QuestionsQuestions (CDA Resolution NO. 120)
CMP financing is not primarily production credit to individual farmers; it is financing of cooperative institutions (lending and investment in eligible cooperatives) to strengthen the cooperative marketing structure, managerial capabilities, technical expertise, and—eventually—the establishment of an apex cooperative bank.
They were integrated to CALF and transferred to the Agricultural Credit Policy Council (ACPC) effective 18 April 1989 in line with EO Nos. 113 and 116. Later, they were transferred to CDA in compliance with Section 10 of RA 6939, so they are now administered by CDA.
CMP funds are under the administration of CDA. The Cooperative Finance Group (CFG) is a special unit in the Cooperative Project Development and Assistance Division of CDA tasked to provide specialized handling, monitoring, supervision, and servicing of loans to cooperatives made through cooperative banks/lenders.
Total outstanding term liabilities must not exceed a debt-equity ratio of 2:1.
The amortization of the term loan component must be repaid from the cooperative’s disposable earnings.
They shall be repaid as inventories of financed commodities and products are sold and proceeds collected; in any event repayment must be within twelve (12) months or less.
Borrowers must invest in the Guarantee Fund: 5% of advances on term loans and 3.75% of advances on seasonal loans (except re-advance within the year). They continue investing until Guarantee Fund investments equal 10% of the borrower’s combined loan outstanding.
Any net loss is chargeable up to 85% against the Guarantee Fund, and the balance 15% against the cooperative bank/bank. Losses are first charged against the delinquent borrower’s Guarantee Fund investment; any remaining losses are charged against (a) Guarantee Fund earnings, (b) USAID loan proceeds, and (c) the investment of other borrowers.
Seasonal operating capital and commodity loans (short-term inventory/receivables financing repaid within 12 months or less) and term loans (long-term working capital/facilities/non-current assets amortized over more than one to ten years). The funds may also be used for joint/split financing and trust fund investment via preferred stock subscription.
CMP trust funds may be invested in preferred stocks of eligible cooperatives not exceeding 100% of their paid-up capital or PHP 1,000,000.00, whichever is lower. Preferred shares must be retired within ten (10) years according to the cooperative’s capital build-up program, reckoned from each release of capital assistance.
Any cooperative bank/bank meeting requirements, including: (1) certification by relevant Central Bank supervisory departments that it operates substantially in accordance with laws/directives; (2) past due loans to total loans not exceeding 50% at time of application; (3) risk asset ratio not below 10% minimum; and (4) being up-to-date in payments/remittances to CDA.
It must be registered/confirmed with CDA under RA 6938; its main business must involve supply of certified seeds/fertilizers/inputs, buying/storing/processing/marketing members’ produce, combinations of input supply and produce marketing, and/or other economic services for members; at least 50% of total business must be with members; it must keep acceptable accounting records and provide required statements; and share capitals/interest declarations require CDA approval.
Seasonal operating and commodity loans: 10% per annum charged to borrowers. Term and special term loans: 9% per annum. No interest is collected in advance and no service charges are allowed.
Payments by the borrower to the cooperative bank/bank are applied first to interest due and payable, then to principal. Collections must be remitted to CDA within five (5) days from receipt; otherwise the lender pays liquidated damages equivalent to 1% per month on the amount due, in addition to the prescribed interest rates.
If proceeds are used for other purposes, the loan contract is deemed cancelled and lending institutions must immediately demand repayment of released amounts, without prejudice to criminal prosecution of the borrower under the law.
If diligent collection fails and forebearance is not advisable, lender and CDA take immediate action. The right to foreclose mortgages/pledged commodities/assigned assets arises from the time the borrower defaults in payment of loan amortizations or violates any condition of the loan agreement.