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July 22, 1997



SUBJECT    :     Implementing Policies and
                           Guidelines for the Joint DAR-NLSF
                           Livelihood Credit Assistance Program
                           for ARCs



Section 37, RA 6657 recognizes support services to agrarian reform beneficiaries (ARBs) as a critical component of the Comprehensive Agrarian Reform Program (CARP) in order to enhance productivity of agricultural lands and improve farmers' income. Among these support services are institutional development, credit and linkages with institutions concerned with rural development.   CHIScD

To facilitate rural development, the Department of Agrarian Reform (DAR) advocates the principle of agrarian reform communities (ARCs) as convergence areas for all development interventions. Cooperation and collaboration with the different sectors of the government, the NGOs/POs, LGUs and the business sector is being promoted to create more impact on the efforts and interventions being introduced.

Among others, the national Livelihood Support Fund (NLSF), a fund administered by Land Bank of the Philippines (LBP) was tapped to become a partner towards the attainment of total development of the ARCs. This Partnership was formalized through a memorandum of Agreement (MOA) signed by both Secretary Ernesto D. Garilao and LBP President and Chairman of the NLSF Executive Committee Jesli A. Lapus. Under the said MOA both parties agreed to implement a joint program known as the "Livelihood Assistance Program for ARCs."


The Program seeks to improve the economic and social conditions in ARCs through credit assistance and institutional development services to members of the ARCs through organized groups and entities.

Specifically the Program aims to:

A.        Support the comprehensive development plan of the ARCs based on a strong partnership/tie-up among NLSF, DAR, program partners and target beneficiaries;

B.        Enhance the socio-economic development of the ARCs by providing credit funds and institutional services to beneficiaries through credit conduits; and,

C.        Strengthen the capability of program implementors and their conduit organizations operating in the ARCs for them to effectively deliver credit and other support services to qualified beneficiaries.



A.        Credit Fund

1.         Internally Sourced Fund

            Subject to its credit policies, the NLSF shall make available the credit funds to qualified lending conduits to finance the requirements of the livelihood or income-generating activities of the target beneficiaries in the ARCs.

2.         Externally Sourced Fund

            Resource mobilization shall be undertaken by both the DAR & NLSF to adequately service the credit demands of the ARBs. Sources may include the following:

           Additional allocation from Agrarian Reform Fund (ARF)

           LGUs, CDF, and other GOs

           ODA/foreign funding

           Other Local Sources

            This fund shall be kept in a separate account and shall be subject to the terns and condition stipulated in the agreement between the source of the fund and NLSF/DAR.

B.        Institutional Development Fund

1.         The DAR shall take the lead role in the sourcing and provision of institutional development fund.

2.         Funds for this component may come from other government agencies and from the ODA or foreign bilateral/multilateral assistance intended for support services delivery for the ARCs.

3.         Fund allocation/withdrawals for institutional development and capability building purposes (activities, programs and projects) shall first be approved by the PMC as recommended by the TWG with supporting details, budget and justifications.   DEICHc

C.        Organization and Management Fund

1.         This fund shall be used for activities relative to the administration, management and supervision of the Program.

2          The DAR and NLSF shall pool their resources on a 5-50 sharing basis to sufficiently cover the required budget based on approved Work and Financial Plan as agreed by both parties.

3.         The fund shall be administered and managed by the NLSF and shall be disbursed is accordance with government accounting and Commission on Audit rules and regulations.

4.         Disbursements shall be based on approved Work and Financial Plan as recommended by the TWG and approved by the PMO.


As an institutional partnership between the DAR and NLSF, the program management shall utilize the parties' existing resources which shall include manpower and logistics. The following structures shall be established to ensure effective program implementation.

A.        Program Management Committee (PMC)

            The PMC shall be formed to serve as the policy-making body of the program. It shall be composed of the following:

           Assistant Secretary, DAR Support                Chairperson Services Office SSO

           Executive Director, National Live-               Co-Chairperson lihood Support Fund (NLSF)

           Deputy Executive Director, (NLSF)**             Member

           Director DAR-Bureau of Agrarian                Member

            Reform Beneficiaries Development


           Director DAR-Project Development           Member

            And Management Service (PDMS)

           Head, Cooperative Lending Department      Member

            (CLD)-Land Bank of the Philippines

The PMC shall have the following functions:

1.         Set the policies and define the priority thrust of the Program.

2.         Make representation with their respective agencies for the provision of the required manpower and financial support for the Program.

3.         Identify and solicit funding and technical assistance from external sources including training needs of the technical staff of DAR, NLSF and program partners or conduits.

4.         Coordinate and synchronize program implementation with their respective agencies priorities.   caADIC

5.         Resolve issues or matters pertaining to program implementation submitted by the Technical Working Group.

B.        Technical Working Group (TWG)

            The TWG shall also be organized to oversee the program implementation. It shall be composed of the following:

           Representative, DAR-SSO

           Representative, DAR-BARBD

           Representative, DAR-PDMS

           Head, Account Management and Livelihood Development Group, NLSF

           Head, Institutional Development Group, NLSF

           Head Information and Publications Department, NLSF

           Representative, Cooperative Lending Department (CLD)-LBP

The TWG shall perform the following functions:

1.         Prepare the implementing guidelines and procedures of the program for the approval of the PMC.

2.         Prepare the program strategies, plans and timetable in coordination with other partners/conduits.

3.         Undertake the necessary coordination among the key players in the area/ARCs (i.e. DAR's Development Facilitators, NLSF personnel, conduits, other program partners, etc.) to facilitate the implementation of development assistance/interventions in specific ARCs.

4.         Prepare the necessary instruments in data gathering, project monitoring and impact assessment of the program.

5.         Performs other functions that may be assigned by the PMC.

C.        Program Secretariat (PS)

            The Social Entrepreneurship and Enterprise Development Division (SEEDD) of BARBD shall compose the PS. It shall perform the following functions:

1.         Monitor processing of applications and coordinate closely with PMC and TWG regarding the status of applications and provide feedback to the applicants.

2.         Coordinate with NLSF and DAR field offices regarding the monitoring of the program status.

3.         Provide Secretariat support to the PMC and TWG during its regular meeting.

4.         Prepare and submit quarterly status reports to the PMC through the TWG.

D.        DAR Provincial Office

            The DAR Provincial Office shall perform the following functions:   ISDHcT

1.         Initially screen prospective conduit applicants based on NLSF policies and guidelines.

2.         Endorse applications deemed qualified to the NLSF, copy furnished (endorsement letter) to the DAR Regional Office and the Program Secretariat.

3.         Ensure that systems for effective program implementation and monitoring are established at the conduit level.

4.         Assist the NLSF field staff in the evaluation and monitoring of the programs of conduits with approved funding.

5.         Assist program partners/conduits in the identification and delivery of appropriate institutional development services to the target beneficiaries.

6.         Provide technical assistance to program partners/conduits in project development and documentation for funds drawdown.

7.         Ensure that administrative and logistics support are provided for the program implementation and monitoring; and

8.         Prepare and submit quarterly status reports to the PS, copy furnished regional office concerned.

E.         DAR Municipal Office

            The Development Manager/MARO and the Development Facilitator (DF) will be the direct link and implementing arm of the program at the ARC level. They shall perform the following functions:

1.         Assist the applicant-organization in complying with the program documentary requirements;

2.         Ensure that sub-projects for funding are consistent with the ARC Development Plan;

3.         Assist the NLSF in program validation;

4.         Prepare and submit quarterly status report on program implementation to DARPO.


A.        Area Coverage

            The program shall cover the Agrarian Reform Communities (ARCs)

B.        Eligible Program Partners

1.         People's Organizations

2.         Non-Government Organization

3.         Rural Financial Institutions

C.        Accreditation Criteria


1.         Must be duly registered with the Securities and Exchange Commission, Cooperative Development Authority, or Department of Trade and Industry.   AHDacC

2.         Must have a satisfactory credit record, if applicable.

3.         Must have a track record of at least three (3) years of satisfactory/profitable operations in livelihood lending. In case of newly-formed organizations with less than three (3) years track record, a program partner must have successfully undertaken community projects and the members of management must have adequate experience in livelihood development and lending.

4.         Must have sufficient manpower for the program capable of handling financial and lending transactions.

5.         Must have acceptable and well established internal control accounting and documentation system.

6.         Must have bookkeeper/accountant and cashier/treasurer. For cooperatives, the officers must not be related within the second (2nd) degree of consanguinity or affinity.

7.         Must not have a past due ratio of more than 25.0% in its lending operations.

8.         Must have at least a permanent working capital of P100,000.00. However, in case of NGOs/POs in ARCs, a reduced amount may be considered on a case to case basis provided there is a savings mobilization and capital build-up program that will meet the capital deficiency in one year.

9.         Other criteria that may be deemed necessary, by NLSF management.


1.         Must satisfy criteria from 1 to 5 under NGO/PO

2.         Must be of good standing/with no major exceptions per Bangko Sentral ng Pilipinas audit.

3.         Must have at least ten percent (10%) capital to risk asset ratio.

4.         Must not have a past due ratio in its loan portfolio which exceed the following percentages at the time of application:

            Commercial Bank                                  15.0%

            Rural Financial Institutions                   25.0%

5.         Must have no legal reserve deficiencies for the last four (4) weeks at the time of application.

D.        Target Beneficiaries

1.         Wives and dependents of farmers in ARCs

2.         Other non-farmer households in ARCs

3.         Small farmers for non-traditional crop production and off-farm projects

E.         Services

1.         CREDIT

a.         Relending

            One (1) year revolving credit line (for relending) to Program Partners (PP) shall be based on credit evaluations, program plans and type/number of beneficiaries with loan limits of P25,000.00 each but not to exceed PP's total asset base. However, in case of LEP's accredited financial institutions, an automatic credit line may be granted equivalent to one-third (1/3) of its credit line with LBP.   DaTICE

            The actual drawdown shall be based on the amount of sub-PNs of individual borrowers approved for financing or rediscounting.

            Batches of availments/drawdowns shall be co-terminus with the underlying loans/PNs of beneficiaries but not to exceed 3 years. The amortization payment to NLSF shall follow the beneficiaries' terms which shall depend on the type of project of the end user, however, in case of daily, weekly or monthly terms to end-beneficiaries, the Program Partner shall pay NLSF quarterly.

            Maximum loan per sub-borrower: P25,000.00

b.         Soft Loan for Conduit's Program Operations and Trading of End-Beneficiaries

  The loan amount shall depend on the needs of the Program Partners as assessed by NLSF but not to exceed 10.0% of credit line.

  The purpose of the soft loan is to finance the start-up costs (first year of operation) of the Program Partner in launching the NLSF — funded credit program while awaiting the streams of income cash flows from the build-up of its loan portfolio, to be used as follows:

a.         For administrative expenses such as: salaries of staff directly involved in NLSF lending program (the number depending on the manpower requirement of the program) and training/community organizing costs. of the NLSF target beneficiaries. The operational expenses which are regular in nature are excluded.

b.         For logistic support expenses as allowed by NLSF depending on its assessment of the needs of the Program Partners.

c.         Other administrative and logistic support expenses which may be subsequently approved by NLSF management.

            Soft loan portion for asset acquisition maybe released simultaneously with but not ahead of the credit loan fund.

2.         NON-CREDIT

                 Institution/capability building of conduits

            This component will cater to the trainings, workshops, skills development seminars, systems installation that will be actually required/needed by the program partners and the end-beneficiaries relative to the implementation of the Program. This is the non-credit component of the program.

F.         Financial Charges


            To Conduit/Program Partners — 12%

            From Conduit to End-Beneficiaries — to be jointly determined by partner and NLSF to cover all costs with reasonable spread. The actual maximum rate to be allowed requires NLSF approval.   DHACES

2.         SOFT LOAN

            3.0% per annum

            Loan duration shall depend on the nature of the soft loan utilization but not to exceed five (5) years.

Note: Interest rates to conduits/program partners are subject to NLSF's periodic review which may increase or decrease. However, there shall be no retroactive escalation/descalation of interest of existing PNs/sub-borrowers' PNs.

G.        Availment Terms or Credit Line

            Depending on the financial requirements of the end-beneficiaries specified in the loan proposal, fund releases shall be undertaken on credit line availment basis. Initial releases shall be made only after full compliance by the program partner with the guidelines, policies and documentary requirement of NLSF

            The subsequent releases may be availed from the credit line provided that the credit line has not yet expired and that there are no past due notes/amortization/s.

            In cases where the program partner has failed to undertake a drawdown from the credit line within ninety (90) days from date of approval, the line shall be automatically cancelled.

H.        Relending Period

            The NLSF funds must be fully relent to end-beneficiaries within thirty (30) days from date of receipt of the fund. Unreleased funds after this period must be returned to NLSF including the interest due it.

I.          Past Due Loans

            The following instances shall constitute default and shall make the loan due and demandable:

1.         Quarterly                              non-payment of two (2)

                                                               consecutive amortizations

2.         Semi-Annual & Annual        non-payment of one (1)

                                                               amortization, however, a 30-

                                                               day grace period is granted

J.         Penalty

            Up to 12% per annum with 30 days grace period.

K.        Collaterals

1.         All promissory notes and underlying collaterals of end-beneficiaries and assets financed by soft loan shall be assigned to NLSF on a continuing basis.

2.         Joint and several signatures (JSS) of at least three (3) key officers of the program partner which shall operate in case of default due to diversion/misappropriation of funds, misrepresentation, fraud and gross negligence.

L.         Policy On Program Partners Relending

            NLSF shall provide loans trough wholesale lending to accredited Program Partners in the form of a none-year revolving credit line. These program partners shall relend the NLSF fund to members of self-help groups (SGHs).   IAEcaH

            Types of projects to be funded by the program partners include short-gestating income-generating activities and other short-term crop being financed by Land Bank. This, however, shall depend on the needs and capabilities of the beneficiaries to manage.

            The following guidelines must be followed in determining the type of project for the end-beneficiaries:

1.         Viable and has a ready market for the products or services

2.         Able to generate income for the target beneficiaries within a short period of time

3.         Within the capability of the end-beneficiaries to manage

4.         Must be able to generate savings for the beneficiaries

5.         Must comply with all the existing government rules and regulations

6.         Must be in accordance with or consistent to the over-all ARC development plan

M.       Savings Mobilization

            The program partners shall be required to establish a savings mobilization scheme to ensure the continuity of the livelihood development activities of the SGHs even after the full payment of the beneficiary loan to the Program Partners. It may be used as a future capital or as a mutual guarantee fund of the SHGs/sub-borrowers when they organize themselves into formal organizations. However, the program partner shall have mobilized borrowers savings of at least ten percent (10.0%) of the total loan releases during the loan term.

N.        Credit Line Renewals/increases

            Credit line renewals/increases maybe granted subject to NLSF evaluation of the program partners' credit line availment performance and implementation of the NLSF livelihood Program.

            However, automatic credit line renewals/increases maybe granted by NLSF subject to Program Partners' satisfactory availment and repayment performance as well as attainment of Program objectives in its area of operations with updated data bank.

O.        Books of Accounts

            The program partners shall maintain a separate set of subsidiary records of books of account for NLSF transaction/loans to facilitate identification/monitoring of the NLSF assisted program. A data bank of borrowers profile and loan records shall be maintained at all times for ready reference of NLSF.

P.         Audit and Project Proposal

            The program partners shall submit annual financial statements duly certified/audited by an independent CPA and program accomplishment and status report. NLSF reserves the right to conduct any time after due notice an examination of books and records, inspection of individual projects reported as financed under the program and appraisal of program status and accomplishments.   cACDaH

Q.        Loan Restructuring

            The NLSF loan is liability of the Program partner and should be paid regardless of the status of the individual loans of beneficiaries. However, in case of adversities caused by force majeure or unexpected events that greatly affect its financial condition, a restructuring of loan terms maybe allowed subject to acceptable remedial and repayment plan.

            In no case shall restructuring be allowed if cause of defaults is diversion of loan funds and collection proceeds. The JSS provision shall apply.

R.        Documentation and Safekeeping

            Loan documents to be used shall be in accordance with NLSF forms. All necessary taxes/fees as required by law relative to the documentation of the approved loan shall be for the account of the Program Partner. Individual sub-PNs being financed shall be kept in custody by the program partner for safekeeping in a well secured vault on behalf of NLSF.

S.         Application Requirements

1.         Accomplished NLSF Application Form

2.         Registration and Incorporation Papers

3.         Board Resolution to Borrow

4.         Personal Data Sheet of Board of Directors and Principal Officers and 2" X2" pictures with signatures at the back

5.         Audited Financial Statements for the last three (3) years, if applicable and latest Interim Financial Statements.

6.         Other requirements/s that may be deemed necessary by NLSF management.


         (See Appendix A for the Process Flow)

ACTIVITY                                                                PARTY RESPONSIBLE


           Undertake an information drive                        NLSF/DAR

           On the program through holding

           Of orientation/workshops


1.        Accomplishes and submit the                           Prospective

           NLSF Pre-Evaluation                                      Program

           questionnaire (PEQ) to MARO                       Partner with the

           for endorsement to DAR's                               assistance of DF

           Provincial office (PARO)

           (See form I)

2.        Reviews the PEQ and                                     DF/MARO

           submits to the PARO

3.        Assists in pre-evaluating the                             PARO

           PEQ following the NLSF

           accreditation/eligibility criteria

4.        Submits NLSF application                               Prospective

           requirements upon passing                               Program

           the program's eligibility                                    Partner

           criteria to PARO for endorsement

           to NLSF (See Item 5.19)

5.        Reviews completeness of submitted                 PARO

           documents prior to endorsement

           to NLSF

6.        Upon receipt of loan application                      NLSF/DAR

           documents, validates the applicant-

           organization's qualification and

           capability through the conduct of an

           organizational assessment

           (See Form 2)

7.        If results of OAA is positive,                            NLSF

           undertake credit/background investigation.

           If there are certain deficiencies

           in the organization, management and

           operations, the proposal together with

           the OAA is endorsed to the

           Institutional Development Group.

           Please refer to Step 6.3 for

           processing of institutional development


8.        Notifies applicant-organization of                     NLSF

           validation findings and recommendation

           copy furnished the PARO/MARO concerned


1.        Evaluates and determines what                        TWG

           specific type of training and

           other institutional development

           interventions are needed to be

           undertaken based on the OAA.

2.        Informs PARO on the                                     TWG

           specific institutional development

           interventions for inclusion in

           the ARC action plan.

3.        If institutional development                               PARO

           intervention identified are within

           the resources and expertise

           of the PARO, PARO

           conducts training/institutional

           development and submits status/

           completion report to PS.

4.        If institutional development                               PARO

           intervention is not within

           the capability of the

           PARO (either in resources,

           technical capability or both),

           the request is transmitted

           to TWG for appropriate action.

5.        Undertakes the training/institutional                  NLSF/DAR

           development activities.                                     Resource


6.        Issues certification on the                                 NLSF/DAR

           institutional development                                  Resource

           interventions undertaken                                  Institution

           addressing the deficiencies

           of the applicant-organization.


1.        Prepares credit facility proposal                       NLSF

           and submits/presents to NLSF

           Credit Committee and Executive

           Committee for deliberation

2.        If approved, notifies applicant-                        NLSF

           organization of approval and

           requirements for loan

           availment copy furnished the

           PARO/MARO/PS concerned.


1.        Submits request for fund                                  Program.

           release with the list of                                      Partner/

           qualified beneficiaries                                       DF/MARO

           certified by DF/MARO

           concerned, type of projects,

           and individual loan amount

2.        Conducts pre-release validation                       NLSF/DF

3.        Signs loan documents                                      Program Partner

4.        Reviews as to legal                                          NLSF

           sufficiency and completeness

           of documents/requirements

           and safeguards


1.        Release loan via fund transfer                           NLSF

           to Program Partner's deposit

           account with concerned LBP branch

2.        Notifies program partner on                             NLSF

           the fund release, copy furnished

           PARO/MARO/PS concerned


1.        Conduct post-release requirements                  NLSF/DF/MARO

           of program Partner

2.        Reviews post-release requirements                  NLSF

           of Program Partner

3.        Submits semi-annual Program                          Program Partner/

           Status Report (See Form 3)                            DF/MARO

           copy furnished PARO/MARO



1.        Sending billing letter/notice                               NLSF

           to program Partner thirty (30)

           days before due date of loan

           amortization, copy furnished

           PARO/MARO concerned

2.        Remits amortization payment                           Program

           via Program Partner's account                         Partner

           with designated LBP branch

This Memorandum Circular shall take effect immediately upon approval and shall remain in force unless modified or repealed by subsequent Memorandum Circular. July 22, 1997.   IcTaAH



President, Land Bank of the Philippines
and Chairman, NLSF Executive Committee





Secretary, Department
of Agrarian Reform


**        "Deputy Executive Director or other MSF official as may be designated by NLSF"


Department of Agrarian Reform
Elliptical Road, Diliman
Quezon City, Philippines
Tel. No.: (632) 928-7031 to 39

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