SIXTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES }
First Regular Session

HOUSE OF REPRESENTATIVES

BY:
Introduced by Representative Rufus B. Rodriguez and’,
Representative Maximo B. Rodriguez, Jr.

8701

House Bill No.
EXPLANATORY NOTE

|. Introduction

The performance of agriculture is critical in attaining the goals of food security, poverty
alleviation and employment generation. The policy framework to guide agricultural development
was laid down under Republic Act 8435, or the Agriculture and Fisheries Modernization Act
(AFMA) as well as the Quedancor Charter, RA 7393. For credit, AFMA stipulates that the
Philippines sets as a policy the alleviation of poverty and the promotion of vigorous growth in the
countryside through access to credit of small farmers and fisherfolk. Access to credit is often
linked with the bank's perception that agricultural projects are not viable and small farmers and
fisherfolk, are high credit risks, As a result, majority of farmers and fisherfolk borrow from
informal sources at usurious interest rates, affecting their income and competitiveness vis-a-vis
world trading order.

Bank's credit infusion to Philippine agriculture shows a dismal picture. Loan outstanding
of banks to the agriculture sector have constituted only a small proportion, averaging six percent
(6%) of the total loan portfolio in the past 10 years according to a study by the Agricultural Credit
Policy Council

For the year 2008, an estimated P420 billion worth of loans were released by banks to
the agri-fishery and forestry (AFF) sector. However, ACPC cites that this represents only 2.3%
of the total loan disbursed by the banking system amounting to P18 trillion to finance the
country's economic activities. Out of the P420 billion loans to the AFF sector P178 billion
financial agricultural production,

ll.  Quedancor: Government’s Guarantee Agency for the Agri-fishery Sector

The Quedan and Rural Credit Guarantee Corporation (Quedancor, for brevity) is the
National Government's guarantee institution for the agri-fishery sector. For the past 32 years,
the corporation has generated P47.5 Billion loans benefitting 4,3 million small farmers, fishers,
agricultural workers and entrepreneurs nationwide. Of this amount, P25.8 Billion are in the form
of guarantees, particularly covering inventory financing of grains and other storable high value
agricultural commodities.

Quedancor traces its roots from the erstwhile Quedan Guarantee Fund Board (QGFB)
created in 1978 by virtue of Letter of Instruction (LO!) No. 704 specifically to evolve a guarantee
system for grains inventory stock financing. QGFB has been given a P95M guarantee seed
fund through LOI No. 696. Later, the scope of QGFB's guarantee operations expanded to
include other storable agri-aqua commodities.

The success of QGFB's guarantee financing program led to its re-organization and
expansion of authority under a corporate set-up through the passage of Republic Act No. 7393
(the Quedancor Charter) in 1992 during the administration of then President Corazon C. Aquino.


In 2001, Quedancor went heavily into direct lending and veered away from guarantee
operations. Borrowed money from the capital market was used for direct lending to the agri-
fishery sector, a very high-risk and high-cost transaction.

In a Sudden twist, Quedancor’s direct loan releases surged from 2001 to 2005.
Significantly, the ratio of direct loans vs. guarantees likewise dramatically increased. From a
P986.5M direct loans released in 2001, it went up to P2.23B in 2003, doubled to P4.81B in 2004
and further increased to P5.19B in 2005. Conversely, guarantee releases tapered off from
P402.5M in 2001 to P177M in 2005. Percentage-wise, in 2001, Quedancor guarantees is 28.9%
of the total loan generation, while in 20085 it drastically dropped to a measly 3.4% of the P5.2B
loan exposure.

Quedancor posted net profits from 2001 to 2005, From a gain of P18.5M in 2001, profit
drastically increased to about 900% in 2004 in the amount of P169.6M. This is primarily due to
income derived from increased direct loan releases as a result of the avallabllity of borrowed
capital that year (P5-B Syndicated Loan)

However, direct loans surged but gradually declined due to collection inefficiency. Bad
accounts and high interest servicing racheted losses that began in 2006. From a Net Loss of
P23.3M in 2006, it ballooned to P286.5M in 2007, P625.6 in 2008 and P563.4M in 2009. This
sudden continuing drop is a manifestation of how bad Quedancor’s loan portfolio has become
since the time it borrowed funds from the capital market and heavily engaged into direct lending
from 2001 to 2006.

The convergence of having a bad portfolio; a declining repayment rate; high operating
cost, personal services (PS), maintenance and other operating expense (MOOE) due to
organizational expansion; and high interest cost all led to a tight cash flow and a financially
bleeding corporation. Quedancor was thus bound to default from its credit obligation. For
years, Quedancor invested substantially to develop the core competency of its personnel in
credit and guarantee management. Todate, its employees face possible joblessness due to an
approved Rationalization Plan that will terminate more than 600 of them, clearly victims of past
mismanagement.

ll, The Solution

Guaranteeing agricultural credit is stil an effective intervention by the National
Government by which small farmers and fishers become bankable partners in economic
development. Quedancor is the potent arm of the government in providing agricultural credit
though its time-tested guarantee operations, thus making credit more affordable and accessible
to the agri-fishery sector.

Quedancor’s renewed and strengthened guarantee business addresses a niche in the
agri-fishery economy which it once was performing successfully, The need to revisit
Quedancor's mandate in consonance with the present policy thrusts merits preferential
attention, more particularly in the aspect of fund support considering that its continued
guarantee operation provides livelihood and employment that increases productivity and rural
income.

Though this Proposed Bill, the Quedancor shall be reconstituted into the Agricuttural
Credit and Guarantee Corporation or AGRICORP with a proposed authorized capitalization of
P25 Billion

The AGRICORP shall be given a clean slate and a strengthened mandate in
implementing a renewed agricultural guarantee business by separating and transferring the
liabilities and obligations of the Old Quedancor to the National Government. In so doing, the
liabilities incurred shall be separately dealt with through the assistance of the national
government's expert agencies while the needed agricultural guarantee intervention by the
government to the agri-fishery sector shall be strengthened further in the over-all objective of
national progress and economic development.


Quedancor has a unique mandate and potency in triggering countryside growth and
employment through the provision of guarantee services to the agri-fishery sector — the sector
which has been given less priority though pregnant with remarkable potentials. And the way to
survive this unique and noble mandate is to skin Quedancor from its trappings and baggage.
letting its core mandate of providing guarantees to the agri-fishery sector transcend to its full
potentials under the reconstituted AGRICORP. The complex problems associated with the Old
Quedancor shall be left with the National Government for a more focused management of
liabilities, without affecting the over-all investment relation with the banking industry and other
creditor institutions.

‘As a government financial institution, AGRICORP needs close supervision by the
National Government's fiscal and financial regulators, particularly the Department of Finance,
Bangko Sentral ng Pilipinas and the Department of Budget and Management whose
representation in the AGRICORP Board shall provide better financial assessment and policy
guidance. Moreover, considering the broad national objective of increasing credit and
guarantees in the agrisfishery sector, the Chairmanship and Vice-Chaimmanship of the
IAGRICORP Board necessitates the expert guidance from the Office of the President and the
National Economic Development Authority, respectively. These institutional memberships in the
AGRICORP's Governing Board shall help ensure strict regulation and full guidance on the
precise, updated and proper policies as regards agricultural credit and guarantee operations.

Finally, increasing AGRICORP’s authorized capitalization provides preferential
advantage in better recovering the lost trust and confidence from the banking sector and capital
market in once again evolving a workable and complementary beneficial relationship in spurring
the flow of investments and credit resources into the countryside as a joint undertaking for
nation-building and development. The rich resources of the banking industry and capital market
lay awaiting the National Government's intervention to access the same for the remarkable
potency of the Philippine agri-fishery sector. What remains to be done is to trigger active
cooperation among the stakeholders by evolving a strong mechanism and policy on agricultural
credit guarantee anchored on the new AGRICORP.

In view of the foregoing, immediate approval of this bill is eamestly requested

RUFUS B. RODI EZ

MAXIMO B. nooglaues, JR.


SIXTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriquez and
_ Representative Maximo B. Rodriguez, Jr.

House Bill No. 37014

AN ACT

STRENGTHENING QUEDAN AND RURAL CREDIT GUARANTEE CORPORATION,
BROADENING ITS POWERS AND RESOURCES TO SUPPORT MICRO, SMALL AND
MEDIUM ENTERPRISES, FARMERS, FISHERFOLKS, AND WORKERS BY
RECONSTITUTING IT AS THE AGRICULTURAL CREDIT GUARANTEE CORPORATION,
AMENDING FOR THE PURPOSE REPUBLIC ACT NO, 7393, OTHERWISE KNOWN AS THE
QUEDAN AND RURAL CREDIT GUARANTEE CORPORATION ACT AND FOR OTHER
PURPOSES.

Be it enacted by the Senate and the House of Representatives of the Philippines in Congress
assembled.

SEC 1. Title — This Act shall be known as the “Agricultural Credit Guarantee Corporation
(AGRICORP) Act’.

SEC 2. Declaration of Policy — Sections 10 and 20 of Article II of the Philippine Constitution
mandate one methodology on how the State shall perform its task of accelerating the flow of
investments and credit resources to the populace so as to trigger vigorous growth and
development, productivity, employment and enterprises thereby generating more livelihood and
means opportunities for the disadvantaged populace.

Consonant to this, the State shall set up a convenient credit-support mechanism, a
reliable guarantee system and a specially emplaced credit and/or guarantee facility that shell
effectively;

(a) Provide avenues of access of urban and rural workers, thelr cooperatives, the

small urban and rural enterprises to credit or credit institutions and providers;

(b) Encourage the participation of private enterprises to support the undertaking of

such persons by providing incentives for them, to focus upon, to trust and/or increase

the flow of credit resources and investments into these areas of concerns;

(c) __ Institutionalize the Quedan Purchase Order/Job Order (PO/JO) and other

instruments such nature as evidence of guarantees and in providing credit assistance;

(d) —_Institutionalize the quedan or warehouse receipt and other negotiable

instruments, evidencing existence of commodities stored in the Corporation's bonded

warehouses, as convenient collateral for accessing credit,

(e) Prioritize financing support and/or grant of assistance to small enterprises

engaged and or will engage in small production, processing and developmental activities

and to those businesses directly supporting such endeavors either as their markets or
partners;

(f) Support and encourage dynamic cooperativism, groupings, capital formation and

savings mobilization among the populace;


(a) Ascertain income from the above-stated activities in recognition of committed,
honest undertakings and services by promoting, adopting or institutionalizing a system
that rewards these efforts or by-passes or merges the unnecessary layers of marketing
through linkages and voluntary arrangements among its players;

(h) — Harmonize, involve, coordinate and/or team up with other government
institutions, nongovemmental organizations, private voluntary organizations, seff-helo
groups and other aggrupations involved in providing support services to these sectors
and areas.

(i) Maximize access to credit and credit providers for rural workers, their
cooperatives, associations and groups, formal or informal; and

() __ Institutionalize different schemes to accelerate the flow of credits to rural
workers, their cooperatives, associations and groups, and forms of instruments as
evidence of loan and other monetary obligations;

SEC 3. Definition of Terms - The following terms as used in this Act shall mean:
(a) “Corporation” — The Agricultural Credit Guarantee Corporation or AGRICORP;
(b) “Farmer” - Any natural person whose primary livelihood is cultivation of land or
the production of agricultural crops, livestock and aquaculture products, in small or
commercial scale, either by himself or primarily with the assistance of his immediate
farm household or workers for the secondary purpose of gaining profit, or any juridical
person, such as but not limited to corporations, cooperatives or associations, whose
primary purpose is cultivation of land or the production of agricultural crops, livestock
and aquaculture products with the assistance of farm workers, whether the land is
‘owned by hinvit or by another person, under a leasehold tenancy agreement or
arrangement with the owner thereof;
(c) _ “Fisherfolk’ - Refers to any natural person whose primary livelihood is fishing or
the catching and/or gathering of other marine products, in small or commercial scale,
either by himself or with the assistance of his immediate household or workers for the
secondary purpose of gaining profit, or any juridical person whose primary purpose is
fishing or the catching and/or gathering of other marine products, engaging in such
activity either by himself or with the assistance of workers, whether the vessel, banca,
fishpond and other equipment used is owned by him or by another person under lease
or other arrangement with the owner thereof and there is no employer-employee
relationship;
(d) “Worker” — Refers to any natural person whose primary livelihood is employment
whether with an employer or by himself engaging or will engage in a livelihood activity in
small scale either by himself or with the assistance of his immediate household or family
members for the primary purpose of augmenting their family income which may not be
necessarily to gain profit.
(ce) ‘Farm-Workers" — Refers to any natural person not being a member of the
household, whose primary and secondary source of livelihood is giving assistance to
farmers and fisherfolks;
(f) “Enterprise” — Refers to an activity of a production, processing or development-
based undertaking, or of such combination or trading thereof, engaged either for profit,
or as a source of daily sustenance or for addition thereto;
(g) “Banks” — Refer to entity or entities which per authority from the Bangko Sentral
ng Pilipinas are authorized to lend and accept deposits;
(h) “Credit Providers” - Refers to banks, quasi-banking Institutions, or any
institutions, private or government owned, that provide credit or financial assistance to
any member of the agricultural sector thru the Corporation;


(i) “Providers” — Refer to legally operating businesses that render services or that
provide merchandise to clients or borrowers of the Corporation for an undertaking;

() ‘Clients and Borrowers” — Refer to any person or persons whether natural
juridical or recognized aggrupations that avail or are availing of the loan or guarantee
services of the Corporation;

(k) “Partners” — Refer to any person, natural or juridical, that supports the realization
and implementation of the loan and guarantee programs of the Corporation other than a
client, borrower or provider;

(I) | “Recognized Lending Entities” - Refer to any person, natural or juridical, other
than banks, that lend its cash, goods or services to the clients or borrowers under any of
the programs of the Corporation, which loan is intended to be covered by the guarantee
of the Corporation

SEC 4, Reorganization - The Quedan and Rural Credit Guarantee Corporation is hereby
reorganized in accordance with the provisions of this Act and renamed as Agricultural Credit
Guarantee Corporation and hereafter referred to as the Corporation.

The Corporation, in consideration of its role in national development, is hereby attached
to the Office of the President of the Republic of the Philippines and subject to the regulatory
powers of the Securities and Exchange Commission insofar as allowed under Sections 6, 7, 9,
10, 13 and 31 hereof.

SEC 5. Place of Business — The Corporation shall have its principal place of business in Metro
Manila and may establish as many branches or smaller units of organization in any part of the
Philippines as may be necessary in carrying out efficiently and effectively its operations

SEC 6. Term of Existence - The term of existence of the Corporation shall be fifty (60) years
from the date of effectivity of this Act

SEC 7. Authorized Capital Stock — The authorized capital stock of the Corporation is hereby
increased from Two Billion Pesos (P2,000,000,000.00) to Twenty-Five Billion Pesos
(P25,000,000,000) to be divided into twenty five billion common and voting shares, with the par
value of One Peso (P1.00) per share, sixty percent (60%) thereof to be subscribed solely by the
National Government, government-owned or —controlled corporations and/or any other
government instrumentalities as allowed by their respective charters and forty percent (40%) by
private investors: Provided, however, That the shares of the National Government,
‘government-owned or-controlled corporations or any other government instrumentalities may be
sold to one another but not to private investors.

SEC 8, Subscription by National Government — Upon the effectivity of this Act, the National
Government shall be deemed to have subscribed to such number of shares of the Corporation
equivalent in par value to, and considered paid for by, the net assets of Quedan and Rural
Credit Guarantee Corporation, as determined and certified by the Commission on Audit within
three (3) months from the effectivity hereof.

‘All other Government Agencies whose heads are ex-officio members of the Governing
Board of the Corporation are mandated to subscribe in the stocks of the Corporation to cover a
total of at least one fourth (1/4) of the required subscriptions of the government in pro rata basis
as is necessary to cover the required subscriptions of the Government and which may be
sourced from their annual budgets. Ten (10) percent of such subscriptions shall be paid in the
immediate year succeeding the approval of this Act. the remaining shall be paid at ten (10)
percent yearly from their approved budgets or from the dividend of their subscriptions in


accordance with the succeeding paragraph hereof until the subscribed stocks shall have been
fully paid

Subject to the approval of the majority of members of the Governing Board, in a meeting
called for the purpose, profit accruing to the investment of the above-mentioned agencies, in
accordance to the provision of Section 22 of this Act, may be used as part of their compliance to
the required subscriptions. The permanent representative of the Office of the President of the
Republic of the Philippines or his duly authorized representative shall vote corresponding to the
National Government's shareholding.

SEC 9, Subscription by Private investors — No private person, natural or juridical, shall
directly or indirectly, by interlocking directorate or other forms of combinations, by trust,
subscriptions, purchase, lease, mortgage, pledge, or other means of acquisition or
encumbrance, own at any one time more than ten percent (10%) of the portion of the
Corporation's authorized capital stock, that can be subscribed solely by private investors. The
Corporation in consultation with the Securities and Exchange Commission shall prescribe within
ninety (20) days from the effectivity of this Act, implementing rules and regulations which will
assure strict observance of the herein section by private investors and stock exchanges, stock-
brokers, traders and personnel thereof, if the Corporation is listed in such exchanges for the
trading of its shares therein under Section 10 hereof. Violation of any provision of the herein
section or its implementing rules and regulations shall be punishable under Section 185 of the
Revised Penal Code or, whenever applicable, the Anti-graft and Corrupt Practices Act.

SEC 10. Submission to the Securities and Exchange Commission — The concemed officers
of the Corporation are mandated to submit to the Securities and Exchange Commission a copy
of this Act not later than six (6) months from its effectivity.

Failure to comply with the provisions herein shall be prima facie evidence of bad faith on
the part of the Corporation's personnel responsible therefor.

SEC 11. Corporate Powers — The Corporation, as a body corporate, shall have the following

powers and purposes:
(a) _ Establish a credit-support mechanism for the benefit of and assistance to its
clients, borrowers and partners;
(b) Establish, institutionalize and implement a guarantee system to promote
inventory financing of storable commodities; establishment of production and post.
production facilities; issuances of bonds and notes to finance the co-lending and
guarantee activities of the Corporation as authorized under this Act.
(c) Evolve and provide agri-fishery credit and guarantee options for start-ups and/or
pioneering ventures which ordinarily fail to pass stringent banking lending requirements
or which no financial institution would be willing to lend, including borrowers and clients
who have been thrice denied to access and avail loan from banks;
(d)Set up a system for accrediting the participation in the Corporation's various
programs by borrowers, lending banks, financing institutions, bonding and insurance
companies;
(e) Franchise-bonded warehouses intended for quedan inventory financing, issue and
enforce rules and regulations therefor;
(f) Print and provide uniform negotiable quedan or warehouse receipt forms for the
purpose of quedan financing which shall be serially numbered, on security notepaper, in
specific quantity denominations of such unit of measurement of subject commodities;
and shall contain the name and business address of the werehouseman, the variety,
classification, moisture content and quality of the commodity deposited, the warranties of


the warehouseman as prescribed by existing laws, rules and regulations, the charges
and authorized liens on the stocks in deposit;

(g) Prescribe fees and charges for the Corporation's services; fix, lower, condone or
waive interest and penalty charges for delinquent accounts; and/or impose fines and
sanctions for violations of its rules and regulations;

(h) Acquire by purchase or otherwise ownership of and invest in, hold, sell or otherwise
dispose of stocks or bonds of any interest in either or any obligation or evidence or
indebtedness of any person, firm or corporation; and as owner of such stocks, bonds or
interest therein, or other obligations or evidences of indebtedness, exercise the rights,
powers and privileges or ownership, including the right to vote thereon or consent in
respect thereto for any and all lawful purposes;

(i) Purchase or otherwise acquire, sell, lease, convey, mortgage or encumber and
otherwise deal with any property, real or personal, or any interest therein;

() Develop or otherwise improve the properties acquired by the corporation, reall or
personal, either directly or in coordination with and assistance of any government
agency or private institutions through any form of contracts, for the purpose of
enhancing the value and marketability of the property;

(k) Actas a receiver;

(I) Adopt and use a corporate seal,

(m) Sue and be sued;

(n) Prescribe, repeal and alter its own bylaws; determine its operating policies and issue
such rules and regulations as may be necessary and incidental to implement its various
policies, programs and projects; and

(0) Carry on any lawful business whatsoever and do everything suitable, convenient and
proper for the exercise of any of the foregoing powers and promote the interests of the
Corporation or its properties.

SEC. 12. Governing Board — The affairs and business of the Corporation shall be directed, its
properties managed and preserved, and its corporate powers exercised, unless otherwise
provided in this Act, by a governing Board consisting of fifteen (15) members composed initially
Of the following: a permanent representative from the Office of the President of the Republic of
the Philippines, the Director General of the National Economic Development Authority (NEDA),
the Secretaries of the Department of Budget and Management (DBM), Department of Finance
(DOF), Department of Agriculture (DA), Department of Interior and Local Government (DILG),
the Governor of Bangko Sentral ng Pilipinas, the president of the Philippine Chamber of
Commerce and Industry (PCC), the President and Chief Executive Officer (CEO) of the
Corporation, and three (3) other members: a small farmer or fisherfokk to be endorsed by the
Department of Agriculture, a worker to be endorsed by the Department of Labor and
Employment and a government employee to be endorsed by the Civil Service Commission and
approved by the other members of the Governing Board after having been nominated by a
nationally organized association of farmers or fisherfolks, workers and employees, respectively
Said representatives shall serve for a term of two (2) year. Members of the Governing Board
who would proportionately represent the private investments in the Corporation shall be decided
upon by the initial members of the Governing Board as provided for under Section 13 hereof,

in the interest of the State, the representative of the Office of the President of the
Republic of the Philippines and the Director General of NEDA shall be the Chairman and Vice
Chairman, respectively, which functions shall not be delegated through representation.

‘The Chairman shall preside over the meetings of the governing Board where aside from
voting regularly he shall vote to break a tie. He shall likewise preside over the stockholders
meetings.


The Vice-Chairman of the Board shall assist the Chairman and actin his stead in case of
the latter's absence or incapacity. In case of incapacity or absence of both the Chairman and
Vice-Chairman, the Governing Board shall, upon determination of a quorum and counting the
present representatives of the Chairman and Vice-Chairman, but who must not vote, by the
Corporate secretary, shall elect from among themselves a temporary Chairman from among its
members and whose authority to act as such shall be for the particular instance and/or duration

‘After the determination of the quorum, recognized representatives of any of the
members of the Governing Board shall be allowed to share their views, present propositions
‘and motions which can be voted upon and vote on matters requiring such during their
representation. Provided, however, that delegation of representation to attend a meeting by any
member of the Governing Board shall only be valid for not more than two (2) consecutive
meetings

SEC 13. Election, Terms of Office of Elective Board Members — The additional members of
the Governing Board to be elected by the initial members of the Governing Board and
henceforth shall serve for a term of one (1) year each and can be reelected to serve for a
continuous and maximum term of three (3) years. The election shall be presided by the Board
Chairman, which shall be held in Metro Manila, in a place accessible to the public, and shall be
in accordance with provisions of the Corporation code of the Philippines and other pertinent
laws. The first election after the effectivity of this Act shall be held when the initial members of
the governing Board shall have been duly constituted and twenty-five percent (25%) of the
counterpart shares for private investors shall have been subscribed, the exact date, time and
place to be determined by the governing Board then incumbent. The governing Board of the
Corporation, in consultation with the Securities and Exchange Commission, shall prescribe the
rules and regulations for the efficient and effective implementation of this section

SEC 14. Specific Duties and Powers of Governing Board - The Governing Board shall have
the following specific duties and powers:

(a) Determine the general policies of the Corporation within the scope of its powers,
objectives and financial resources;

(b) Approve and adopt annually the Corporation's budget at least three (3) months
before the start of the fiscal period in conformity with the guidelines prescribed by the
Department of Budget and Management, the Department of Finance and the Government
Corporate Monitoring and Coordinating Committee; the Corporation's plan of operation for
the year, as well as its medium-and long-term plans, programs and projects;

(c) \ Monitor the implementation of the Corporation's general policies, plans, budgets,
and projects;

(4) Upon the recommendation of its President and CEO of the Corporation, approve,
reorganize or otherwise alter the position structure, staffing pattern, qualifications, powers
and functions of the Corporation's officers and employees in consultation with the Civil
Service Commission and the Department of Budget and Management;

(e) With the same power as that of other Government Owned and Controlled
Corporation, rationalize the rates of salaries, wages, allowances, per diems, consultant's
fees, overtime pay and other forms of compensation, including gratuities and fringe benefits,
without prejudice to the compensation, fringe benefits and gratuities enjoyed by or provided
for incumbent personnel at the effectivity of this Act;

(f) Approve, upon the recommendation of its President and CEO, the appointment
of senior corporate officials from the rank of Vice Presidents, in accordance with the
pertinent provisions of the Civil Service Law, rules and regulations;


(@) __ Evaluate the financial reports of the Corporation and the comments of the Auditor
thereon;

(h) Submit to the President of the Philippines, the Congress of the Philippines, the
National Economic Development Authority, Department of Finance, the Department of
Budget and Management, and the Government Corporate Monitoring and Coordinating
Committee, an annual report of the Corporation's operations which shall include the
folowing audited financial statements: balance sheet or statement of assets and labilities;
income statement or statement of income and expenditures; and statement of sources and
application of funds.

Such reports shall also include an analysis of any surplus or deficit of the
Corporation and other additional statements and information necessary to make known the
financial conditions and operations of the Corporation such as the outstanding domestic and
foreign borrowings, the ‘amount of government capital and/or dividend that will be credited to
the Bureau of Treasury during the fiscal year, and pursuant to Section 7 hereof the
appropriations needed to restore capital impairments, if any, subject to pertinent laws, rules
and regulations; and such other reports and statements that the Government Corporate
Monitoring and Coordinating Committee may prescribe,

i) Establish a competitive selection process to ensure that the key executives of the
Corporation have the necessary motivation, integrity, competence and professionalism
‘Adopt a professional development program for officers and employees, and succession
planning for key executives;

}) Monitor and manage potential conflicts of interest of management, board
members and shareholders, including misuse of corporate assets and abuse of related party
transactions;

k) Ensure the integrity of Quedancor's accounting and financial reporting systems,
including independent audit, and that appropriate systems of control are in place, in
particular, systems for risk management, financial and operational control, and compliance
with the law and relevant standards; Implement a system of internal checks and balances
that must be regularly reviewed and updated; and

1) Constitute an Audit Committee and such other specialized committees as may be
necessary to assist the board in discharging its functions;

SEC 15. President — The management of the day-to-day operation of the Corporation shall be
vested in the President as its Chief Executive Officer.

No person shall be appointed President by the Governing Board unless he is of good
moral character and reputation, in the government career service, Is at least forty (40) years of
age and has proven expertise in banking, finance, economics, law, agriculture, business
management, or public administration and is recommended by at least two nationally
recognized farmer's association and the employees association of the Corporation. The tenure
of the President and CEO of the Corporation shall be four (4) years subject to renewal or
reappointment by the appointing authority and with the confirmation of the Commission on
Appointments.

in no case shall the Corporation be headed by an officer-in-charge for a period of not
more than three (3) months, counted cumulatively from the time of his first assumption to such
post.

SEC 16. Powers and Duties of President ~ The President of the Corporation shall have the
following powers and duties:
(a) Direct and manage the affairs and business of the Corporation;
(b) Implement or cause the implementation of its budget, policies, programs and
projects approved by the Governing Board;


(c) Represent and enter into and execute, in behalf of the Corporation, all contracts
and authorized transactions;

(d) Appoint, promote, remove, suspend or otherwise discipline for cause, any
subordinate officer or employee of the Corporation pursuant to the Civil Service Law, rules
and regulations: Provided, however, that with respect to officers and with rank equivalent to
or higher than Vice-President, such action shall be subject to the approval of the governing
Board;

(e) Ensure that the officers concemed prepare the annual and financial reports,
including the analysis required in Section 14 hereof on or before the time fixed therein; and

(g) Perform such other powers or duties as may be appropriately and reasonably
assigned to him by the governing Board from time to time.

SEC 17. Solicitation of Grants - The Chairman or President and CEO of the Corporation is
hereby authorized, subject to the approval of the governing Board, to directly solicit, negotiate
for and receive grants or fund in trust for the Corporation from any source, domestic or foreign,
public or private, in accordance with existing laws.

For the purposes of this Act, grants shall include legacies, devises, gifts, donations,
endowments and other transfers from any source, domestic or foreign, public or private, or the
‘ownership and/or possession of real or personal properties, which are free from any monetary
considerations except for the cost of its transfer to the Corporation and which ownership is
deemed transferred to the Corporation.

With respect to such grants, the following are hereby prescribed:

(a) No grant shall be accepted if its term and conditions are patently and
grossly disadvantageous to the Corporation or the Government;

(b) The disbursement or use by the Corporation of any cash grant shall be,
pursuant to a special budget approved by the governing Board, in consultation
with the Department of Budget and Management, and subject to accounting and
auditing laws, rules and regulations;

(c) _ Incase of foreign sourced items that need to pass through the Bureau of
Customs, the Bureau shall give priority for the expeditious, safe, efficient and
effective release from its premises of grants given to the Corporation under this

Act;

(d)\ The President and CEO of the Corporation may, upon authority of the
Governing Board, in his sound discretion, deputize members of deputize the
Philippine National Police, Armed Forces of the Philippines (AFP) and other
security forces of the Government to escort and/or guard the grants given to the
Corporation under this Act in order to ensure their safe and speedy
transportation, delivery and custody by the Corporation's representatives;

(e) _ Grants given to the Corporation under this Act shall be accorded utmost
priority in transportation by national flag carriers and domestic common carriers;

and

(f) Not later than forty (40) days from the start of or receipt thereof, the
President and CEO of the Corporation shall submit to the Director General of the
National Economic and Development Authority a report about the grants being
negotiated for and/or received by the Corporation, specifying therein the peso
value, general descriptions, sources, summaries of terms and conditions,
purposes, and date of start of negotiation or receipt of such grants.

SEC 18, Operating Principles - The Corporation in the exercise of its powers shall be guided
by the following operating principles:


(a) The guarantee cover and loan under its various programs shall be scaled
progressively in favor of agri-ishery micro-enterprises vis-a-vis small and medium-sizec
businesses;

(b) The rate of guarantee fees and other corporate charges shall be commensurate
to the risk covered;

(c) Yearly fund allocations for its programs shall be always on a sixty (60)forty (40)
basis in favor of its sole guarantee versus its guaranteed co-financing programs;

(d) The aggregate contingent liability, that is, its outstanding guarantee obligation at
any given time, shall not exceed three (3) times its available guarantee fund;

(e) The guarantee for storable commodities stored in bonded warehouses covered
by a quedan or warehouse receipt shall be based on their physical presence;

(f) The guarantee program for production and post-production facilities, farm-aqua
machineries, equipment and implements, shall be on the loan extended by a bank or lending
institution on the basis of a mortgage thereon, without prejudice to the requirement for an
additional or substitute collateral;

(g) The guarantee for production inputs and labor or provision of goods and/or
services for an undertaking may either be on the loan if granted by a bank or recognized
lending entity or over the obligation of the performance of the Corporation's clients and/or
borrower to pay its value without prejudice to the requirement for a counter-guarantee from
non-governmental organizations, or for some form of acceptable collaterals;

(h) The credit-support mechanism may be in the form of assistance or any of the
combination thereof in client prospecting, credit evaluation, collateral appraisal, account
monitoring, special time deposit, co-financing arrangement, co-guarantee, interest
stabilization, liquidity access or a combination of any thereof and other similar incentives
whichever is applicable;

(i) The guarantee cover, credit-support system and the credit to be extended by the
Corporation shall be oriented to promote capital formation, savings mobilization investment
and private participation;

(j) Secondary trading market and liquidity access for participating banks and lending
institutions, especially for those operating in small municipalities, shall be developed and
promoted by the Corporation for its guaranteed loan papers;

(kK) Working relationships shall be harmonized with other government institutions,
agencies and instrumentalities engaged in national development; and

(I) Program evaluation shall be made on a yearly basis with the operations officers
as the main sources of information in cooperation with program recipients,
Recommendations of the operations officers shall be the basis for the furtherance,
modification or cancellation or the program. A feedback mechanism to this effect shall be
defined by the Governing Board within 90 days from its first meeting.

SEC 19, Sovereign Guarantee - In accordance with pertinent laws, rules and regulations, the
Republic of the Philippines shall answer for the payment of guarantee obligations duly incurred
by the Corporation under the provisions of this Act: Provided, however, that the Corporation's
assets shall have been first fully exhausted to satisfy its guarantee obligations

Pursuant to the above, the Department of Budget and Management and the Congress of
the Republic of the Philippines shall include in its yearly appropriations a fund for the
Corporation in consonance with Sections 7 and 14 of this Act, the approval of which shall not be
delayed. In the same manner, Congress shall give preferential consideration to budgets
presented by Government agencies intended for investment to the stocks of the Corporation or
for trust to the Corporation under Section 23 hereof.


SEC 20. Compliance with Agri-Agra Law — Other than those incentives already provided by
the Government, investment by any banking institution in the authorized capital stock of the
Corporation shall be considered compliance with Presidential Decree No. 717 (1975), otherwise
known as the Agri-Agra Law, in such equivalent as to their equity holdings in the Corporation
‘and yearly computed at its present market value. Likewise, loans extended by @ bank ane
covered by a guarantee of the Corporation shall be deemed as compliance with the Agri-Agre
Tow, Rediscounting by secondary banks of originating banks’ loan receivables having the
quarantee cover of the Corporation shall ikewise be deemed complance with the same jaw ane
Bans released by a bank to an entity acting as partner of the Corporation shall kewise be
considered as compliance of the Agri-Agra Law to the value of the loan granted.

SEC 21, Protection for Corporation's Guarantees and Other Accommodations — The
provisions of anny local, regional, national, special or general law to the contrary notwilhstandthg
eecurities on guarantees and/or accommodations granted by, or subrogated to, the Corporation
or its predecessors-irvinterest shall not be subject to attachment, execution or any other court
process, nor shall they be included in the property of insolvent persons or institutions, unless et
eebts and obligations of the debtor to the Corporation and its predecessors-in-interest shall
have been previously paid, including accrued interest, penalties, collection expenses, and other
charges.

“The tight of the Corporation over the indebtedness of its clients or borrowers shal,
except for the payment of matured taxes, the payment of salaries and wages for work already
rendered by workers of the subject entities, are considered superior over any other rights in the
attachments and garnishments of the properties of its clients and borrowers that may be filed by
Sther creditors for obligation stil contracted by the Corporation's clients and borrowers after the
existence of the borrowers’ loan with the Corporation.

SEC 22. Dividend for Government Shareholdings — Subject to the provisions of Sections 7
and 14 (i) hereof, the annual dividends that may be declared by the Corporations pertaining ‘o
the National Government shareholdings shall be in the form of stock dividends in order to bulld
up the capital base of the Corporation in accordance with Section 8 hereot

inno instance, however, shall the subscription of the National Government exceed the
authorized share in the authorized stock of the Corporation.

SEC 23. Funds as Trust to the Corporation. —The National Government and all other
government instrumentalies including government owned and controlled corporations, in
Sursuance of their mandates, are hereby authorized to place funds in the Corporation in the
v ture of trust for credit and/or guarantee programs in such arrangements and purposes as may
be agreed upon by the entrustee and entrustor to service particular clients, borrowers and
activities

Countrywide Development Funds of the members of Congress may likewise be placed
in the Corporation in the nature and purpose as herein contemplated.

Subject to rules and procedures, foreign entities are also allowed to place funds to the
Corporation in the same nature of trust in accordance with this Act

SEC 24, Corporate Secretary - The Corporate Secretary, who shall be a lawyer, and who shall
have a regular item as one officer of the Corporation that must be appointed by the Governing
Board and under the supervision of its Chairman, shall record the deliberations and other offical
actions of the governing Board and shall take custody of the records and other papers
pertaining to it.

Unless replaced for cause, the Corporate Secretary, who can be reappointed, shall have
a tenure of three (3) years.


SEC 25, Legal Affairs — The Corporation shall have its own Legal Affairs Department to De
headed by the Corporate Legal Counsel, with the rank not lower than Senior Vice President,
and whose nature and terms of appointment shall be the same as that of other senior officers of
the Corporation under Section 14 (f) hereof.

in appropriate cases, the Corporation may also avail of the legal services of any
government legal office authorized to render such services to government-owned or-controred
Sorporations oF subject to rules and regulations, hire private law firms to support its collection
activities.

‘The Corporation may, upon the recommendation of its Corporate Legal Counse)
deputize any member of its legal staf to act as special shenif in foreciosure cases, In the sole o°
fttachment of the debtor's properties, and in the enforcement of court writs and processes 'n
eaese Involving the Corporation, Such special sheriff of the Corporation shall make a report to
the proper court on any action taken by him, which shall treat such action as if it were an act of
its own sheriffs in all respects.

SEC 26. Internal Audit ~ An Internal Audit Unit to be attached to the Office of the President
end CEO of the Corporation and must be headed by a person whose salary grade shall not be
(wer that the rank of Senior Vice President and to be appointed by the President and CEO of
the Corporation upon the recommendation of the Governing Board, shall also be established ir
tig Act as a tool of both the Governing Body and the management for the evaluation of
corporate programs, policies and directions.

Reports and recommendations of the said unit shall be directly given to the President
and CEO of the Corporation, to the next in rank post in the Corporation and to the Governing
Body for their reference and basis in their decision for Corporate efficiency.

SEC 27. COA Personnel and Expenditures - The number of personnel to be assigned by the
Commission on Audit in the Corporation and the concomitant expenses to be incurred in the
performance of their duties shall be determined in such manner as to harmonize equitably the
pea of the Commission on Audit to undertake efficiently and effectively its constitutional
powers and functions and the obligation of the Corporation to economize in the use of is funds,
Ponsidering that it is the Corporation which shall defray the expenses for the audit of I's
operations, In case of disagreement between the Commission on Audit and the Corporation As
fe the reasonableness of the number of such personnel and their auditing expenditures, the
opinion of the former shall prevail

‘As much as possible, the nature, function and accomplishments of the mandate of the
Corporation being performed by it shall be more on service and economic stimulation rather
than on proprietary basis and as being inept of governmental power, must be given due weight
by Its audit as proper as it can be in comparison to those government instrumentalities whicl
inherently have been accorded governmental powers or of those which are primarily established
by it primarily for its proprietary function.

SEC 28. Transitory Provisions — The incumbent President of the Quedan and Rural Credit
Guarantee Corporation shall be the President of the Agricultural Credit Guarantee Corporation
Gail a new President who shall have futflled the requirements of the position subject to the
provisions of Section 15 of this Act shall have been appointed by the President of the Repubtic
Ef the Philippines. The President and CEO shall, as soon as possible, prepare and submit fo
the Governing Board such plans and programs which will ensure harmonious and effective
transitional activities towards the full operation of the Corporation.

Notwithstanding any law to the contrary, the Corporation shall continue to be the
Corporation being referred to under Chapter 3 of the Agricutture and Fisheries Modemization


‘Act (AFMA) particularly Section 26 thereof, and shall likewise be the fund manager of all
agricultural guarantees and loan funds issued by the government for developmental purposes.

SEC 29. Transfer of Assets and Liabilities — Upon the effectivity of this Act, the Secretary of
Aagriculture, the Secretary of Finance, the Secretary of Budget and Management. the Governor
Of the Bangko Sentral in representation of the National Government, and the Chairmen of tne
Committees on Government Enterprises of the Senate and the House of Representatives shal
Gatermine the assets and liabilities of the Quedancor which may be transferred to or assunnee!
by the Department of Agriculture, The Committee shall complete its work within ninety (90) days
fomthe constitution of the Agricultural Credit and Guarantee Corporation submitting @
comprehensive report with all its findings and justification.

The folowing guidelines shall be strclly observed in the determination of which assets
and liabilities shall be transferred to the Department of Agriculture:

(a) the Governor of the Bangko Sentral and the Secretary of Finance shall have
primary responsibilty for working out creative monetary and financial solutions to
Patire the Quedancor liabilities and losses at the least cost to the Government;

{(b) collections from Quedancor's trade receivables shall be remitted to a specie!
deposit account (sinking fund) until such time a the net liabilites of the Central San
shall have been liquidated through generally accepted finance mechanisms such as,
but not limited to, write-offs, setoffs, condonation, collections, reappraisal,
revaluation and bond issuance by the National Government, or to the National
Government as dividends;

(c) the transfer of Quedancor's assets and liabilities, to be certified by the
Commission on Audit (COA), shall not commence until the initial required
capitalization of the Agricultural Credit and Guarantee Corporation shall have been
funded;

‘All actions taken under this section shall be reported to Congress and the President
within thirty (30) days.

SEC 30. Mandate to Organize — The Agricultural Credit and Guarantee Corporation shall be
organized by the Governing Board without being subject to the provisions of Republic Act No,
$430, by adopting I it so desires, an entirely new staffing pattern on organizational structure 9
Git the operations of the Agricultural Credit and Guarantee Corporation under this Act. No
preferential or priority right shall be given to or enjoyed by any personnel for appointment to ary
position in the new staffing pattern, nor shall any personnel be considered @s having Prior or
Pested rights with respect to retention in the Agricultural Credit and Guarantee Corporation ot in
any position which may be created in the new staffing pattem, even if he should be te
ay Peent of a similar position prior to organization. The formulation of the program of
Organization shall be completed within six (6) months after the effectivity ofthis Act, and shall be
fuly implemented within a period of six (6) months thereafter. Personnel who may not be
retained are deemed separated from the service.

SEC 31, Separation Benefits — Pursuant to Section 15 of this Act, the Governing Board is
Suthorized fo provide separation incentives, and all those who shall retire or be separated from
the service on account of reorganization under the preceding section shall be entitled to such
incentives, which shall be in addition to all gratuities and benefits to which they may be entitled
under existing laws.

SEC 32. Suppletory Application of Corporation Code — The provisions of Republic Act 7293
otherwise known “An Act Reorganizing The Quedan Guarantee Fund Board, Renaming It As
Quedan and Rural Credit Guarantee Corporation, Enlarging Its Powers And Resources To


Support Farmers And Rural Enterprises, And For Other Purposes” shall serve as suppletory to
the provisions of this act in so far as it is not in full conflict with the provisions of this Act
Moreover, matters not provided for in this Act shall be governed by the Corporation Code of the
Philippines and on the other accepted incidents of a principle of a corporation, in suppletory
character insofar as itis applicable

SEC 33. Separability — Any portion or provision of this Act that may be unconstitutional or
invalid shall not have the effect of nullifying other portions or provisions hereof as long as such
portions or provisions can still subsist and be given legal force and effect in their entirety.

SEC 34. Repeal - All laws, ordinances, rules, regulations and other issuances or parts thereof,
contrary to or inconsistent herewith, are hereby repealed or modified accordingly.

SEC 36. Effectivity - This Act shall take effect upon its approval.
Approved,