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

HOUSE OF REPRESENTATIVES

Introduced by Representative Maximo B. Rodriguez, Jr.

pitt No, 4497

EXPLANATORY NOTE

House Bill No.

|. 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 fisherfok 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 (LOI) 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
©. 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


P986.6M 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 2006 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
availability 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

lll The Solution

Guaranteeing agricultural credit is still 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 Agricultural
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 agfi-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 liabilitles, 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 agri-ishery sector, the Chairmanship and Vice-Chairmanship of the
AGRICORP 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 earnestly requested,

MAXIMO B. RODRIGUEZ, JR,


SEVENTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session

HOUSE OF REPRESENTATIVES

Introduced by Representative Maximo B. Rodriguez, Jr.

4497

House Bill No.

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 Il 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 shall
effectively;

(a) Provide avenues of access of urban and rural workers, their 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;

(4) 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

(g) __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, nongovernmental organizations, private voluntary organizations, self-help
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 hit or by another person, under a leasehold tenancy agreement
or arrangement with the owner thereof:

(c) _ “Fisherfok" - 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
livelinood 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;

() “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:

(j) "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 (50)
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 Goverment, govemment-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-officlo 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 (90) 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 186 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 concerned
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
warehouseman, 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, real
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) Act as a receiver;

(|) 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 (PCCI), the President and Chief Executive
Officer (CEO) of the Corporation, and three (3) other members: a small farmer or fisherfolk
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 fisherfoks,
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
stockholder's meetings.

The Vice-Chairman of the Board shall assist the Chairman and act in 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 only.

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;

(d) 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;

(g) 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 following audited financial statements: balance sheet or statement of assets
and liabilities; 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

) 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.

ih 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;

(4) Appoint, promote, remove, suspend or otherwise discipline for cause, any
subordinate officer or employee of the Corporation pursuant to the Civil Service Law,
ules 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 concerned 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-fishery micro-enterprises vis-a-vis small and medium-sized
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, thats, 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 a
bank and covered by a guarantee of the Corporation shall be deemed as compliance with
the Agri-Agra Law, Rediscounting by secondary banks of originating banks’ loan receivables
having the guarantee cover of the Corporation shall likewise be deemed compliance with the
same law and loans released by a bank to an entity acting as partner of the Corporation
shall likewise 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 any local, regional, national, special or general law to the contrary
notwithstanding, securities on guarantees and/or accommodations granted by, or
Subrogated to, the Corporation or its predecessors-in-interest 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 all debts 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 right of the Corporation over the indebtedness of its clients or borrowers shall,
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 other creditors for obligation still 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 to the National Government shareholdings shall be in the form of stock dividends.
in order to build up the capital base of the Corporation in accordance with Section 8 hereof.

In no 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 instrumentalities including government owned and controlled corporations in
pursuance of their mandates, are hereby authorized to place funds in the Corporation in the
nature 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 official 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 be
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
goverment legal office authorized to render such services to government-owned or-
controlled corporations or subject to rules and regulations, hire private law firms to support
its collection activities.

The Corporation may, upon the recommendation of its Corporate Legal Counsel,
deputize any member of its legal staff to act as special sheriff in foreclosure cases, in the
sale or attachment of the debtor's properties, and in the enforcement of court writs and
processes in cases 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
and CEO of the Corporation and must be headed by a person whose salary grade shall not
be lower 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 in this 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 need 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
se of its funds, considering that itis the Corporation which shall defray the expenses for the
audit of its operations. In case of disagreement between the Commission on Audit and the
Corporation as to 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 which 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 until a new President who shall have fulfilled the requirements of the position
subject to the provisions of Section 15 of this Act shall have been appointed by the President
of the Republic of the Philippines. The President and CEO shall, as soon as possible,
prepare and submit to 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 Agriculture and Fisheries Modernization
‘Act (AFMA) particularly Section 25 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 Agriculture, 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 the Committees on Government Enterprises of the Senate and the House of
Representatives shall determine the assets and liabilities of the Quedancor which may be
transferred to or assumed by the Department of Agriculture. The Committee shall complete
its work within ninety (90) days from the constitution of the Agricultural Credit and Guarantee
Corporation submitting a comprehensive report with all its findings and justification

The following guidelines shall be strictly 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 responsibility for working out creative monetary and financial
solutions to retire the Quedancor liabilities and losses at the least cost to the
Government;

(b) collections from Quedancor’s trade receivables shall be remitted to a
special deposit account (sinking fund) until such time as the net liabilities of the
Central Bank shall have been liquidated through generally accepted finance
mechanisms such as, but not limited to, write-offs, set-offs, 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, 7430, by adopting if it so desires, an entirely new staffing pattern on organizational
structure to suit 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 any position in the new staffing pattern, nor shall any personnel be
considered as having prior or vested rights with respect to retention in the Agricultural Credit
and Guarantee Corporation or in any position which may be created in the new staffing
pattern, even if he should be the incumbent of a similar position prior to organization. The
formulation of the program of organization shall be completed within six (6) months after the
effectivity of this Act, and shall be fully 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 16 of this Act, the Governing Board is
authorized to 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
7393 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 35, Effectivity ~ This Act shall take effect upon its approval
Approved,