Fund creation and authorized amount
- The FUND refers to the PHP 20.0 M revolving fund appropriated pursuant to Board Resolution No. 101, series of 1990, dated August 22, 1990.
- The Department’s Re-integration Programs Department (RPD) requests the FUND quarterly based on the projected financial requirement of the Department.
- A FUND transfer is initiated by the RPD through a letter request addressed to the Administrator via the Resource Management Department (RMD).
- Upon approval, the FUND is transferred and deposited with the Land Bank of the Philippines (LBP) under three (3) new accounts to facilitate fund transfer and disbursement.
Composition and allowed uses of FUND
- The FUND includes: the principal, interest earned out of the deposit/investment, interest earned from the loan extended, 2% surcharge on delinquent accounts, proceeds of sales or acquired assets, and any special appropriation.
- The PHP 20.0 M FUND covers three use items:
- Item 1: Bridge Fund for NLSF loan — PHP 3.0 M
- Item 2: Loan Fund for Non Collateralized Window — PHP 1.4 M
- Item 3: Seed Fund for Small & Microenterprise Financing Scheme — PHP 15.6 M
- Item 1 is exclusively used to pay amortization to the National Livelihood Support Fund (NLSF) when actual collections are insufficient to meet maturing obligations.
- Item 2 finances socio-economic projects qualified under the Non-collateralized Financing Scheme (Non-colat) and is fully decentralized to Regional Units, which implement disbursement under the memorandum and the Financial Management for Regional Operation.
- Item 2 is transferred to the Regional Units; each region is allocated PHP 100,000.00.
Reporting, monitoring, and audit flow
- A Monthly Report on Disbursement must be submitted to the Fund Management Division (FMD)-RPD for recording, and FMD-RPD endorses it to the Resident Auditor for post-audit.
- For loan implementation, the Project Monitoring Officer (P.M.O.) inspects bank books of program availed borrowers to ensure compliance with the Program.
- The P.M.O. prepares a progress report after every visit.
- The P.M.O. prepares a Terminal Report upon full payment of the loan, and this Terminal Report serves as the basis for granting re-loan.
- For efficient Head Office monitoring, projects monitoring reports submitted by different regions must be submitted seven (7) days after the reference month.
Non-collateralized financing—eligibility and terms
- The Non-collateralized loan window is available to:
- Individual projects requiring PHP 5,000.00 and below; and
- Group loans with a PHP 50,000.00 loan ceiling.
- Instead of collateral, the program uses a Guarantor System.
- The program accepts:
- For individual loans: an individual guarantor for the individual loan; and
- For group loans: individuals and/or organizations as guarantors for group loans.
- Loans are available with specified interest rates:
- For non-collateralized window:
- 10% for individual loans
- 6% for group loans
- For non-collateralized window:
- Non-collateralized debt-equity ratio is 95:05.
Capital build-up and re-loan privileges
- Under the capital build-up scheme, each individual loan availing borrower must open a savings account (deposit only) with any reputable bank.
- A borrower must deposit an initial PHP 200.00 from the savings account, which is considered the borrower’s equity for the project.
- During loan amortization, the borrower must deposit each period an amount equivalent to 25% of the amortization due, in addition to the regular downpayment due under the Program.
- The same 25% capital build-up deposit requirement applies to each group member with individual projects.
- Borrowers may apply for re-loan upon loan maturity; the second loan is authorized subject to the recommendation of the P.M.O.
- Withdrawal of savings by the proponent is allowed upon loan maturity if the proponent does not intend to reapply; otherwise, withdrawals are authorized only upon the maturity of the second loan, except when the project requirement is above PHP 5,000.00.
- Proponents (both individual and group) may avail of the Program only twice.
Guarantor qualification standards
- For an individual guarantor, qualification requires:
- The guarantor must not be a spouse of the applicant.
- The guarantor must be locally employed.
- The guarantor’s salary per annum must be PHP 12,000.00 or more for individual projects and PHP 100,000.00 for group projects, supported by ITR or Certificate of Employment and an ID card.
- For an organization guarantor, qualification requires:
- The organization must be duly registered with the appropriate government regulatory agency; and
- The organization’s Current Ratio must not fall below 2:1.
Micro, small enterprise, and impact project rules
- Micro-enterprise financing is open to:
- Individual projects requiring over PHP 500.00 to PHP 15,000.00 additional capital; and
- Group loans requiring PHP 5,000.00 to PHP 500,000.00 additional capital, provided the total project cost does not exceed PHP 50,000.00.
- Micro-enterprise project evaluation is decentralized region-to-region.
- Small enterprise financing is open to projects requiring over PHP 15,000.00 to PHP 50,000.00 additional capital with total project cost not exceeding PHP 1.0 M, and group loans with a PHP 500,000.00 loan ceiling.
- Impact projects are open to group projects meeting any or both criteria:
- The project can launch small ventures out of the original project industry; and/or
- The project can have significant community impact, particularly regarding employment generation and fostering self-reliance among project participants.
- Impact project financing criteria require all of the following standards:
- The project reaches a greater number of beneficiaries and must be inter-sectoral in scope for community development.
- The project must address the felt needs of beneficiaries at the proper time.
- The project must establish both forward and backward linkages so that the original industry can generate consequent ventures.
- The project must be aligned with social responsibility and must not undermine social values or add to existing social ills.
Eligible projects, loan ceilings, and rates
- The Seed Fund (Item 3) finances livelihood endeavors that include agri-business, manufacturing, trading, transport, service-oriented projects, and other lucrative livelihood endeavors as may be considered by the RPD.
- Eligible projects include those with a short gestation period, fast sales turnover, labor-intensive operations, and requiring less capital outlay.
- The program’s indicative, non-exclusive eligible project examples include:
- Trading (e.g., sari-sari store, food vending, fruit and vegetables vending, garments trading, mini-mart, grocery, dried fish trading, rice/grain retailing, etc.)
- Light service oriented business (e.g., small cafeteria, barber shop, beauty parlor, rice mill, roving thresher, etc.)
- Agri-business (e.g., mushroom culture & spawn production, cutflower production, orchid growing, goat raising, cattle fattening, duck raising, black pepper, fruit & vegetable processing, meat & fish processing, soap making, table egg production, commercial dairy products, etc.)
- Manufacturing (e.g., noodles, fish sauce, soy sauce, vinegar, native cakes and other delicacies, cereals, peanut butter, candies, tofu, etc.)
- Transport service (e.g., pedicab, tricycle, jeep, taxi, etc.)
- Loan proceeds must be used for working capital, site improvement, and/or the purchase of equipment/tools.
- Loan ceilings are:
- PHP 50,000.00 for individual applicants; and
- PHP 500,000.00 maximum for group loans.
- Interest rates under Micro/Small/Impact financing provide:
- Micro-enterprise financing: 12% for PHP 500.00–15,000.00, and 15% for over PHP 15,000.00
- Debt-equity ratio rules:
- Micro-enterprise financing:
- 85:15 for secondary beneficiary and group projects; and
- 95:05 for primary beneficiary
- Small enterprise financing:
- 80:20 for secondary beneficiary and group projects; and
- 85:15 for primary beneficiary
- Impact projects with TPC exceeding PHP 1.0 M: 80:20
- Micro-enterprise financing:
Borrower categories and document requirements
- Eligible borrowers for Micro, Small Enterprise, and Impact Projects include Primary Beneficiary and Secondary Beneficiary.
- Primary Beneficiary means the OCW-Returnees or his immediate family whose overseas employment has ceased.
- Secondary Beneficiary means the immediate family of an OCW who is still gainfully employed:
- The immediate family refers to the legitimate spouse of a married OCW who bears the OCW’s marital consent.
- For a single OCW, the beneficiaries are the parents and single brothers or sisters, provided there is proper authorization from the OCW.
- For Non-colat, eligible borrowers include dependents of deceased/disabled OCW’s, those affected by man-made or natural calamities, and those not gainfully employed who could not produce collaterals.
- Loan application documents must be prepared in quadruplicate, distributed as follows:
- Original — COA-OWWA Resident Auditor
- Duplicate — FMD
- Triplicate — Regional File
- Quadruplicate — Proponent
- For individual borrowers, required items include:
- Proof of OWWA contribution
- Loan Application Form
- Business Plan
- Documents attesting identity/relationship to the OCW (including Birth Certificate of OCW in case she/he is single OCW, authorizing parents to borrow, and Death Certificate for deceased OCW-spouse)
- Latest Residence Certificate
- Pertinent Business Permit/Licenses
- For start-up/revival pre-release condition and on-going loans upon application, business permit/license rules are applied as stated below
- Marital Consent/Authorization
- For cultural minority applicants: marriage contract or certificate/affidavit from two (2) disinterested person, and affidavit of separation (at least 5 years separated)
- Promissory Note, Deed of Mortgage, Affidavit of Good Faith
- Other pertinent documents required under Non-cola and other requirements the RPD may require
- Under start-up/revival and ongoing conditions:
- Loans under Non-colat are exempt from securing business permits/licenses except for group loans.
- Loans intended for vehicle purchase require only pertinent license after thirty (30) days from the date of purchase.
- Backyard livelihood projects are exempt from securing Municipals/Mayor’s Permit, except for applicants in Metro Manila and other highly urbanized cities.
- Vehicle collateral offerings require annotation by the Land Transportation Commission.
- For group loans, required items include:
- Ratified Group By-Laws
- Minimum organizational structure including head of organization and collection officer
- Certificate of Good Standing in the community issued by the Barangay Chairman
- Group resolution authorizing the organization head to contract the loan
- Written and official recommendation from the OWWA Regional Office/RDD Project Officer that the group is cohesive
- Profit Sharing Agreement
- Special power of attorney authorizing the group head to mortgage personal and real estate properties of group members
- Other requirements prescribed by OWWA-RPD
- Collateral and mortgage documentation include:
- For real estate: photocopy of Certificate of Land Title, Tax Declaration, Current Realty Tax Payment Receipt, Tax Payment Clearance, and Location Map Plan with Vicinity Map
- For ancestral lands: current tax declaration, certificate of non-tax delinquency, and responsibilities for validation/registration/annotation, including approval by the Secretary of Agriculture or duly authorized representative on the particular mortgage transaction under par. 2, sec. 6, P.D. 410
- For chattel-motor vehicles: complete listing in prescribed format plus registration certificate and insurance policy coverage in pre-released condition
- For home appliances: proof of ownership and deed of ownership or donation
Collateral valuation, loan factor, and mortgage registration
- All depreciable collaterals are valued/appraised at Net Book Value, and land is appraised at one hundred (100%) percent of present market value.
- The loan factor applies as follows:
- Project Asset:
- Personal Asset: Real Estate 95%, 90% (as stated by categories)
- Building/Residence: 80%
- Vehicle: 80%
- Machinery and Equipment: 80%
- Furniture and Household Appliance: 80%
- As stated for corresponding personal asset categories:
- Real Estate: 90%
- Building/Residence: 70%
- Vehicle: 70%
- Machinery and Equipment: 80%
- Furniture and Household Appliance: 70%
- Project Asset:
- Depreciation uses the straight-line method with uniform economic lives:
- Building: concrete/permanent 10; light materials 5
- Building improvement/renovation: concrete/permanent 7; light materials 5
- Vehicle: four-wheeled brand new 5; four-wheeled reconditioned 4; three-wheeled brand new 3 (mechanical); three-wheeled reconditioned 2 (mechanical); three-wheeled brand new 5 (motor driven); three-wheeled reconditioned 4 (motor driven)
- Machinery and equipment: motor driven 7; mechanical 5
- Furniture: 5
- Home appliances except gas range: 7
- Gas range: 5
- Chattel/real estate mortgages must be registered with the Registry of Deeds.
- For collaterals purchased out of loan proceeds, mortgage registration takes effect immediately after purchase, and the proponent registers the deed of mortgage at the expense of the proponent.
- For purchase of motor vehicles, registration is effective only after purchase, and all vehicles offered as collateral must be annotated by the Land Transportation Commission.
Loan evaluation and approving authorities
- A Project Officer (P.O.) interviews prospective applicants to determine whether an applicant qualifies under lending policies and guidelines.
- Qualified beneficiaries are further probed to gather preliminary data and information on proposed/existing business.
- The P.O. schedules on-site inspection to validate data and information and requires appropriate training for applicants needing project identification or lacking project management skills.
- Two business skills training types are offered based on educational qualification:
- Ladderized Entrepreneurial Career Development Training
- Entrepreneurship Development Training Appreciation Course
- Livelihood Skills Training on specific business ventures is offered by regional offices in coordination with tie-up agencies.
- Regional OWWA Unit Supervisors endorse requests for evaluation to ELDD with a minimum of five (5) projects, including a suggested itinerary; requests are recorded by the Project Assistant (P.A.).
- No request for evaluation is granted while a region has pending validated projects.
- Only loan applications with complete documentary requirements are included in validation, and the P.O. must have visited the project site and inspected collaterals offered before evaluation.
- Evaluation authority depends on loan amount:
- A Department Head approves loans up to PHP 50,000.00.
- The Deputy Administrator approves group loans beyond PHP 50,000.00 to PHP 500,000.00.
- Impact project loans exceeding PHP 500,000.00 are approved by the Board of Trustees.
- Non-colat financing scheme approvals and loan release are fully decentralized.
Distinct collateral locations—NCR and inter-region
- For cases where loan collateral is located in a different region:
- If the loan application originates from a region and the collaterals are in NCR, the originating region must notify ELDD in writing so ELDD accomplishes collateral valuation before project site validation; the notice includes specific details of collateral assets.
- If the loan application originates from NCR, the NCR unit must request the concerned region to do the initial collateral valuation, and final appraisal must be included in regional validation/evaluation.
- For region-to-region cases:
- The region where the loan application is filed is the originating region.
- The originating region requests the regional unit where the assets are located to do initial appraisal.
- The region where assets are located must include site validation and check that legal documents were annotated and encumbrances registered if the loan is approved.
- The Chief of ELDD schedules regional evaluation; Project Evaluators rotate and take custody of loan documents for evaluation and review prior to field validation.
- The Sr. Project Officer/Supervising Project Officer conducts final evaluation for loan amounts not exceeding PHP 15,000.00; ELDD evaluates loans exceeding PHP 15,000.00.
Fund release, vouchers, and check controls
- For Micro, Small, and Impact projects, approved loans endorsed by ELDD are recorded by the P.A., forwarded to the Chief of FMD to initiate Disbursement Voucher (D.V.) preparation.
- FMD must not accept a loan docket from ELDD when it is not in order or lacks necessary attending documents.
- D.V. is prepared by the P.A. upon request of the FMD Chief.
- The Department Head must certify that disbursement is necessary, lawful, and incurred under her direct supervision.
- The RPD Accountant prepares accounting entries, indexes account codes, indicates voucher number, certifies proper expenditure, adequate funds, and that claims are supported by legal and proper documents.
- The D.V. is forwarded to the Internal Audit of the Office of the Administrator to initiate the approving portion for the Deputy Administrator prior to final approval.
- Only approved D.V.s are used for check issuance.
- Checks are prepared by the Cashier, signed by the Department Head and the FMD Chief.
- Check release rules include:
- Checks for regional proponents are released through the Regional Extension Service to regional units.
- NCR checks are released directly to the proponent for working capital loans and to the supplier for machinery and equipment purchase loans.
- A disbursement workflow is established where D.V.s may not be issued to “Cash” or “Bearer”, and D.V. details must reflect the nature of transaction and supporting documents.
Non-colat accounting system and regional trust model
- Non-colat accounting/bookkeeping is handled by Regions in accordance with guidelines requiring:
- Funds for Non-colat in the Regional Office are coursed through the Regional Offices of DOLE, which holds the funds in trust and issues an official receipt acknowledging acceptance of the trust.
- Each RO opens new bank accounts exclusively for Non-colat.
- Accounting uses prescribed account codes including Cash in Bank, Accounts Rec’ble, Trust Fund, Interest Income, Miscellaneous Income, Withholding Tax Expense, Bank Charges, Miscellaneous Expense.
- Processing of D.V. for Non-colat is handled by the Region only through stated exceptions; for Non-colat applications in NCR, the processing of D.V. is handled under the decentralization framework described for Regions.
- Regions maintain bookkeeping through the Cash Disbursement Book (CDB), Cash Receipt Book (CRB), and General Journal (GJ), with monthly summarization to the general ledger and bases for financial statements.
- Each client has a Subsidiary Ledger (SL) containing name, address, loan amount, monthly amortizations, payment dates, official receipt number, interest paid, penalty (if any), and other useful information.
Release mechanics and direct supplier payments
- Loan releases are based on project needs.
- Working capital and site improvement loans are released on a lump sum basis.
- If equity participation is required, the P.O. ensures the proponent’s participation is complied with before release.
- Machinery purchase loans are released to the proponent, except for NCR where releases are payable to the supplier.
- Where direct payments cannot be made, the P.O. and proponent pay the vendor/supplier.
Orientation, monitoring schedule, and forms
- Upon loan release, proponents receive orientation on:
- Salient provisions of the Promissory Note and Deed of Mortgage;
- Importance of Business Plan for implementation and compliance with stipulations; and
- Policies on monthly amortization and penalty charges for delayed/delinquent payment.
- Orientation is followed by issuance of forms and instructions for use.
- Initial site visit occurs within fifteen (15) days after loan release.
- Regular monitoring visits occur monthly for the first three (3) months for newly funded projects.
- After stabilization, proponents submit accomplished forms at frequencies determined by the P.M.O.
- After each visit, the P.M.O. prepares a progress report.
Penalties, payment application, and collections
- Delinquent accounts bear an additional surcharge of two (2) percent per month.
- The program provides penalty-charge exemption when approved by the Program Manager due to inevitable circumstances causing failure to pay on due dates.
- Collection progresses through three stages:
- Reminder: a monthly statement of account is furnished by the P.O. regardless of account age.
- Follow-up: successive actions at intervals using follow-up letters, telephone calls, and telegrams.
- Drastic stage: collection through an attorney only after reminder and follow-ups fail; an account is not placed with an attorney until all other means are exhausted.
- Partial payments are applied in this order:
- Penalty
- Interest
- Principal
- Personal checks are not honored.
- Full settlement prior to maturity exempts the borrower from paying unearned interest.
Remittance, deposit timing, and reporting
- Amortization payments are made at the OWWA Office or regional units, with an Official Receipt issued upon receipt.
- Collections recorded in cash books are deposited with the bank the following day.
- Funds in the bank accounts cannot be withdrawn by OWWA Regional Units in any form.
- The P.O. accomplishes three (3) copies of the deposit slip for bank validation; the second and third copies are retained by the P.O. for reconciliation.
- Each first Wednesday of the succeeding month, the bank automatically debits deposits for the month (exclusive of initial deposits and interest earned) through telegraphic transfer to credit the main accounts; telegraphic charges are paid by the Regional Units from their bank charges allocation.
- Within five (5) working days after the reference month, regions furnish the Head Office a Collection Report with Official Receipts and validated deposit slips for FMD updating of the subsidiary ledger.
- The FMD P.O. collates/summarizes regional collection reports, and the RPD accountant records them in journals.
Loan restructuring and restructuring limits
- Loan restructuring is prepared/recommended by the P.O./P.M.O.
- Restructuring is granted only upon specified conditions, including when:
- Business is hardly hit by natural calamity (typhoon, flood, earthquake, drought, crop infestation, pestilence, and likes);
- Business is struck by man-made calamity (arson, power interruption causing projects to operate below projected capacity level, robbery, civil disorder, and likes);
- The client suffers an accident, contracted disease, or injury causing the project to close shop or operate below normal level;
- Loan release is made within the business cycle and the amortization due date does not fall during the harvest season;
- Semi-annual/annual gestation period projects are erroneously extended into a monthly repayment term;
- High/optimistic projections in documentation were not realized in actual operations;
- The project is liquid and the proponent wishes to shorten the loan term;
- All other means are exhausted and the proponent must continue drawing funds for basic personal necessities.
- Restructuring is denied when:
- Mismanagement of business operations occurred; or
- Funds were diverted without prior notice causing low sales.
- Restructuring extending beyond the original term requires approval of the Program Manager.
Re-loan conditions, defaults, and frequency
- Re-loan uses the same process, with abbreviated preparation of loan proposals using data culled from periodic monitoring reports.
- Re-loan proposals must satisfy these conditions:
- The loan is fully paid, or in pretermination, the loan is within the last quarter of its term;
- The project is in the same business line as the original proposal;
- Collateral coverage is not less than the requirement;
- There is no other source of income for the proponent; and
- There is a favorable Terminal Report containing actual and projected financial statements.
- Default within the repayment term is considered provided:
- OWWA was informed;
- It was done in good faith; and
- It is a sound business decision.
- Re-loan proposals must include updates of:
- Application Form
- Marital Consent
- Permits and Licenses
- Residence Certificate
- A re-loan proposal is served only once.
Foreclosure process and governing statutes
- The foreclosure process applies to both real estate and chattel mortgage.
- Real estate mortgages require:
- A first demand letter by the Regional Units to delinquent clients.
- A final demand letter by the Legal Counsel.
- If the proponent continues to ignore demands, Legal Counsel files extra-judicial foreclosure with the Sheriff’s Office under Act 3135, as amended by Republic Act No. 4118.
- Notice to mortg