Law Summary

Introduction

This Letter of Instruction (LOI) was issued by President Ferdinand E. Marcos to facilitate guarantee payments under the Masagana 99 Program, aimed at supporting rice farmers and restoring the credit standing of participating banks.

Purpose of the LOI

• Objective: To ensure continued access to bank credit for rice farmers affected by loan arrearages under the Masagana 99 Program.
• Government Commitment: The government pledges to guarantee supervised credit losses to support the program.

Establishment of the Trust Fund

• Creation: A special revolving Trust Fund amounting to P450 million is to be administered by the Philippine Crop Insurance Corporation (PCIC).
• Allocation: The fund will cover 85% of past due Masagana 99 loans from participating banks.
• Key Definitions:
  • Masagana 99 Program: A government initiative designed to achieve rice self-sufficiency and export capability.
  • Trust Fund: A designated fund for processing claims related to past due loans.

Funding Schedule

• Funding Release:
  • Initial amount of P150 million to be released by July 31, 1982.
  • Additional P150 million in each of the following years: 1983 and 1984.

Claim Payment Schedule

• Payment Structure: The PCIC will pay claims from the Trust Fund based on the following schedule:
  • 25% for the first year
  • 30% for the second year
  • 30% for the third year
• Eligibility Requirements:
  • Loans must be in arrears for three (3) years or more.
  • Loans must not have received advances from the Agricultural Guarantee Fund.

Loan Restructuring

• Farmers' Loans:
  • Past due loans, inclusive of interest but excluding penalties, will be restructured over five (5) years.
  • No interest, penalties, or other charges will be imposed on restructured loans.
• Bills Payable:
  • The Central Bank will restructure past due M-99 Bills Payable over three (3) years, excluding penalties.

Implementation Mechanisms

• Central Bank's Role: The Central Bank will formulate the mechanics for implementing this LOI.
• Custody of Promissory Notes: The Central Bank and the Philippine National Bank will hold relevant promissory notes for the Trust Fund.

Collection and Reporting

• Loan Collection: The Philippine National Bank and rural banks must continue to collect amortizations and remit collections to the Trust Fund.
• Guideline Formulation: The PCIC is tasked with creating necessary guidelines for implementing the Trust Fund objectives.
• Annual Reporting: The PCIC must submit annual reports on the Trust Fund status to the President and relevant ministries.

Memorandum of Agreement

• Administration Expenses: The Central Bank and PCIC are to enter into a Memorandum of Agreement for expenses related to administering the program, charged against the Trust Fund.

Effectivity

• Immediate Effect: This LOI takes effect immediately upon signing.

Key Takeaways

• The LOI establishes a P450 million Trust Fund to support rice farmers under the Masagana 99 Program.
• Claims will be paid out in a structured manner over three years based on eligibility criteria.
• Loan restructuring provisions are in place to relieve farmers of past due obligations without penalties.
• The implementation and administration of the fund involve multiple government institutions, emphasizing collaboration for agricultural support.