Implementing Rules and Regulations (IRR) of the Socialized Credit Program (SCP) under the Sugarcane Industry Development Act (SIDA)

January 23, 2018

SRA-LBP JOINT MEMORANDUM CIRCULAR NO. 1, S. 2018

 

A. RATIONALE

RA 10659 or the Sugarcane Industry Development Act (SIDA) of 2015 through its Socialized Credit Program is aimed to promote and support the productivity improvement programs to boost the production of sugarcane and increase the incomes of sugarcane farmers/planters and farm workers.

B. ACRONYMS AND DEFINITION OF TERMS

1. AgAD — Agrarian Accounting Department (a LBP unit)

2. AGFP — Agricultural Guarantee Fund Pool

3. CSF — Credit Surety Fund

4. DA — Department of Agriculture

5. DAR — Department of Agrarian Reform

6. GAA — General Appropriations Act

7. LC — Lending Center (a LBP unit)

8. Management Fee — covers administrative expenses for the processing of loan application and other costs for collection excluding litigation expenses, attorney's fees and other legal fees

9. MDO — Mill District Officer

10. MOA — Memorandum of Agreement of LBP and SRA

11. PCIC — Philippine Crop Insurance Corporation

12. Pole Vaulting — act of selling by the borrower to a buyer other than the one with whom he/she holds a contract

13. PVCID — Property Valuation & Credit Investigation Department (a LBP unit)

14. SCPMC — Socialized Credit Program Management Committee

15. SRA — Sugar Regulatory Administration HTcADC

C. THE PROGRAM COVERAGE

The program shall be made available nationwide particularly in sugarcane producing regions and provinces for the production inputs including but not limited to labor and hauling services, farm machineries and implements necessary for the continuous production of sugarcane of the following target beneficiaries:

1. Small sugarcane farmers owning farms with areas of five (5) hectares and below and are not eligible under the Block Farm Program;

2. Block farms/farmers' groups who have not received start-up capital/grants under the Block Farm Program;

3. Agri-business Machinery and Equipment Service Centers (Common Service Centers) duly registered with SRA such as but not limited to agri-machinery service centers and farm labor service providers, which shall provide farm mechanization services to sugarcane farms that do not have the capability to purchase or maintain their own machineries and equipment; and

4. Farmers groups qualified under the Block Farm Program which have already received start-up funding/grant from the SRA may avail additional funding only for meritorious consideration subject to SCP Management Committee approval.

D. THE PROGRAM FUND

The Program Fund shall be sourced from the annual General Appropriations Act (GAA).

E. GENERAL POLICIES AND GUIDELINES

1. The following funds shall be established, maintained and disbursed by LBP according to this IRR:

a) Program Fund is the fund released by SRA to LBP for the SCP under the Farm Support and Farm Mechanization Programs.

b) Income Fund is the fund derived from the interest income on loans and penalties from which the Management Fee and other duly approved program administrative expenses including cost for credit/background investigation (CI/BI) and crop insurance premium/guarantee fee shall be charged. In the event that the income fund is not sufficient to cover the management fee as defined and stated in Article E, paragraph 3, cost for CI/BI and crop insurance premium/guarantee fee, these shall be charged to the Program Fund except the management fee for Common Service Centers which are not exempt from paying the said fee and other administrative expenses.

 The account for the income fund shall be under the account name of SRA.

2. SRA authorizes LBP to perform the following transactions:

a) Place the Program Fund to the LBP's pool of funds; and

b) Debit/Draw from the following funds:

1) Program Fund which will be used for loan releases; and

2) Income Fund to cover the expenses mentioned in Section E.1.b.

 The approving authorities/signatories for the transactions mentioned in Section E.2.a and E.2.b shall be established by LBP.

3. LBP shall charge a Management Fee of 4.5% p.a. based on average quarterly loan balance and chargeable to Income/Program Fund.

4. Loan application fee shall be waived. The minimum deposit required for opening deposit accounts for borrowers shall also be waived.

5. All loan applicants shall be subjected to the standard LBP credit/background investigation (CI/BI). Any adverse findings on credit and character shall be a ground for loan denial.

6. The LBP shall be responsible in making sure that all documentary requirements for the loan including collateral, other forms of securities and all documents necessary to collect the loans are complete and submitted before the loan release. The LBP shall also be responsible for the safekeeping of the above-referred documents until the same are turned over to SRA.

7. LBP-AgAD shall provide SRA quarterly status report on loans (disbursements, collections/repayments, outstanding balances and financed projects of borrowers) and status of the Income and Program Funds (interest income, operating expenses and fund balances).

8. The LBP shall not bear the credit risk in administering the loans, collecting loan repayments and performing remedial actions such as, loan restructuring, foreclosure (optional) except when LBP violates the provision on the safekeeping of all loan documentary requirements (detailed under item 6 of this section) or in cases of unpaid loans which cannot be turned over to SRA as stated under item 9 of this section. aScITE

9. Past due loans can be restructured except when the borrower is guilty of fraud or misrepresentation including but not limited to pole vaulting. Those that remain unpaid for more than three (3) years shall be turned over to SRA including the Promissory Notes, loan security/collaterals, and other supporting documents including Deed of Assignment authorizing SRA to institute necessary legal action to collect unpaid loans. However, unpaid loans with incomplete documentation as referred to in Article E paragraph 6, cannot be turned over to SRA.

 Moreover, LBP may provide SRA necessary assistance in collecting unpaid and turned over accounts including but not limited to providing witnesses in any legal proceedings.

10. The LBP, at its option, may foreclose the Real Estate Mortgage and/or Chattel Mortgage, if necessary, based on its standard procedures. In case of foreclosure, all related costs including litigation expenses, publication and the maintenance of the foreclosed property/equipment shall be charged against the Borrower. The said costs may be advanced by LBP from the Program/Income Fund but it shall be credited to the said Fund once collected. The latter notwithstanding, LBP shall obtain the prior consent of SRA in incurring these costs and expenses if the same is more than twenty percent (20%) of the outstanding principal balance and/or will substantially deplete the Income Fund. The LBP shall shoulder all costs for any lost or destroyed collateral documents (i.e., Chattel Mortgage, quedan), and other loan documents in their possession.

11. The funds transferred by the SRA shall be administered by LBP for a period of five (5) years commencing from the date of fund transfer subject to a mandatory annual evaluation by SRA. Parties can revisit the MOA and IRR from time to time as the need arises.

12. All loan data/information received by SRA and LBP shall be treated by both parties with utmost confidentiality.

F. PROGRAM MANAGEMENT

1. Socialized Credit Program Management Committee

 Socialized Credit Program Management Committee (SCPMC) shall be created to be constituted by representatives from SRA and LBP with the following functions:

a) Provide direction and formulate policies for the SCP;

b) Monitor the performance of the SCP;

c) Act on issues or concerns relative to program implementation; and

d) Conduct SCP performance evaluation.

 The SCPMC shall be composed of:

 CHAIRPERSON: SRA Representative

 VICE CHAIRPERSON: LBP Representative

 MEMBERS:

1. SRA Administrative and Finance Department Representative

2. LBP Lending Program Management Group Head/Representative

3. SRA Legal Department Representative

4. SRA Research Development & Extension Department Representative

2. SCP-Technical Working Group

 SCP-Technical Working Group (SCP-TWG) shall be created to be constituted by representatives from SRA and LBP with the following functions:

a) Monitor the process of implementation and SCP performance;

b) Review the policies, procedures and recommend changes to the SCPMC; and

c) Monitor fund disbursements against program funds.

 The SCP-TWG shall be composed of:

 HEAD: SRA Representative

 ALTERNATE HEAD: SRA Representative

 MEMBERS: (3) SRA Representatives and (2) LBP Representatives

 The three (3) members from SRA shall also act as SCP-SIDA Technical Secretariat who shall undertake the following duties:

a) Review and evaluate all loan applications including all documentary requirements;

b) Endorse to Sugar Board/SCPMC (excluding LBP representatives) all loan applications which pass its review process for approval;

c) Submit to LBP all loan applications approved by Sugar Board/SCPMC;

d) Coordination with partner agencies;

e) Preparation of minutes of meetings of the SCPMC; and

f) Compilation of reports and preparation of materials. HEITAD

3. Mill District SCP-SIDA Focal Persons

 The SRA shall designate focal persons for the SCP-SIDA at the Mill District Levels covered by the Program who shall have the following responsibilities:

a) Consolidate the list of accredited sugarcane farmers, block farms, and planters' cooperatives/associations/federations and service centers and forward the same to the SCP-SIDA Technical Secretariat for evaluation/endorsement to LBP.

b) Coordinate with various regional program partners for the conduct of regional/provincial orientation seminar.

c) Coordinate with the SCP-SIDA Technical Secretariat regarding reportorial and other requirements in line with the SCP-SIDA implementation.

G. BASIC LENDING POLICIES

H. AMENDMENT

This IRR may be amended upon written agreement of all parties.

I. SEPARABILITY

If any provision in this IRR or application of such provision to any circumstance is held invalid, the remainder of this IRR shall not be affected thereby.

J. EFFECTIVITY

This Joint Memorandum Circular shall take effect upon signing.

City of Manila, January 23, 2018. ATICcS

SUGAR REGULATORY ADMINISTRATION

By:(SGD.) HERMENIGILDO R. SERAFICAAdministrator

By:(SGD.) ATTY. ROLAND B. BELTRANChairman, Committee on Socialized

 

LAND BANK OF THE PHILIPPINES

By:(SGD.) ALEX V. BUENAVENTURAPresident and CEO

By:(SGD.) EDWARD JOHN T. REYESExecutive Vice PresidentAgricultural and DevelopmentLending Sector

ANNEX A

CLASS D

Land Bank of the PhilippinesBasic Documentary Requirements (On Top of SRA Requirements)

 

Specific Requirements for Common Service Centers

1. Business Plan/Feasibility Study (including Financial Projections, Source of Equity, List of Suppliers/Markets or Buyers and Contact Numbers)

2. For Acquisition of Machinery/Equipment: Price Quotation of Machinery/Equipment to be acquired

3. For Construction/Repairs and Renovation:

— Cost Estimates

— Building Plan/Architectural Design and Specification

— Bill of Materials and Work Program

— Building Permit

— Contractor's All Risk Insurance (CARI) for building to be constructed (thru LBP Insurance Brokerage)

4. Collateral Documents ETHIDa

 Real Estate Mortgage

— Photocopy TCT

— Photocopy of Tax Declaration

— Photocopy of RETR

— Location Plan/Vicinity Map

— Building Plans/Architectural Design, Bill of Materials of land development & building improvements

 Chattel Mortgage

— Evidence/Affidavit of Ownership of Existing Machineries/Equipment (e.g., OR/CR of vehicle)

Footnotes

1. Note: The indicated program fund allocation may be reviewed periodically by the SCPMC and adjusted if necessary to meet actual demand for credit by the target program beneficiaries.