	3 mont hs	0 . 50%	0 . 25%	0 . 25%	0 . 15%
	Goa t (breeding)	7 mont hs	1 . 20%	0 . 60%	0 . 60%	0 . 30%
	Goat( fattening)	7 mont hs	1 . 20%	0 . 60%	0 . 60%	0 . 30%
Pou lt ry/ Li vestock Note: *Milk Production	Ho g (breedi ng)	1 4 mont hs	2 . 35%	1 . 20%	1 . 20%	0 . 60%
	Ho g (f att eni ng)	7 mont hs	1 . 20%	0 . 60%	0 . 60%	0 . 30%
	Ca ttle ( f att eni ng)	8 mont hs	1 . 35%	0 . 70%	0 . 70%	0 . 35%
	Cattle (breed i ng)	1 1 mont hs	1 . 85%	0 . 95%	0 . 95%	0 . 50%
	Carabao (breed i ng)	1 5 mont hs	2 . 50%	1 . 25%	1 . 25%	0 . 65%
	Carabao (da i ry)*	1 1 mont hs	1 . 85%	0 . 95%	0 . 95%	0 . 50%
	Goat (dai ry)*	6 mont hs	1 . 00%	0 . 50%	0 . 50%	0 . 25%
	Cattle (dairy)*	1 1 mont hs	1 . 85%	0 . 95%	0 . 95%	0 . 50%

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 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) calendar days after the last maturity date in the batch, 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.     Initial  payment  of  80%  of  the  guarantee  shall  be  made  as follows:

1.     50% after validation  of enrolment  of accounts  requested for claims payment; and

2.     30%  net  of  invalid  accounts  after  review  of  complete supporting documents.

b.     Field  validation  shall  be  conducted  prior  to  final  payment which shall be net of recoveries  and/ or claims found invalid for payment.
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 invalid.
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 PLl.
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     The PLI shall execute a Deed of Subrogation with Collection Arrangement of the subject account(s) in favor of the AGFP prior to payment of the guarantee claims.

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

5.3     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.

5.4     AGFP  shall  have  the  option  to enter  into  an  agreement  with  Collecting
Agent(s) for subrogated receivables of more than two (2) years.

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.

The  claims’  made  on  the  guarantee  fund  will  be  charged  against  the allocation  for the respective  PLI types. Losses incurred  from guaranteed particular type of PLl.

The  amount  corresponding   to  the  allocation  intended  to  cover  loans granted  by partner-banks  shall be invested  only in assets  that are zero percent   risk   weighted   under   the   BSP   risk-based   capital   adequacy framework.

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 revoked and superseded.

7.0     EFFECTIVITY

These guidelines shall take effect upon approval.