Legal Basis and Legislative Policy Anchor
- Republic Act No. 9700 is the legal basis for implementing support services and liberalizing ARB access to credit.
- The Order expressly links its mandate to Section 14 of R.A. 9700 on providing agricultural support and liberalized access to credit by ARBs.
- The Order also anchors CARP implementation policies through the State approach of ensuring farmers have greater control of farm gate prices and easier access to credit under R.A. 9700.
Purpose and State Policy Commitments
- The State adopts, as far as practicable, a community-based approach in CARP implementation to help farmers gain greater control of farm gate prices and easier access to credit.
- The DAR must adopt an integrated policy of support services delivery to ARBs.
- The DAR, together with the Department of Finance (DOF) and Bangko Sentral ng Pilipinas (BSP), must institute reforms to liberalize access to credit by ARBs.
- The program framework emphasizes sustainable agriculture and climate-change mitigation through agricultural support/grants.
Core Definitions for Program Operation
- Accreditation means formal recognition by DAR of a People’s Organization (PO) after verification and validation of required documents.
- Agrarian Reform Beneficiary (ARB) Cooperative is a community-based organization registered with the Cooperative Development Authority (CDA) where ARBs comprise at least 50%+1 of membership.
- Agricultural production covers natural farming activities from land preparation through harvesting, including use of seeds, fertilizers, and farm implements/equipment, and covers fisheries, livestock, and poultry.
- Community-based Organizations (CBOs)/People’s Organizations (POs) include existing farmers’ cooperatives, associations, and women’s organizations that DAR may tap as credit conduits.
- Cooperative bank is a member-owned financial institution authorized and supervised by BSP to provide banking and financial services such as loans, deposits, and payment services.
- Existing ARBs are men and women farmer-beneficiaries holding Emancipation Patent (EP)/Certificate of Land Ownership Award (Individual or Collective CLOA) and other DAR-issued instruments, including leaseholders; new ARBs who availed of subsidy under APSP are thereafter treated as existing ARBs.
- Financing Institution is any bank or non-bank organization capable and willing to provide financial services to ARBs and ARB cooperatives.
- Financial Services Cooperative is a CDA-registered cooperative whose core business is provision of savings, credit, and other financial services.
- Government Financing Institutions (GFIs) include DBP, LBP, and other government-owned/controlled financing institutions under BSP supervision.
- Joint and Several Liability exists when two or more persons agree to take on the same obligation such that the creditor may sue all or any one for the debt.
- Marketing Agreement is a contract between producers/farmers and buyers where producers commit to produce specified crops/products and buyers commit to purchase at pre-agreed terms.
- Micro-finance is viable and sustainable provision of savings and credit to poor/low-income households for livelihood/microenterprise using nontraditional methodologies; it includes microfinance loans up to PHP 150,000 for individuals.
- New Agrarian Reform Beneficiaries (New ARBs) are men and women awarded with EP/CLOA from July 1, 2009 onwards under R.A. 9700.
- Purchase Order (PO) is a commercial document issued by a buyer indicating product/service types, quantities, and agreed prices; sending a PO is a legal offer, acceptance typically creates a one-off contract.
- Socialized Credit is affordable and accessible credit assistance for existing ARBs to finance agricultural production and agri-based enterprises.
- Standing crop is the quantity/total volume of planted crops in a location ready for harvesting.
- Subsidy is a one-time grant to new ARBs for initial capitalization of agricultural production.
Covered Programs, Funds, and Credit Windows
- The rules apply to delivery of support services to ARBs under Section 14 of R.A. 9700, specifically:
- agricultural support as initial capitalization of new ARBs, and
- socialized credit for existing ARBs.
- The DAR must establish two (2) ARB credit programs:
- Agricultural Production Support Program (APSP), and
- Socialized Credit and Microfinance Program (SCMFP).
- From total CARP appropriation, 40% is allocated for support services.
- Of the support services fund:
- 30% is immediately set aside for agricultural credit facilities, fully disbursed for this purpose, and
- the remaining 70% is utilized for extension and other support services.
- Of the funds for agricultural credit facilities:
- one-third (1/3) is allotted for subsidies for initial capitalization of agricultural production of new ARBs upon awarding EP and/or CLOA, and
- two-thirds (2/3) is allocated to provide access to socialized credit to existing ARBs, including leaseholders.
- The DAR must ensure mechanisms for sustainable implementation of the credit program.
- LANDBANK and other GFIs must provide credit delivery platforms through accredited retail lending institutions such as cooperatives, POs, microfinance institutions, non-traditional conduits, and cooperative/rural banks.
- Partner-GFIs provide credit assistance to credit conduits based on merits of marketing agreements or expected harvests, provided loan use is for improvement/development of ARB farm holdings or for establishment of facilities enhancing production/marketing or increasing farm income.
- Collections upon termination of the partnership with credit service providers must be reverted to the Bureau of Treasury under the ARF account for further credit program allocations.
APSP: New ARB Subsidy Program Rules
- The APSP provides a one-time subsidy to new ARBs upon receipt/award of EP/CLOAs under R.A. 9700, through organized groups.
- APSP funding is sourced from one-third (1/3) of the 30% allocated for credit facilities over the next five years (CY 2009 to 2014), and the allocated funds are for direct subsidy.
- New ARBs may be members in bank-assisted cooperatives (BACs) and cooperatives participating in MICOOP and/or BOAT schemes.
- The subsidy amount for each new ARB is determined by NCPSC, considering:
- total fund allocation for subsidy, and
- total number of new ARBs for the next five years.
- Subsidy utilization rules apply to ARB recipients:
- If members collectively purchase implements/equipment, the organization/cooperative may pool subsidies; a rental fee is charged for equipment use, and rental income funds maintenance/upgrading/replacement.
- If members use the grant for personal production, the ARB must pay back the corresponding amount to the organization/cooperative based on expected cashflow.
- Paid-back amounts become indivisible equity owned collectively by all members and used as revolving capital for sustainability of support for newly organized PO/coop where all members are ARBs; for existing organizations, repaid subsidies become capital share of concerned ARB/s.
- ARBs who used subsidy judiciously for its intended purpose may access socialized credit.
- APSP accreditation and documentary requirements require:
- forms including Form 2a (ARB Agricultural Productivity Profile and Indicative Farm Plan) and Form 3a (Application for APSP),
- certificate of membership signed by the Chairperson,
- certificate of attendance/participation in orientations/trainings/seminars facilitated by DAR Provincial Office,
- authenticated photo copy of CLOA/EP issued after July 1, 2009 bearing the ARB’s name or PARO certification of DAR issuance/annotation and issuance date,
- DAR-issued ARB ID card photocopy when available,
- Letter of Intent (Form 1a) stating willingness of the organization to manage subsidy assistance funds.
- APSP profiling and accreditation workflow mandates:
- DARMO continues profiling new ARBs and distributes ID cards,
- MARO prepares an annual list of new ARBs based on pipeline claim folders and submits it to DARPO for consolidation,
- DARMO submits a 5-year indicative subsidy APSP plan based on LAD target,
- the number of new ARBs in the initial APSP plan must tally with EP/CLOA awards starting July 1, 2009.
- Consolidation and budget basis duties require:
- DARPO consolidates new ARB lists and endorses to DARRO,
- DARRO consolidates reports and submits to BARBD through NCMU as basis for budget programming,
- CMPCU produces a national masterlist, recommends annual subsidy budget and release schedule to NSPSC, and updates the national masterlist annually.
- APSP processing steps require:
- MARO reviews documents for compliance with guidelines and endorses ARB lists and accreditation documents to DARPO,
- DARPO-BDCD evaluates viability and soundness of proposed projects and verifies ARBs are included in the masterlist,
- PARO issues Certificate of Accreditation to each New ARB when documentary requirements are met,
- written notice is issued to MARO (and ARB copied) if any accreditation requirement is not met,
- PARO endorses lists for subsidy assistance to DARRO for approval and fund releases with specified items:
- Form 1a Letter of Intent,
- Form 2a ARB Agricultural Productivity Profile,
- Form 3a Application for APSP,
- Certificate of Accreditation (original copy).
- DARRO deliberation and release operations require:
- DARRO through RPMU deliberates and prioritizes approval based on availability of funds,
- DARRO-RPMU forwards funding checks with summaries to DARPO,
- BDCD, through MARO, facilitates signing of MOA (Form 4) between DARPO and the organization/cooperative,
- DARPO-Cashier releases funding checks solely to the partner organization, which distributes to individual ARB recipients,
- ARBs execute a deed of undertaking ensuring exclusive fund use for the intended purpose specified in approved APSP Form No. 1 Letter of Intent.
- APSP accounting, auditing, and reporting require:
- DAR Central Office establishes a separate Key Budgetary Item (KBI) for APSP under the ARF,
- a Special Allotment Release Order (SARO) from DBM must be released to DARRO-Finance and Administrative Division through DAR Central Office-FIMAS,
- POs must keep/maintain separate and simplified books of accounts,
- Internal Audit Service audits those books with tailored procedures for newly formed organizations.
- APSP training and extension require:
- BDCD with MARO and DF provides technical and business advisory assistance,
- DARPO annual work and financial plans include training and activities to strengthen ARB organizations and make agricultural enterprises profitable.
SCMFP: Socialized Credit and Microfinance Program
- SCMFP must cater to existing ARBs and leaseholders needing agricultural credit assistance, including rural women/spouses of ARBs.
- Subject to appropriations, two-thirds (2/3) of the fund allocated for credit is set aside for socialized credit for the next five years, with a sufficient sum or 10% at most for allocation to specified uses under specific SCMFP programming.
- The SCMFP allocation for socialized credit uses covers:
- institutional capability building for implementers and partners (MFIs/coop),
- agricultural technology and/or enterprise development for cooperatives/individual borrowers,
- management/operating costs of APSP and SCMFP.
- Credit service providers for SCMFP include LANDBANK, DBP, and other GFIs, providing credit disbursement to partner credit-conduits such as:
- accredited savings and credit coops,
- financial service coops,
- ARB cooperatives and accredited cooperative banks.
- Partner credit conduits must engage in wholesale and retail credit.
- DAR and concerned GFI must enter into a MOA to formalize partnership, with partners submitting a five-year and annual operational plan as basis for credit downloading, subject to recommendation of NMCU and approval of NSCPMC.
- NCMU and partner GFIs jointly formulate accreditation and credit guidelines approved by NSCPC for field implementation by NMCU counterpart offices.
- Credit facility collections must be treated as revolving fund of the partner GFI during the program partnership term.
- Unused funds and collections upon termination of DAR-GFI partnership revert to the National Treasury under the ARF account for DAR credit program use.
- Partner credit conduits must provide credit assistance to:
- ARB cooperatives/organizations/federations and MFI-oriented NGOs,
- individual ARB members awarded with EP/CLOA and other CARP instruments,
- leasehold contract holders,
- ARB household members who are community-based organization/cooperative members in good standing.
- DARPO strengthens ARB organizations without credit track record through MARO, and program management may partner with service providers, academe, and NGOs for capacity building.
- Bank-assisted cooperatives/organizations must be tapped when they enlist a minimum of 60 ARBs as members, to extend credit assistance primarily to ARBs.
- The program management must explore tying-up with existing government institutions offering guarantee or credit surety programs to mitigate credit risks.
- Eligible individual borrowers must, as much as practicable, have no past due accounts from DAR financing programs or other financial institutions/agencies, and must submit proof of settlement of previous accounts.
- End borrowers with past due accounts may avail assistance only by issuing a plan of payment enforced and monitored by their organization/cooperative, with collections remitted to the lending institution that the members owe.
- New ARBs who availed agricultural subsidy may access credit upon proof the subsidy was used in accordance with its purpose.
SCMFP: Eligible Projects, Collateral, and Rates
- SCMFP eligible financing covers:
- capitalization for agricultural production,
- improvement/development of farm holdings including irrigation canal construction/repair and change to intercropping, diversification, integrated and multi-cropping systems,
- storage, trading, and processing facilities, and pre- and post-harvest facilities to enhance production or marketing,
- working capital for agri-based micro and small enterprises including regulatory requirements and licensing of processed products and services (e.g., BFAD) and training/acquisition of technology,
- primary production, processing, manufacturing, and other strategic technology and livelihood development.
- Partner conduits may accept collateral including:
- purchase orders,
- marketing agreements,
- expected harvests,
- other types of soft collateral such as promissory notes and treasury bonds.
- Interest rate rules require:
- partner-GFIs charge a maximum of 2% per annum to institutional borrowers/conduits to cover disbursement and collection costs,
- crop insurance is at the option of the borrowers,
- interest rates at the partner-conduit level must be significantly lower than market rates based on availability, accessibility, and affordability dimensions of credit,
- credit-conduits must not impose advance payment of interest, and are encouraged to compute accrued interest using the declining balance method.
- Loan term rules require:
- NCMU and partner-GFIs package short-term (one year) loans for new partner-credit conduits,
- financing scales up gradually to medium-term loans after several successful cycles of good repayment, subject to lending policy of specific credit programs.
SCMFP: Access Procedures and Documentation
- After publication of the IRR, DAR field offices must update databases of ARBs and ARB organizations needing credit using approved guidelines, including:
- profiles of existing credit service providers and potential credit conduits,
- type of farming and enterprise/livelihood activities,
- financing instruments and payment terms and preferred credit delivery schemes.
- Completed forms must be submitted by field offices two months after database updating and profiling.
- DARPO and DARMO must conduct orientations on salient features for new and existing ARBs and potential credit conduits.
- DAR at all levels must assist ARBs/ARB organizations in linking with other credit service providers when no qualified cooperative/organization exists in the area.
- DAR field offices must provide technical assistance for viable agri-enterprise project proposal preparation and must capacitate and monitor ARB and organization borrowers for operationalizing funded projects.
- DAR Central Office through NCMU must design and implement a monitoring system for credit programs for policy development, program/project design improvements, accomplishment tracking, and best practice documentation and replication.
- NCMU must harmonize policies and guidelines of existing credit programs such as CAP-PBD Window III and GMFA with this IRR.
- NCMU must orient DARCO officials and personnel on IRR highlights with DARRO-RSSD; DARRO must orient PAROs, BDCD staff, MAROs, and DFs for information campaigns, and must post the approved IRR at conspicuous places for public information.
- Partner GFIs must ease accreditation criteria and documentary requirements for credit conduit applicants, and conduits must ease documentary requirements for ARB applicants.
- Basic documentary requirements for credit-conduit applicants require:
- certified true copy of SEC/CDA/BRW-Dole Registration,
- certified true copy of constitution and by-laws,
- masterlist of membership duly signed by the Chairperson,
- list of ARB-members duly certified by the concerned MARO,
- BOD resolution stating intention to apply for a loan to be used for relending/MF and authorized persons to transact with the bank,
- financial statements for the past three consecutive years,
- list of previous projects undertaken, and loans secured/repaid to establish track record.
- Qualified applicants must execute a Joint and Several Liability Undertaking prior to fund release.
- Partner-GFIs are encouraged to waive submission of audited financial statements for short-term agricultural production loans, while still being able to require other proof of the credit-conduit’s sound financial status.
- Program management must reserve the right to ease/relax documentary requirements for individual ARB/cooperative borrowers.
Institutional Setup, Steering, and Monitoring
- The DAR must constitute a National Credit Program Steering Committee (NCPSC) chaired by the DAR Secretary and vice-chaired by the Undersecretary-SSO.
- NCPSC membership includes representatives from:
- FOO, FMAO, PPEAO, LAO, PARC Secretariat, BSP, DOF, and People’s Organization designated by the DAR Secretary.
- The NCPSC may invite academe, NGOs, and NGAs as resource persons during meetings as needed.
- NCPSC functions require it to:
- review and approve policy recommendations,
- develop new credit windows and/or enhance existing credit programs,
- oversee implementation of agricultural support and socialized credit programs.
- The DAR must establish a National Credit Management Unit (NCMU) lodged in DAR under its Bureau of Agrarian Reform Beneficiaries Development (BARBD) to develop, facilitate, oversee, monitor, and evaluate agricultural support and socialized credit programs.
- NCMU must provide technical and secretariat support to NCPSC and must formulate more detailed operational guidelines within 90 calendar days upon publication of the IRR.
- Regional and provincial counterparts of NCMU must be established.
- DAR, in collaboration with BSP and DOF, must formulate implementing policies on liberalized terms and conditions of credit assistance/financing under Section 14 of R.A. 9700, and must monitor, evaluate, and review/amend policies and guidelines as needed.
- Monitoring and evaluation must follow DAR rules under MC 17, series of 2009 on an enhanced Planning, Monitoring and Evaluation (PME) system in accordance with R.A. 9700.
- For accountability and accomplishment tracking, NMCU must design and operationalize a separate program-based monitoring and evaluation system.
- Sectoral reporting requires:
- MARO/DARPO-BDCD submit monitoring and evaluation reports regularly as prescribed by NMCU,
- Provincial PME Unit consolidate data for Planning Monitoring Evaluation System inclusion and submit to the Planning Service through the Regional Planning, Monitoring, and Evaluation Unit.
- NCMU must provide the Planning Service with consolidated quarterly accomplishment reports and an analysis and program performance evaluation to guide NCPSC policy review/formulation.
- NMCU may conduct random monitoring among ARB recipients within two months after release of subsidy to individuals.
Separability, Repeal, and Final Implementation Rules
- A separability clause requires that if any section or provision is declared unconstitutional or invalid, the unaffected parts remain in force and effect.
- A repealing clause mandates that all inconsistent orders, circulars, rules, and regulations are amended, modified, or repealed accordingly.
- The Order takes effect on June 24, 2010, and adopted on 24 June 2011 by Nasser C. Pangandaman, Secretary of the Department of Agrarian Reform.