Law Summary

1. Introduction and Background

• Administrative Order No. 04, S. 2018 amends the Implementing Rules and Regulations of the Agricultural Guarantee Fund Pool (AGFP).
• Based on Administrative Order No. 225-A, issued on May 26, 2008, which directs allocation from government financial institutions.
• The AGFP aims to reduce risks in agricultural lending by providing guarantee coverage for loans to small farmers and fisherfolk (SFF).

2. Program Description and Purpose

• The AGFP is designed to facilitate credit provision to the agricultural sector by mitigating lending risks.
• Government Financial Institutions (GFIs) and Government Owned and Controlled Corporations (GOCCs) must allocate 5% of their 2007 surplus towards projects in palay and food production.

Key Definitions:

• Agriculture and Agrarian Reform Credit: Loans for activities related to agricultural and fishery production, acquisition of farm inputs, and rehabilitation of farms.
• Small Farmers: Defined as individuals tilling not more than five hectares of agricultural land or having specific livestock limits.

3. Organization and Management

• The Department of Agriculture (DA) oversees the AGFP through a Governing Board and various committees.

Governing Board:

• Composed of representatives from various government departments and agencies.
• Responsible for setting policy directions, approving work plans, and overseeing implementation.

4. Policies on Guarantee Coverage and Claims

Guarantee Coverage:

• Covers up to 85% of the principal loan at the time of claim.
• Eligible accounts must be unsecured loans and used for specific agricultural purposes.

Eligible Borrowers:

• Small farmers, fisherfolk, or their organizations with majority SFF membership.

Guarantee Fee:

• Paid by Partner Lending Institutions (PLIs) based on the loan amount and commodity rates.

Claim Procedures:

• Claims must be filed within 60 days post-maturity of the promissory notes, supported by specific documentation.

Important Requirements:

• PLIs must meet specific credit standing and operational requirements.
• Guarantee lines are valid for one year, subject to renewal based on performance.

5. Collection of Accounts

• Following a guarantee claim payment, PLIs must collect from borrowers.
• If the AGFP pays a claim, the PLI must remit 85% of collections from subrogated accounts back to AGFP.

6. Miscellaneous Provisions

• Risk weight for loans guaranteed by AGFP will follow BSP guidelines.
• The AGFP may enter into agreements with collecting agents under specified circumstances.
• The governing board can adjust the leveraging ratio and allocation of funds as deemed necessary.

7. Effectivity

• The guidelines shall take effect upon approval by the Secretary of Agriculture.

Key Takeaways

• The AGFP aims to support agricultural lending by offering guarantees to mitigate risks for PLIs.
• The program emphasizes collaboration between government institutions to improve agricultural credit access.
• Small farmers and fisherfolk are the primary beneficiaries, with specific eligibility criteria for both borrowers and lending institutions.
• There are strict timelines and requirements for claims and guarantee coverage, with penalties for non-compliance.
• The AGFP operates under the oversight of a governing board, which sets policies and monitors implementation.