Pepublic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City
FIFTEENTH CONGRESS
First Regular Session

House BniNno, 4465

EXPLANATORY NOTE

WHEREAS, the Republic Act (R.A.) No. 10000, also known as the
“Agri-Agra Reform Credit Act of 2009” was signed into law on 23 February
2010, repealing Presidential Decree No. 717 dated 29 May 1975;

WHEREAS, R.A. No. 10000, an act providing for an agricutture and
agrarian reform credit and financing system through banking institutions,
specifically mandated all banking institutions, whether government or
private, to set aside at least twenty-five percent (25%) of their total
loanable funds for agriculture and fisheries credit in general, of which at
least ten percent (10%) shall be made available for agrarian reform
beneficiaries (ARBs);

WHEREAS, the implementing rules and regulations (IRR) of R.A.
No. 10000, which was drafted by the Department of Agriculture (DA),
Bangko Sentral ng Pilipinas (BSP) and Department of Agrarian Reform
{DAR), in consultation with the banking sector and other stakeholders,
has yet to be finalized and issued;

WHEREAS, the Bankers Associations of the Philippines (BAP), after
review of the aw and series of consultations made with various
stakeholders and concerned government agencies find it necessary te
officially raise major concerns on the absorptive capacity of the sector as.
regards the compliance with the 25% credit allocations of banks’ total
loanable funds for agriculture and agrarian credit, among others;

WHEREAS, based on the survey and study conducted by the DA,

the total loans needed to finance the country’s agricultural and fisheries
sector only amount to #276 billion which is way below the required

AMENDMENTS TO R.A. 19900


compliance of #403 billion for the 15% agri-lending requirement as of
September 2010 computed based on banking sector's total loanable funds
generated of ®2,691 billion as reported by BSP;

WHEREAS, based on DAR’s data, about 3.3 million hectares of land
(net of 1 milion mortgaged with LANDBANK) which were transferred to
ARBs, would only require about ®165 billion representing agrarian loan
demand, which is again tower than the #269 billion (10%) required
compliance under the old law, PD 717. Historically, the banking sector
has been unable to comply with this 10% requirement because of lack of
agrarian toan demand;

WHEREAS, R.A. No. 10000 provides several new alternative
methods of compliance (/.., investments in bonds issued by LANDBANK,
and DBP, and/or opening of special deposit accounts (SDAs) with
accredited rural financial institutions provided proceeds shall be used
exclusively for on-lending to agriculture and agrarian reform sector, etc),
as substitutes for the non-agri items. However, in practice, it is unclear if
said banks are sourcing significant funds from commercial banks for their
own agricultural on-lending;

WHEREAS, the Bankers Associations of the Philippines, adhering to
its duty to protect deposits from the public, strongly believes that
individual banks be allowed to decide on the field of expertise it should
operate and compete in. Furthermore, there may be credit and non-
performing loans implications if banks are mandated but untrained to lend
outside their area of competence.

In view thereof, the proposed bill seeks immediate approval.

}
Ay
LUIS R. VILLARUERTE

AMENDMENTS 10 8.A. 9099 2


nu

Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS:
First Regular Session

4465

HOUSE BILL NO.

AN ACT AMENDING REPUBLIC ACT NO. 10000 , PROVIDING FOR
AN AGRICULTURE AND AGRARIAN REFORM CREDIT AND
FINANCING SYSTEM THROUGH BANKING INSTITUTIONS
OTHERWISE KNOWN AS THE AGRARIAN REFORM ACT OF
2009.

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

SECTION 1. Section 6 of the Agrarian Reform Act of 2009 is hereby
amended to read as follows:

“Section 6. Credit Quota. All banking institution whether
government or private, shail set aside at least TWENTY [twenty-
five] percent [(25%)] (20%) of their total foanable funds for
agriculture and fisheries credit in general, of which at least
EIGHT [ten] percent [(10%)}] (8%) of the loanable funds shall
be made available for agrarian reform beneficiaries mentioned in

Section 5 hereof: Provided, however, That total loanable funds

AMENDMENTS [0 R.A. 10097 3


20

21

22

as used in this section shall refer to funds generated from the
date of effectivity of this Act AS DEFINED BY THE BANGKO
SENTRAL NG PILIPINAS AND THE BANKING ORGANIZATIONS
NAMELY THE BANKERS ASSOCIATION OF THE PHILIPPINES,
CHAMBER OF THRIFT BANKS AND RURAL BANKERS
ASSOCIATION OF THE PHILIPPINES.
XXX
SECTION 2. Section 8 of the Agrarian Reform Act of 2009 is hereby
amended to read as follows:

Section 8. ALTERNATIVE COMPLIANCE - [The] BANKS
MAY BE ALLOWED TO ENGAGE IN THE FOLLOWING alternative
compliance (enumerated in the preceding section shall also be
subject to joint review by the DA, the DAR and the BSP after
three (3) years of the implementation to determine whether the
modes of compliance directly target the agriculture, fisheries
and agrarian reform sector. The Findings shall be submitted to
Congress]

a. DEVELOPMENT LOANS EXTENDED BY BANKS TO FINANCE
EDUCATIONAL INSTITUTIONS, COOPERATIVES,
HOSPITALS AND OTHER MEDICAL SERVICES, SOCIALIZED
OR LOW-COST HOUSING, LOCAL GOVERNMENT UNITS,

b. INVESTMENT IN NFA BONDS, LGU BONDS, PAG-IBIG
BONDS, SPECIAL PURPOSE TREASURY BONDS AND

OTHER FINANCIAL INSTRUMENTS AS MAY BE ISSUED

RDMENTS TO RA.+



AND AUTHORIZED BY THE NATIONAL GOVERNMENT AND

ITS AGENCIES/INSTRUMENTALITIES
¢, WHEN AT LEAST 5% OF LOANABLE FUNDS ARE DIRECTLY

LENT TO FARMERS’ ASSOCIATION OR COOPERATIVES

THROUGH LOANS TO HIGH-VALUE CROP PROJECTS OR

SIMILAR CREDIT ACCOMMODATIONS SHALL BE DEEMED

COMPLIANT WITH THE REQUIREMENTS OF SECTION 6 OF

THE AGRARIAN REFORM ACT OF 2009.

Section 3. Section 10 of the Agrarian Reform Act of 2009 is hereby
amended to read as follows:

Section 10. Penalty Clause. - The BSP shall impose
administrative sanctions and other penalties on the lending
institutions for noncompliance with the provisions of this Act.
Penalties on noncompliance shail be computed at one-half of
one percent (0.5%) of noncompliance and undercompliance
COMPUTED AND ASSESSED ANNUALLY and shall be directed to
the development of the agri-agra sector. Ninety percent (90%)
of the penalties collected shall be allocated between the AGFP
and PCIC according to the needs of the agri-agra sector as
provided for in implementing rules and regulations of this Act
and the remaining ten percent {10%) shall be given to the BSP

to cover administrative expenses.

MEN ISTO R.A, 10092 5


Section 4. Repeating Clause. - All laws, decrees, executive orders,
rules and regulations, or parts thereof inconsistent with the provisions of
this Act are hereby repealed, amended or modified accordingly.

Section 5. Effectivity. - This Act shall take effect fifteen (15) days

after its publication in the Official Gazette or in a newspaper of general

circnauun,

Approved,

NDMENTS TO R.A. 1096 &