DA-QUEDANCOR AGRIKULTURANG MAKAMASA HYBRID CORN PRODUCTION GUARANTEE PROGRAM

The following guidelines shall govern the implementation of
AGRIKULTURANG MakaMASA — Hybrid Corn Production Guarantee Program, which
is a joint program of the Department of Agriculture and Quedan and
Rural Credit Guarantee Corporation (Quedancor).

1.         RATIONALE

A major objective of the Agrikulturang Makamasa Corn is to
increase productivity and production of quality corn for human
consumption, feed and individual user, as well as improve farmers’
income. One strategy to carry out this objective is through the
establishment and development of farm cluster in prime corn lands
located in municipalities within the Strategic Agricultural &
Fishery Development Zones (SAFDZs).

However, higher corn production is anchored on the promotion of a
conducive environment for better credit access by corn farmers which
will enable them to support their production needs.

Thus, to further improve credit accessibility in the farm cluster,
the DA in coordination with Quedancor designed the Agrikulturang
Makamasa – Hybrid Corn Production Guarantee Program, which will
encourage private entities (seed producers, input suppliers, traders,
feed millers, etc.) to lend to small farmers, farmer association and
cooperatives by providing risk-reducing mechanism in the form of
guarantee.

2.         OBJECTIVES

1.  To increase the production of quality corn.
2.  To promote the farmer’s adoption of yellow/white corn hybrid technologies.
3.  To encourage the participation of the private sector particularly the input supplier in the corn development program.

3.         LEGAL BASES

3.1           RA 7393, dated 13 April 1992, which mandated
Quedancor to establish a credit support mechanism and guarantee system
for the benefit of farmers, fisherfolk and other agricultural
enterprises.

3.2           RA 8435, dated February 9, 1998, which mandated
Quadancor to be the credit guarantee institution for the Agri-fishery
sector.

3.3           Memorandum of Agreement dated April 24, 2000,
between the Department of Agriculture and Quedan and Rural Credit
Guarantee Corporation (QUEDANCOR).

4.         DEFINITION OF TERMS

4.1           SAFDZS — Strategic Agricultural & Fishery Development Zones.

4.2           Corn Farm Cluster — small farmholder and coops
within at least 400 hectares of contiguous corn lands with a cropping
intensity of 200%, and adequate agricultural extension service and
commitment of the LGU to implement the program.

4.3           Cooperative — a group of farmers who voluntarily
form themselves into a business enterprise to promote their common needs
through mutual action, democratic control and sharing of economic
benefits on the basis of the patronage of members.

4.4           Quedan Operations Officer (QOO) — Quedancor’s field
personnel duly authorized to implement the Agrikulturang MakaMASA for
Sugar Farm Modernization Program.

4.5           Corporation — a juridical person, created by
operation of law, having the right of succession and the powers,
attributes and properties expressly authorized by law or incidental to
its existence.

4.6           Farmer/Planter — any natural person whose primary
livelihood is cultivation of land for corn production, either by himself
or primarily with the assistance of his immediate farm household or
worker, whether the land is owned by him or another person under a
leasehold tenancy agreement or arrangement with the owner thereof.

5.         SCOPE

The guarantee program shall cover the loans extended by input
suppliers to farmers/sole proprietor/farmers
federation/cooperative/association in municipalities within the SAFDZs.

6.         STATEMENT OF POLICIES

6.1       Purpose of Loan

To finance the purchase of hybrid corn seed by farmer/sole proprietor/farmer’s federation/cooperative/association.

6.2       Eligibility Requirements for Farmers/Sole Proprietor/Farmers’ Federation/Cooperative/Association

6.2.1 Must be indorsed by DA.
6.2.2 Must be duly accredited with Quedancor.
6.2.3 Must be located in areas with available input supplier.
6.2.4 Must have members who are qualified to participate in the program and adapt recommended technologies, if applicable.
6.2.5 Must meet the qualification criteria set by the concerned input supplier-lender.

6.3       Loanable Amount

The loanable amount shall be maximum of P600,000 per cluster.

6.4       Interest Rate

The interest rate shall be at the discretion of the input supplier-lender.

6.5       Term of Payment

Maximum of 130 days.

6.6       Guarantee Fee

A guarantee fee of 2.5% per annum based on the loan amount shall
be paid by the input supplier to support its application for guarantee
cover.

6.7       Guarantee Coverage

Quedancor’s guarantee cover is on the loan per se. The guarantee
cover shall be 80% of the outstanding principal plus accrued interest
up to maturity date or demand for full payment, whichever comes first.

6.8       Leveraging Ratio

Quedancor’s total guarantee exposure on outstanding loans shall
not, at any given period, exceed five (5) times the amount of available
guarantee fund established therefor.

7.         MECHANICS OF IMPLEMENTATION

7.1       Program Promotion

Quedancor, with the assistance of the Department of Agriculture,
shall promote the program with prospective input suppliers and
borrower-clients to orient them with the program’s objectives, features
and mechanics of implementation.

QOO shall promote the program through meetings and dialogues
with prospective clients and use of promotional materials such as
posters and brochures.

7.2       Input Supplier Accreditation

Input suppliers intending to participate under the program shall
sign a Guarantee Agreement with Quedancor, pay a non-refundable
accreditation fee and submit the following documents:

7.2.1        Board Resolution authorizing the company to
participate and designating the officer(s) with specimen signatures who
shall represent the company and sign all documents pertaining to its
accreditation;

7.2.2        List of Key Officers;

7.2.3        Latest Audited Financial Statements;

7.2.4        Copy of SEC registration (for corporation ), DTI registration (for sole proprietorship/partnership);

7.2.5        Articles of Incorporation/By-Laws; and

7.2.6        Endorsement letter from DA Regional Director concerned.

7.3       Clientele Accreditation

Any farmer/sole proprietor/farmer
cooperative/federation/association intending to apply for a loan under
HCPGP shall submit an Application for Accreditation, pay a
non-refundable accreditation fee of P2,000.00 for
coops/association/federation and P100.00 for individual borrower and
submit the following:

7.3.1        General Requirements

a.    Duly accomplished Application for Accreditation;
b.    Two 2×2 photos of individual applicant or authorized representative(s); and
c.    Duly certified Financial Statements for the last two years.

7.3.2        Additional Requirements

For Federation/Cooperative/Association

a.      Certificate of Registration or Confirmation from CDA/SEC;
b.      Copy of Articles of Cooperation and By-Laws, and amendments, if any;
c.       Board Resolution and Secretary’s Certificate
authorizing the cooperative to participate in the specified program and
designating its authorized representative(s) to transact business and to
act as jointly and severally liable for the loan with specimen
signatures; and
d.      List of names and addresses of current key official and members.

The QOO shall conduct a background/credit investigation of
applicant, accomplish the Evaluation Sheet and forward the application
together with the required documents to the Regional Assistant
Vice-President (RAVP) for review, approval and issuance of Certificate
of Accreditation.

7.4       Loan Application and Approval

7.4.1        Application for loan shall be submitted by
accredited applicants to the input supplier together with the following
requirements:

a.      Two copies of the farm plan and budget, for individual
borrower or list of members qualified in the cluster program together
with the farm plan and budget, for cooperatives/federation/association;
b.      Certification from the DA/MA concerned; and
c.       Two qualified co-makers for individual borrower and
Comprehensive Surety Agreement of at least 3 officers/Directors for the
cooperative/association/federation in favor of Quedancor.

7.4.2        QOO shall authenticate photocopies of the above documents.

7.4.3        The input supplier shall review the documents
submitted by the borrower and conduct its own investigation and
evaluation, if deemed necessary. Input Supplier has the final discretion
to approve/disapprove the loan application.

Any loan from a farmer/sole proprietor/farmers’
federation/cooperative/association not favorably recommended by DA and
which did not pass Quedancor’s accreditation procedures shall not be
guaranteed by Quedancor.

7.5       Preparatory Clearance for Guarantee Coverage (PCGC)

Using the prescribed form (Exhibit 1 *), Input Supplier shall
secure a written clearance from QUEDANCOR Central Office either through
fax, telefax, radiogram, telegram or letter. This is to ensure that
QUEDANCOR maintains a total guarantee exposure on outstanding loans
under the program of not more than five (5) times the amount of
available guarantee fund. The loan shall be released within ten (10)
calendar days upon receipt of the PCGC.

7.6       Loan Release and Documentation

7.6.1        The loan proceeds shall be in the form of seeds to
be supplied by the input supplier corresponding to the approved farm
plan and budget.

7.6.2        Proper loan documentation shall be the sole
responsibility of the input supplier. This shall cover the LAF, PN, as
the case may be.

7.6.3        Original copies of loan documents shall be retained
by the input supplier. Quedancor shall receive two copies and the
borrower, one copy.

7.7       Payment of Loan

The borrower shall remit the loan payment directly to the input supplier on maturity date as specified in the PN.

7.8       Project Monitoring

During the term of the loan, periodic inspection and reporting
shall be undertaken by the QOO and DA representatives to closely monitor
the project. The QOO shall submit to Quedancor C.O. a monthly Accounts
Status Report.

Spot inspection shall be conducted at any time by Quedancor/DA and/or input supplier representatives to check the project.

7.9       Certificate of Loan Settlement (CLS)

Upon full settlement of the loan, input supplier shall submit to
Quedancor Regional/Head Office, at the soonest possible time, a CLS
(Exhibit 2 *). Failure or delay in submission of CLS will affect input
supplier’s pending request for guarantee cover.

8.         APPLICATION FOR GUARANTEE COVERAGE

8.1       Nature of Guarantee Cover

Quedancor’s guarantee cover is on the loan per se.

8.2       Requirements/Procedure for Guarantee Coverage

8.2.1        The input supplier applying for guarantee coverage
must submit within thirty (30) days from the date of loan release, two
copies of the Request for Guarantee Coverage (RGC), Exhibit 3*, together
with its guarantee fee payment.

The aforementioned requirements, shall be submitted directly to the nearest Quedancor District Office Cashier.

8.2.2        The date of acknowledgment by Quedancor District
Office on the copies of the RGC, shall be considered as the date of
filing or submission.

8.3       Issuance of Guarantee Certificate

A Guarantee Certificate, duly signed by the authorized Quedancor
representative, shall be issued upon submission by the input supplier of
the required documents pursuant to the procedures outlined in the
preceding paragraphs and shall last until the maturity date of the loan
which in no case be beyond Quedancor’s recommended loan term.

8.4       Claim for Guarantee Payment

8.4.1        Input supplier may claim for guarantee payment when the loan account is not settled upon maturity.

8.4.2        The following are the documents required in filing a guarantee claim:

a.    Claim for Guarantee Payment – Exhibit 4*;
b.    Affidavit of Non-Payment executed by the duly authorized officer of the input supplier — Exhibit 5*;
c.    Statement of Account;
d.    Certified copy of the loan ledger updated as of filing of guarantee claim; and
e.    Copy of duly received demand letter issued by the input supplier.

8.5       Processing of Guarantee Claim

Claim for guarantee payment shall be submitted by input supplier
to the QOO, who shall then verify its completeness. The District RAVP
shall review the guarantee claim and forward it to POD/FFAD for
processing and payment. An acknowledgment letter shall be sent by
POD/FFAD to input supplier. If defects/deficiencies are discovered in
the claim documents while being processed input supplier shall
accordingly be informed in writing to make immediate
correction/completion.

Quedancor shall pay the input supplier within sixty (60) days after having submitted/completed all proper documents.

8.6       Subrogation of Rights

Input supplier shall, on the same day of receipt of guarantee
payment, surrender the original copy of the Certificate of Guarantee
Coverage and provide Quedancor with a Subrogation Receipt (Exhibit 6 *)
assigning and transferring to Quedancor the claim and demand against the
defaulting borrower arising from or connected with the said borrower’s
loan obligation. Original copies of PN and documents listed in Paragraph
7.4.1 shall now be required for submission.

8.7       Recoveries

Recoveries refer to any amount collected from the date a guarantee claim is filed by input supplier with Quedancor.

Any recovery collected from the borrower shall be remitted to Quedancor.

8.8       Grounds for Cancellation/Nullification of Guarantee Coverage

Any of the following shall be ground for cancellation or
nullification of guarantee coverage and/or non-payment of guarantee
claim:

8.8.1        Collusion between and/or among the borrower, QOO
and input supplier in the extension of credit such as but not limited to
the following:

a.      When the borrower and the officer(s) and/or
employee(s) of Quedancor/input supplier enter into an agreement for
fraudulent purposes or whenever said parties conspire to defraud
Quedancor; and

b.      When an input supplier/representative/employee
acquiesces, consents, or agrees with anyone to the granting of loan to
unqualified borrower.

8.8.2        When input supplier makes false statement,
misrepresentation, omission or concealment in the guarantee claim filed
with Quedancor; and

8.8.3        When input supplier releases a loan that is beyond
the prescribed amount or term or has incomplete or defective
documentation.

Any aforementioned provisions shall not preclude Quedancor from
cancelling or nullifying its guarantee coverage for violation of this
Circular or for other causes involving fraud, bad faith or for other
causes involving fraud, bad faith or other machinations.

9.         SPECIAL PROVISIONS

9.1       There shall be periodic consultation among the officers
of Quedancor, DA, input supplier and clients for the purpose of
enhancing the effectiveness of the program.

9.2       The Quedancor reserves the right to promulgate such
rules and regulations (including exemption thereto) and adopt other
measures as may be incidental to, appropriate and necessary for the
attainment of the objectives of the AGRIKULTURANG MakaMASA-HYBRID CORN
PRODUCTION GUARANTEE PROGRAM.

10.       EFFECTIVITY

This Circular shall take effect immediately.

Adopted: 19 May 2000

(SGD.) GALO B. GARCHITORENA
President & CEO