Republic of the Philippines
HOUSE OF REPRESENTATIVES
Batasang Pambansa, Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILL NO.
Authored by HON. JOSEPH VICTOR G. EJERCITO

EXPLANATORY NOTE

The Constitution mandates the State to formulate policies “that
provide adequate social services, promote full employment, a rising
standard of living, and an improved quality of life for all.” (Article II,
Section 9)

Countless solutions, plans and programs, both old and new, have
rightly been forwarded. Among the many, two general summaries can
be inferred. The first is the distribution of aids and grants to the less
and underprivileged in our cities and countryside. The other manner by
which poverty is tackled is by providing technical and financial
assistance through loans. It has been often said, “it is better to teach a
man how to catch a fish than just give him a fish.” The question now is
“What will happen if the man who was taught how to catch a fish does
not have the means to produce by himself the rod he needs to fish?”
Many plans and programs failed and blueprints unable to leave the
drafting table because critical factors were not taken into account.

It is necessary to look closer at state-sponsored or supported
poverty alleviation programs and develop mechanisms that weigh the
critical factors of finance, management and organization capability as
well as the issue of existence, essential to consider in discussing the
standard of living and the quality of life for all.

The Landbank and other government financial institutions
provide credit to cooperatives. However, primary (small and starting
cooperatives) cooperatives find it difficult to access these credit
facilities. This bill intends to provide, through a Cooperative Trust
Fund, access to credit for primary cooperatives that need support from
the government.

—=sQ-

JOSEPH VICTOR G. EJERCITO


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Batasang Pambansa, Quezon City

FIFTEENTH CONGRESS
First Regular Session

HOUSE BILL NO.

Authored by HON. JOSEPH VICTOR G. EJERCITO

AN ACT

ESTABLISHING A FIVE BILLION PESO (Php5,000,000,000.00)
COOPERATIVE TRUST FUND THAT WILL PROVIDE FINANCING
FACILITIES TO LIVELIHOOD PROGRAMS OF COOPERATIVES
AND APPROPRIATING THE NECESSARY SUM FOR INCLUSION IN
THE GENERAL APPROPRIATIONS ACT OVER A PERIOD OF FIVE
(5) CONSECUTIVE FISCAL YEARS IN FIVE EQUAL
APPORTIONMENTS

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

SECTION 1. Declaration of Principles and Policy. - It is the
declared policy of the State to free the people from poverty through
the promotion of full employment, a rising standard of living, and an
improved quality of life for all (Constitution, Article 2, Section 9).

The State recognizes that the promotion of social justice shall
include the commitment to create economic opportunities based on
freedom of initiative and self-reliance (Constitution, Article 13, Section
2

The State has identified cooperatives as private enterprises that
can promote industrialization and full employment based on sound
agricultural development and agrarian reform (Constitution, Article 12,
Section 1).

The State mandates the Government and all its branches,
subdivisions, instrumentalities and agencies to ensure the provision of
technical guidance, financial assistance and other services to enable
cooperatives to develop into viable and responsive economic
enterprises (RA No. 6938, "Cooperative Code of the Philippines.”
Chapter 1, Article 2).

SEC. 2. Creation of a Cooperative Trust Fund. - The
Government shall provide financial assistance to cooperatives through
the creation of a Cooperative Trust Fund with the Landbank of the
Philippines, a Government Financial Institution, hereinafter referred to
as the Landbank, which shall manage the loans of these private
enterprises based on the provisions of this Act.


The Cooperative Trust Fund, hereinafter referred to as the Trust
Fund, shall amount to Five Billion Pesos (Php 5,000,000,000.00).

SEC. 3. Fund Sources. -The following fund sources shall be
used to finance the Trust Fund established in Section 2 hereof:

a) Cooperative Support Fund, formerly the Samahang Nayon
Support Program (SNSP) established under a project agreement
between the United States Agency for International Aid (USAID) and
the National Economic Council of the Philippines;

b) Cooperative Rural Development Loan Fund, formerly
administered by the defunct Regional Cooperative Development
Assistance Offices IX & XII (RCDAO IX & XII);

c) Cooperative Marketing Project Fund as established under a
loan agreement between the Governments of the Philippines and
United States of America, through the USAID for Cooperative
Marketing; and

d) Cooperative Development Loan Fund established under
Presidential Decree No. 175.

Congress shall appropriate an amount that is necessary to
augment the sum total of the funds enumerated above to be
automatically included into the General Appropriations Act over a
period of five (5) consecutive fiscal years to commence on the year of
effectivity of this Act in five equal apportionments to be deposited in
trust to the Landbank.

The Landbank shall automatically provide for a counter-part fund
equal to the amount appropriated by Congress for a particular fiscal
year.

SEC. 4. The Board of Trustees. - A Board of Trustees of the
Trust Fund, hereinafter referred to as the Board, is hereby created.
The Board of Trustees shall be composed of the following:

1. The Chairman of the Cooperative Development Authority as
Co-Chairman;

2. A representative from the private cooperative sector
appointed by the President of the Republic of the Philippines as
Co-Chairman;

3. President of the Landbank of the Philippines as Vice-chairman;
4. The Secretary of Finance as Member;

5. The Director-General of the National Economic Development
Authority as Member;

6. The Cooperative Committee Chairperson of the Senate as
Member; and

7. The Cooperative Committee Chairperson of the House of
Representatives.


The representative from the private cooperative sector shall be
appointed for a term of six (6) years.

The Board shall convene within fifteen (15) days from the date
of effectivity of this Act and shall meet at least twice a year thereafter.

The Board of Trustees shall hold office at the central office of the
Landbank of the Philippines.

SEC. 5. Powers and Functions of the Board. - The Board
shall have the following powers and functions:

1. Formulate, revise or adjust periodically all policies on the
utilization of the Cooperative Trust Fund and to promulgate the
necessary rules and regulations for the effective implementation of this
Act;

2. Monitor the implementation of the loan and trust fund

program.

SEC. 6. Loans Management. - The Board shall determine the
necessity of requiring borrowing cooperatives to attend a marketing
and management seminar to be conducted by the Cooperative
Development Authority, taking into consideration the capability of the
borrowing cooperative in managing its affairs. Borrowing cooperatives
that are required to undergo the CDA seminar shall submit a certificate
of attendance from the CDA together with all other requirements to be
imposed by the Board in applying for a loan under the cooperative
trust fund program. The CDA seminar shall focus on providing
borrowing cooperatives the required skills in the preparation of the
documentation for loan as well as management and marketing
expertise to ensure success of the project.

SEC. 7. Interest on Loans. - The Landbank is hereby
authorized to impose a maximum annual interest on loans equal to
fifty percent (50%) of the prevailing market rate of interest imposed
by Landbank under its agrarian lending program.

SEC. 8. Loans Evaluation and Approval. - The following are
the only types of loan that may be extended to cooperatives from the
Trust Fund:

a) PRODUCTION LOAN - loans to finance income generating
cooperative
Programs such as crops, fisheries and livestock-based projects;

b) WORKING CAPITAL LOAN - loans to finance the start-up
operation of the cooperative project such as labor costs, fuel, rental of
facilities and marketing;

c) FIXED ASSET LOAN - loans to be utilized for the acquisition of
new or upgrading of existing facilities and equipment;

d) TRADING CAPITAL LOAN - loans to be used for the purchase
of raw materials; and


e) REDISCOUNTING LOAN - rediscounting of Promissory Notes
(PNs) of eligible credit cooperatives/unions and other registered
organizations

The evaluation and approval of loans shall remain the sole
responsibility of the Landbank subject to the guidelines and policies set
by the Board of Trustees of the Cooperative Trust Fund.

Loans, however, may only be granted to cooperatives based on
the following pre-qualifying requirements:

1. Must be duly registered with the CDA;
2. Must have a membership of at least sixty (60) individuals;

3. All members should have attended pre-membership education
seminar (PMES) given by the CDA accredited trainors. (Attendance
certificate needed); all eligible borrowers should have attended a
membership education seminar (MES) given by CDA accredited
trainors. (attendance certificate needed);

4. With a minimum paid-up share capital. The Board of Trustees
shall determine the amount;

5. With an ongoing capital build-up program resulting in an
increase in paid-up share capital per member. The Board of Trustees
shall determine the amount of increase in paid-up share capital;

6, With written policies, systems, procedures, and short/long-
term plans on:
a) Membership management including continuous
membership expansion;
b) Capital build-up and savings mobilization;
c) Credit including loan pricing and collection;
d) Accounting and internal control systems; and
e) Budgeting; and

7. Must have been accredited by the Cooperative Development
Authority for at least six (6) months prior to its application for a loan.

The Board is hereby authorized to formulate additional pre-
qualifying requirements for borrowing cooperatives, taking into
consideration the policies set forth in RA 6938 and in this Act.

SEC. 9. Audit. - The Commission on Audit shall be the ex-officio
auditor of all the funds provided for in this Act and is, accordingly,
empowered to designate and appoint its representative(s) and other
subordinate personnel to perform such necessary audit duties as the
Commission shall direct. They shall be responsible to and shall only be
removed by the Commission on Audit.

SEC.10 . Sunset Review. - As the need arises, the Congress
shall conduct a sunset review of the accomplishments and impact of
the Trust Fund program as well as the performance of its


implementing agencies for purposes of determining whether or not the
Trust Fund program and the corresponding appropriations mentioned
in this Act deserve to be continued based on a cost-benefit analysis
thereof. If the result of the review is unfavorable, then the appropriate
Committee of Congress shall not report favorably any bill or resolution
that authorizes the enactment of a new budget authority for the Trust
Fund program.

For purposes of this Act, the term “sunset review” shall mean,
with respect to the Trust Fund program, a systematic evaluation by
the committees of the Senate and House of Representatives which
have legislative jurisdiction over such programs, with the assistance of
appropriate agencies and congressional support agencies, to determine
the merits of the program, justify its continuation rather than
termination or its continuation at a level less than, equal to, or greater
than the existing level. Such review shall be undertaken in the scope
and the detail the committee having jurisdiction deems appropriate
and shall include, but not limited to, an assessment of the degree to
which the original objective of the program has been achieved, of the
problem it was intended to address, and the costs and benefits of the
program.

SEC. 11. Separability Clause. - Should any part of this Act be
declared unconstitutional, the rest of the provisions of this Act shall
not be affected thereby.

SEC. 12. Repealing Clause. - All laws, decrees, executive
orders, proclamations, rules and regulations, and issuances, or parts
thereof which are inconsistent with the provisions of this Act, are
hereby repealed, amended or modified accordingly.

SEC. 13. Effectivity Clause. - This Act shall take effect fifteen
(15) days from its publication in a newspaper of general circulation.

Approved,