Law Summary

Preamble

• Legal Basis: Issued on July 7, 2008, under the directive of President Gloria Macapagal-Arroyo’s Administrative Order No. 225-A.
• Purpose: Mandates allocation of 5% of the 2007 surplus from government-owned and controlled corporations and financial institutions for rice and food production projects, contributing to an Agricultural Guarantee Fund Pool (AGFP).

Section 1: Purpose of the Agricultural Guarantee Fund Pool

• Legal Principle: The AGFP provides guarantee coverage for unsecured loans to small farmers engaged in rice and food production.
• Key Definitions:
  • Agricultural Guarantee Fund Pool (AGFP): A fund established to support small farmers through loan guarantees.

Section 2: Source of Agricultural Guarantee Fund Pool and Remittance of Fund Contribution

• Requirements:
  • Government corporations must enter into a Memorandum of Agreement (MOA) with the Department of Agriculture (DA) specifying contribution amounts.
  • Contributions are to be remitted directly to the Land Bank of the Philippines Trust Banking Group.
• Procedures:
  • DA to establish a trust agreement with the Land Bank for fund administration, allowing investment in government securities.
• Key Details:
  • Trust account details: T.A. No. 05-206, Savings Account No. 3401-0722-75.
• Reporting: DA receives quarterly reports from the Land Bank on fund status.

Section 3: Supervision of the Agricultural Guarantee Fund Pool

• Legal Principle: The DA supervises the AGFP and its utilization.
• Governing Board Composition:
  • Chairperson: DA Undersecretary.
  • Members: Representatives from NAPC, Land Bank, ACPC, and contributing government institutions.
• Responsibilities:
  • Approve guarantee coverage and claims.
  • Set leveraging ratios initially at 1:1.
  • Oversee AGFP’s effective utilization.
• Program Management Unit (PMU): Provides technical and administrative support to the Governing Board.
• Key Details:
  • PMU budget sourced from AGFP interest earnings.
  • Initial P5 million may be used for operating expenses until interest is accrued.

Section 4: Guarantee Policies and Guidelines

• Eligibility:
  • Institutions: Government financial institutions and private credit suppliers with good lending track records.
• Guarantee Coverage:
  • Up to 85% of loan principal for eligible loans.
  • Covers risks such as weather, pests, and diseases, except willful default.
• Guarantee Fee:
  • 3% per annum on the covered amount.
• Eligible Loans:
  • Unsecured loans for small farmers (owning ≤ 5 hectares) and farmer organizations.
• Priority:
  • Focus on rice production activities in designated areas.
• Claims Processing: Guarantee claims must be processed within 30 days of submission.

Section 5: Duration of Agricultural Guarantee Fund Pool

• Duration: AGFP established for a minimum of five years, with a possibility of a five-year extension.
• Transition: After the duration, all assets will be transferred to the Agriculture and Fisheries Modernization Credit and Financing Program (AMCFP) under Republic Act No. 8435.

Section 6: Effectivity and Amendments of the Guidelines

• Effectivity: Guidelines effective upon issuance and remain valid for five years unless revoked.
• Amendments: Can be revised by the DA Secretary upon the Fund Governing Board's recommendation.

Key Takeaways

• The AGFP aims to support small farmers by providing loan guarantees, enhancing food production security.
• Government institutions are required to contribute 5% of their surplus to the AGFP, with defined procedures for fund management and reporting.
• The DA has a supervisory role, ensuring effective utilization of funds, with specific guidelines for eligible institutions and loans.
• Guarantee claims processing is time-sensitive, aiming for a 30-day turnaround, reinforcing the program's operational efficiency.