Question & AnswerQ&A (CDA Resolution NO. 120)
The CMP was created by a bilateral agreement between the GOP and USAID on May 3, 1978, aimed at improving and developing the cooperative marketing structure in the Philippines by providing financing, managerial capabilities, and technical expertise to agri-based marketing cooperatives.
CMP funds are intended for lending to eligible cooperatives, expanding their equity base through trust fund investments, and providing guarantees for loans via a Guarantee Fund.
The CFG is a special unit within the Cooperative Project Development and Assistance Division of the Cooperative Development Authority responsible for handling, monitoring, supervising, and servicing loans to cooperatives made through Cooperative Banks.
A cooperative is a duly registered association of persons with a common bond of interests, voluntarily joined to achieve a lawful common social or economic end, making equitable capital contributions and sharing risks and benefits according to cooperative principles.
Loans must be based on sound lending principles, sufficient for intended purposes, protect credit base, maintain a debt-equity ratio not exceeding 2:1 for term loans, require investment in the Guarantee Fund, and ensure repayment terms are aligned with disposable earnings and repayment capacities.
Eligible borrowers are cooperatives registered or confirmed with the CDA under RA 6938, engaged mainly in supplying farm inputs or marketing member produce, with at least 50% of their business with members, keeping adequate accounting records, and complying with CDA rules on share capital interest and patronage refunds.
Financing includes seasonal operating and commodity loans for short-term needs, term loans for long-term assets and working capital, joint or split financing arrangements, and trust fund investments in preferred stocks to expand equity base.
Collateral should provide reasonable protection and may include commodities secured by warehouse receipts, chattel mortgages, real estate mortgages, and assigned accounts receivables, with loan values capped at specific percentages of appraised or marketable value depending on the collateral type.
Interest rates are set at 10% per annum for seasonal loans and 9% per annum for term loans, with no advance interest collection or service charges allowed. However, rates may be adjusted by CDA for loans made through cooperative banks to reflect sound business practices.
Eligible cooperatives must file application forms with required documents to authorized cooperative banks which then apply for Special Time Deposits with CDA. The CFG conducts evaluations and field investigations, after which the CDA Board approves loan terms and releases proceeds upon completion of documentation.
The loan contract is deemed cancelled, repayment is immediately demanded, and the borrower may be subject to criminal prosecution under the law.
Repayment is scheduled in roughly equal installments of principal and interest on a monthly, quarterly, or semi-annual basis, arranged according to the borrower's income periods.
The cooperative bank must pay 1% per month as liquidated damages on the amount due in addition to the prescribed interest rates if collection remittances are delayed beyond five days from receipt.
Loan restructuring may be allowed with CDA approval in cases of default due to fortuitous events, force majeure, or other justifiable and meritorious grounds.
Borrowers invest 5% of term loans and 3.75% of seasonal loans into the Guarantee Fund to cover possible losses from uncollected loans unprotected by collateral. Losses are charged primarily to the Guarantee Fund investments, earnings, USAID loan proceeds, and then to other borrowers' investments.