13th CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
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First Regular Session 
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S E N A T E  
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S. BILL NO. 
Introduced by Senator Ralph G. Recto 
EXPLANATORY NOTE 
"The State shall provide incentives to landowners to invest the proceeds of the 
agrarian reform program to promote industrialization, employment and privatization of 
public sector enterprises. Financial instruments used as payment for lands shall contain 
features that shall enhance negotiability and acce,ptability in the marketplace," thus 
declares Republic Act 6657 or the "Comprehensive Agrarian Reform Law of 1988." 
Although the numbers show that the Department of Agrarian Reform (DAR) and 
the Department of Environment and Natural Resources (DENR) have been aggressively 
performing its primary task of distributing land - 5,740,000 hectares to 732,694 agrarian 
reform beneficiaries (ARBS) from 1972 to June 2002 - it has yet to fulfill its mission of 
improving the productive capacity of the farmer-beneficiaries. Fifteen years into the 
implementation of the Comprehensive Agrarian Reform Law (R.A. 6657). the agrarian 
reform program remains an unfulfilled dream to a number of sectors. 
Indeed, land redistribution is a vital cog in the wheels of agricultural progress and 
in the attainment of social justice that its importance can never be overemphasized. It 
is aimed at liberating the Filipino farmer from the vicious cycle of poverty by providing 
him not only land to till, but also more importantly, credit support, infrastructure, legal 
assistance, electrification, farm expansion, and the development of rural institutions. 
Financial difficulties oftentimes compel farmers to mortgage their rights on the 
land they till to boost their income or augment their capital to improve their productive 
capacity. This bill seeks to allow the farmer-beneficiary to use awarded land as 
collateral in availing of loans from banks and other financial institutions for the 
improvement of the land cultivated, procurement of agricultural inputs, establishment 
of facilities that will enhance production, and increase farm income. 
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It also seeks to exempt the lender, bank and other financial institution from the 
value-added tax and phases out the alternative compliance to the Presidential Decree 
No. 717, otherwise known as the Agri-Agra Law and other legislated credit programs 
pertaining to agrarian reform. 
Appropriate incentives in the agrarian reform program such as this proposed 
measure would positively aid in uplifting the lives of millions of Filipino farmers and their 
families. 
In view of the foregoing, immediate passage of this bill is earnestly sought. 


13th CONGRESS OF THE REPUBLIC 
I 
First Regular Session 
I 
OF THE PHILIPPINES 
I 
'u4 ,r\k -6 !LIlJ 2 4  
SENATE 
S. BILL NO. 
Introduced by Senator Ralph G. Recto 
AN ACT 
THE COMPREHENSIVE AGRARIAN REFORM PROGRAM AS COLLATERAL FOR 
PURPOSES OF SECURING AGRICULTURAL LOANS, GRANTING TAX EXEMPTIONS 
THEREFOR AND FOR OTHER PURPOSES 
ALLOWING FARMER - BENEFICIARIES TO USE THE LAND AWARDED TO THEM UNDER 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
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SECTION 1. Collateral for Loans. - All agricultural lands shall be 
accepted as collateral by any lender, bank and other financial institution 
to secure loans of the registered owners as appearing in the 
Emancipation Patent, Homestead Patent, Free Patent, Certificate of Land 
Ownership Award, Original Certificate of Title or Transfer Certificate of Title: 
Provided, that the loans obtained shall be used in the improvement or 
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development of the land awarded or the procurement of agricultural 
inputs and establishment of facilities that will enhance production, 
processing or marketing of agricultural products or increasing farm 
income. 
SEC. 2.Default and Foreclosure of Mortgage. - In the event of 
default by the borrower, the lender, bank or financial institution may 
proceed against the security of the loan in accordance with existing laws. 
SEC. 3.Tax Exemptions. -Any loans granted by any lender, bank and 
other financial institution involving the use of agricultural land as collateral 
shall be exempt from the value-added tax (VAT). 


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SEC. 4.Phasing Out of the Alternative Compliance to the Agri-Agra 
Law (Presidential Decree No. 717). - The Banko Sentral ng Pilipinas (BSP) 
shall phase out all alternative compliance to the requirements under 
Presidential Decree No. 71 7, otherwise known as the "Agri-Agra Law" and 
other legislated credit programs pertaining to agrarian reform. 
SEC. 5.Repealing Clause. - All laws, presidential decrees, executive 
orders, rules and regulations or parts thereof inconsistent with the 
provisions of this Act are hereby repealed or modified accordingly. 
SEC. 6. Effectivity Clause. - This Act shall take effect fifteen (15) days 
after its complete publication in a newspaper of general circulation. 
Approved,