EIGHTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
S E N A T E
^cn -T .:
o[ ttjr jbi'crttnrp
20 
FEB 17 
P4 47
s. No. 1 3 5 2
REc: . DS\
Introduced by Senator Manuel "Lito" M. Lapid
AN ACT MANDATING BANKING INSTITUTIONS 
TO STRENGTHEN THE FINANCING SYSTEM 
FOR AGRICULTURAL, FISHERIES AND RURAL DEVELOPMENT
IN THE PHILIPPINES
EXPLANATORY NOTE
Article II Section 21 of the 1987 Constitution states that the State shall promote 
comprehensive rural development and agrarian reform.
Republic Act No. 10000 or the Agri-Agra Reform Credit Act of 2009 was enacted 
to promote rural development by enhancing access of the rural agricultural sector to 
financial services and programs that increase market efficiency and promote 
modernization in the rural agricultural sector.
The Philippine Statistics Authority reported that the agriculture sector has 
remained one with the highest poverty incidence in the country. This could be 
attributed to the fact that the banks are not well-incentivized to invest in this sector 
due to the various risks the same is exposed to. In fact, banks opted to pay the 
mandated penalties rather than lend it to the farmers and agrarian reform 
beneficiaries. This results to underemployment of resources which could have been 
utilized by the farming communities to promote and enhance agricultural productivity.
Thus, this bill seeks to amend the Agri-Agra Reform Credit Act of 2009 by 
providing a holistic approach that addresses the root causes of the challenges faced 
by the agricultural and fisheries sector and takes into account the broader agricultural


financing ecosystem and rural community development requirements by (1) enabling 
access by rural communities to private sector financing; (2) creating a special 
Agribusiness Management Capacity and Institution-Building Fund for purposes of 
financing agricultural-related activities as well as capacity and institution-building 
programs of rural cooperatives and other duly-registered organizations of rural and 
agricultural households to improve their viability and productivity; and (3) establishing 
the Agricultural and Fisheries Finance and Capacity-Building Council (AFFCC) which 
shall be responsible for the management of the special fund as well as the 
identification of eligible activities and programs to be financed by the said fund.
In view of the foregoing early passage of this bill is earnestly sought.
INUEL "tlT O " M. LAPID
Senator


EIGHTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
S E N A T E
S. No. 1352
1 
oHIjc g T T t t i i r p
20 
FEB 17 
P4-47
Introduced by Senator Manuel "Lito" M. Lapid
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AN ACT MANDATING BANKING INSTITUTIONS 
TO STRENGTHEN THE FINANCING SYSTEM 
FOR AGRICULTURAL, FISHERIES AND RURAL DEVELOPMENT
IN THE PHILIPPINES
Be it enacted by the Senate and the House o f Representatives o f the Philippines 
in Congress assembled:
ARTICLE I
GENERAL PROVISIONS
SECTION 1. Short Title. -  This Act shall be known as "The Rural Agricultural 
and Fisheries Financing Enhancement System Act'.
SEC. 2. Declaration o f Policy. -  It is hereby declared the policy of the State to 
promote inclusive and broad-based economic growth by ensuring equal access to 
opportunities under an environment of sustained growth and expanding productivity 
as the key to raising the quality of life for all. Towards this end, the State shall promote 
rural development by enhancing access of rural communities and agricultural and 
fisheries households to financial services and programs that increase productivity, 
enhance market efficiency, promote modernization and improve the welfare and 
economic prospects of beneficiaries in rural communities through active participation 
of banking institutions.
SEC. 3. Definition o f Terms. -  As used in this Act, the following terms shall
mean:
(A) 
Agrarian Reform Beneficiary (ARB) refers to a farmer who was granted land 
under Presidential Decree No. 27, the Comprehensive Agrarian Reform Law and 
Republic Act No. 9700 or the "Comprehensive Agrarian Reform Extension with 
Reforms" and a regular farm worker who is landless, irrespective of tenurial 
arrangement, who benefited from the redistribution of land, regardless of crops or 
fruits produced, to include the totality of factors and support services designed to lift 
the economic status of the beneficiary and all other alternative arrangements to the 
physical 
distribution of lands, such as production or profit sharing, 
labor 
administration, and the distribution of shares of stock which will allow the beneficiary 
to receive a just share of the fruits of the lands one works. The 
term shall 
also 
include registered agrarian reform beneficiaries' cooperatives/associations/other farm
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groups, respectively endorsed as comprising of agrarian reform beneficiaries by the 
nearest office of the DAR, as well as ARB households.
(B) Agrarian Reform Community (ARC) refers to a barangay or a cluster of 
barangays primarily composed and managed by agrarian reform beneficiaries who 
shall be willing to be organized and undertake the integrated development of an area 
and/or their organizations/cooperatives.
(C) Agri-Business refers to agriculture and fishery-related activities that put 
farmers, fisherfolk processors, distributors, and consumers within a system that 
produces, processes, transports, markets, and distributes agricultural and fishery 
products. 
It encompasses input production, farm and fishery operations and 
management, equipment and supplies manufacturing, food/non-food processing, 
trading, and retailing.
(D) Agri-Tourism, also referred to as "Farm Tourism" under Republic Act No. 
10816, refers to the practice of attracting visitors and tourists to farm areas for 
production, educational and recreational purposes. It involves any agricultural- or 
fishery-based operation or activity that brings to a duly-accredited farm tourism camp, 
visitors, tourists, farmers and fisherfolk who want to be educated and trained on 
farming and its related activities.
(E) Agricultural Lessee refers to any person who, with or without help from 
his/her immediate farm household, cultivates the land owned by another for a certain 
price in money, in produce, or in both.
(F) Agricultural or Fisheries Household - a household is considered to be an 
agricultural or fisheries household when at least one member of the household is a 
farmer, a fisherman, an agrarian reform beneficiary, a settler, an agricultural lessee, 
an amortizing owner, a farmworker, a fishworker, an owner-cultivator, a compact 
farmer, or a tenant farmer.
(G) Agricultural Value Chain (AVC) refers to a set of actors/players, such as 
producers (farmers, fisherfolks), traders, suppliers, processors, aggregators, who 
conduct linked sequence of value-adding activities involved in converting an 
agricultural product from its raw material to final form and bringing it to consumers.
Agricultural Value Chain Financing (AVCF) refers to financing to an AVC 
following the identification and analysis of AVC and the design of appropriate financial 
products and services for actors/ players that form part of the AVC.
(H) Agro-Industry Modernization Credit and Financing Program (AMCFP) refers 
to the umbrella credit/financing program of the government for the agriculture and 
fisheries sector created under Republic Act No. 8435.
(I) Amortizing Owners refer to landowners who amortize payment for the land 
to a private individual or to the State.
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(J) Compact Farmers refer to those farmers with adjoining farms operating as
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a single unit under one management, farm plan and budget.
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(K) Farmer refers to a natural person whose primary livelihood is cultivation of
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land or the production of agricultural crops, agroforest products, or livestock, either
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by oneself, or primarily with the assistance of their immediate farm household,
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whether the land is owned by them or by another person under a leasehold or share
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tenancy agreement or arrangement with the owner thereof.
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(L) Farmworker refers to a natural person who renders service for value as an
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employee or laborer in an agricultural enterprise or farm regardless of whether their
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compensation is paid on a daily, weekly, monthly or "pakyaw" basis. The term includes
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an individual whose work has ceased as a consequence of, or in connection with, a
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pending agrarian dispute who has not obtained a substantially equivalent and regular
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farm employment.
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(M) Farmers' Cooperatives refer to organizations composed primarily of small
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agricultural producers, farmers, farmworkers, or other agrarian reform beneficiaries
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who voluntarily organize themselves for the purpose of pooling land, manpower,
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technological, financial or other economic resources, and operate on the principle of
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one member, one vote. A juridical person may be a member of a cooperative, with
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the same rights and duties as a natural person.
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(N) Farmer's and Fisherfolk's Organizations or Associations refer to farmer's
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and fisherfolk's cooperatives, associations or corporations duly registered with
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appropriate government agencies and which are composed primarily of small
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agricultural producers, farmers, farmworkers, agrarian reform beneficiaries, fisherfolk
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who voluntarily join together to form business enterprises or non-business
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organizations which they themselves own, control and patronize.
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(0) Farm-To-Market Road refers to a road linking the agriculture and fisheries
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production sites, coastal landing point and post-harvest facility to the market and
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arterial road and highway.
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(P) Financial Services refer to services extended by banks/financial institutions
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such as, but not limited to, credit/lending, deposits, rediscounting, and insurance.
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(Q) Fisherfolk refers to people directly or personally and physically engaged in
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catching and/or culturing and processing fishery and/or aquatic resources.
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(R) Fishworker refers to a person whether or not regularly employed in
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commercial fishing and related industries, whose income is either from wages, profit
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sharing or stratified sharing basis, including those working in fishpens, fish
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corral/traps, fishponds, prawn farms, sea farms, salt beds, fish ports, fishing boat or
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trawlers, or fish processing and/or packing plants, but excluding administrators,
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security guards and overseers.
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(S) Green Finance refers to financial services and products designed to promote
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the flow of finance towards green economic activities and projects. 
Aside from
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financing to promote climate change adaptation and mitigation, green finance also
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covers environmental improvement and efficiency improvement in natural capital
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preservation and resource mobilization.
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(T) Micro, Small And Medium Enterprise (MSME) refers to any business activity
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or enterprise defined as such under existing laws.
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(U) Newly-Established Bank refers to a domestic or foreign bank without
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banking presence in the Philippines prior to the issuance of its certificate of authority
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to operate. It shall not include banks that have been formed through the acquisition,
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purchase of ownership of the voting stock of an existing domestic bank or the merger
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or consolidation of banks.
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(V) Owner-Cultivators refer to natural persons who own lands by purchase,
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inheritance, or land distribution by the State. Owner-Cultivators can operate the farm
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themselves, supervise wage labor or delegate operations to farmers.
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(W) Philippine Crop Insurance Corporation (PCIC) refers to a government-
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owned and 
-controlled corporation which provides insurance protection to the
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country's agricultural producers, particularly the subsistence farmers against crop
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losses arising from natural calamities such as typhoons, rising sea levels, floods,
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drought, earthquakes, volcanic eruptions, plant diseases and pest infestation, and
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non-crop agricultural asset losses due to perils for which the asset has been insured
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against.
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(X) Post-Harvest Activities refer to threshing, drying, milling, grading, storing,
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and handling of produce and such other activities of a similar nature such as stripping,
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winnowing, chipping and washing.
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(Y) Post-Harvest Facilities refer to threshers, moisture meters, dryers, weighing
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scales, milling equipment, fish ports, fish landings, ice plants and cold storage facilities,
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processing 
plants, 
warehouses, 
buying 
stations, 
market 
infrastructure 
and
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transportation facilities, and such other facilities, supporting post-harvest activities.
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(Z) Public Rural Infrastructure refers to infrastructure in rural communities such
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as highways, streets, bridges, tunnels, railways, railroad, transport systems, ports,
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airports, hydropower projects, canals, dams, irrigation, government buildings and
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housing projects, public schools, public hospitals, public health centers, public
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markets, slaughterhouses, warehouses, solid waste management, sewerage, flood
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control, drainage, dredging and other similar infrastructure projects.
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(AA) Rural Community refers to areas that are defined as such by the Philippine
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Statistics Authority (PSA).
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(AB) Rural Financial Institution (RFI) refers to any financial institution
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established and is operating in a rural community.
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(AC) Settlers refer to persons who range from the forest-clearing pioneers,
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including indigenous people, with a subsistence economy to the better equipped and
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more experienced farmers.
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(AD) Tenant Farmer refers to one who cultivates another's land under a sharing
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or leasehold agreement.
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ARTICLE II
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AGRICULTURAL FISHERIES AND RURAL FINANCING SYSTEM
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SEC. 4. Agriculture, Fisheries and Rural Financing System. -  There shall be an
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agricultural, 
fisheries and 
rural 
financing 
system 
to 
improve the welfare,
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competitiveness, income and productivity of the rural community beneficiaries,
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particularly the farmers, fisherfolk, agrarian reform beneficiaries, agrarian reform
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communities, 
settlers, 
agricultural 
lessees, 
amortizing 
owners, 
farmworkers,
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fishworkers, owner-cultivators, compact farmers, tenant farmers, and members of
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their households and their MSMEs, as well as farmers' and fisherfolk's cooperatives,
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organizations and associations, through government and private banking institutions.
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Agricultural, fisheries and rural financing, as used herein, shall consist of loans,
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investments and grants to finance activities that shall enhance productivity and
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increase income of an agricultural and fisheries household, thereby promoting
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agricultural 
sector productivity and competitiveness, 
as well 
as sustainable
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development of rural communities. These shall include, but not be limited to, activities
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identified under the AMCFP as enumerated under Chapter 3 Section 23 of Republic
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Act No. 8435, off-farm/fishery activities, agricultural mechanization/ modernization,
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agri-tourism, green finance projects, acquisition of lands authorized under the
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Agrarian Reform Code of the Philippines and its amendments, efficient and effective
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marketing, 
processing, 
distribution 
and 
storage of agricultural 
and 
fishery
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commodities, public rural infrastructure, as well as programs that shall address the
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developmental needs of rural communities, such as, but not limited to, projects that
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promote the livelihood, skills enhancement, and other capacity-building activities of
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the rural community beneficiaries and all other activities consistent or analogous to
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the foregoing, as may be determined by the Agricultural and Fisheries Finance and
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Capacity-Building Council (AFFCC).
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SEC. 5. Rural Community Beneficiaries. 
-  The financing mentioned in the
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preceding section shall be extended to the rural community beneficiaries named
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therein or to cooperatives, associations, MSMEs or organizations in good standing of
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such beneficiaries, regardless of capitalization based on the feasibility of the project
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and their paying capacity, their estimated production, and/or securities they can
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provide as well as such assets as may be acquired by them from the proceeds of the
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loan, investments and grants.
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SEC. 6. Credit Quota. -  All banking institutions, whether government or private,
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except newly-established banks for a period of five (5) years from date of
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commencement of the banks' operations, shall set aside a credit quota, or a minimum
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mandatory agricultural and fisheries financing requirement of at least twenty-five
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percent (25%) of their total loanable funds.
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The total loanable funds generated by a banking institution shall be defined by
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the BSP. 
During the first year of effectivity of this Act, the total loanable funds
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generated shall be computed starting from 20 April 2010, the effectivity of Republic
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Act No. 10000, after which the bank's total loanable funds shall be determined based 
on funds generated starting from the second year of effectivity of this Act.
SEC. 7. Modes o f Compliance. Banks may comply with the mandatory credit 
requirement by lending to rural community beneficiaries, to finance agricultural and 
fishery-related activities identified under the AMCFP as enumerated under Chapter 3 
Section 23 of Republic Act No. 8435, off-farm/fishery activities, agricultural 
mechanization/modernization, agri-tourism, green finance projects, 
marketing, 
processing, distribution and storage of agricultural and fishery commodities, livelihood 
projects, skills enhancement or capacity-building programs.
Banks may also comply with the mandatory financing requirement through 
other means as follows:
(a) Invest in debt securities, including those issued by the Development Bank 
of the Philippines (DBP) and the Land Bank of the Philippines (LBP): 
Provided, That the proceeds from said debt securities shall be used to 
finance activities under Section 4 hereof: Provided, further. That the 
proceeds from debt securities issued by the DBP and the LBP shall be 
separately accounted for and shall not be considered for purposes of 
computing the loanable funds under Section 6 hereof of the said banks;
(b ) Open deposit accounts with rural financial institutions: Provided, That the 
deposit accounts shall be separately accounted for by the depository bank 
and shall not be considered for purposes of computing the loanable funds 
under Section 6 hereof of the said banks;
(c) 
Rediscount with banks eligible paper covering agriculture, fisheries and 
agrarian reform credits: Provided, That rediscounted paper shall no longer 
be eligible as compliance on the part of the originating bank;
(d) Invest directly in shares of stock of rural financial institutions, subject to 
prevailing laws, rules or regulations or lend wholesale to rural financial 
institutions: Provided, That the wholesale loans shall be credited as 
compliance of the bank acting as wholesale lender alone;
(e) Lend for the construction and upgrading of infrastructure, including but not 
limited to, farm-to-market roads, as well as the provision of post-harvest 
facilities and other public RURAL infrastructure that will benefit the 
agriculture, fisheries and agrarian reform sector;
(f) Lend to agri-business enterprises that maintain agricultural commodity 
supply-chain arrangements directly with rural community beneficiaries;
(g) Undertake agricultural value chain financing to actors/ players in the AVC 
that benefits rural communities; and
(h) 
Invest in shares of stock of the PCIC or in companies that primarily 
engage in activities under Section 4 hereof that benefit rural community 
beneficiaries:
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Provided That, the loans and investments that are counted as compliance are
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not funded by proceeds from the issuance of debt securities, and/or lending of other
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banks that have been counted as compliance with the mandatory credit: Provided
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Further, that loans to finance activities that shall generally benefit agrarian reform
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beneficiaries, agrarian reform communities, or other priority sectors, as may be
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determined by the AFFCC, shall be counted at not more than ten times (lOX) their
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outstanding amount, or as otherwise prescribed by the BSP, for purposes of
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determining compliance with the mandatory agricultural and fisheries financing
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requirement.
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SEC. 8. The modes of compliance enumerated in the preceding section shall be
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subject to review by the AFFCC after implementation to determine whether these are
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adequate to support the financing requirements of rural communities and recommend
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to Congress for appropriate action.
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SEC. 9. Annuai Reports. -  The BSP shall furnish reports on the compliance with
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the mandatory agricultural and fisheries financing requirement to the Congress on a
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yearly basis. The BSP shall, as part of its regulatory functions, monitor the compliance
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by the banks with the requirements of this Act.
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SEC. 10. Penalty Clause. -  The BSP shall impose administrative sanctions and
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other penalties on the lending institutions for violation of any of the provisions of this
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Act. 
Penalties on non-compliance or under-compliance with the mandatory
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agricultural and fisheries financing requirement shall be computed at one-half of one
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percent (0.5%) of non-compliance or under-compliance, or at rates prescribed by the
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BSP Monetary Board. Upon collection of the penalties, the BSP shall remit the same to
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the AFFCC for deposit to the special fund created under Article III of this Act. Ten
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percent (10%) of the penalties collected shall be retained by the BSP to cover
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administrative expenses.
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ARTICLE III
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AGRIBUSINESS MANAGEMENT CAPACITY AND INSTITUTION-BUILDING FUND AND
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PROGRAM
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SEC. 11. There shall be created an Agribusiness Management Capacity And
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Institution-Building Fund (Special Fund) to finance agricultural- and fishery-related
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activities as well as organizational-, capacity- and institution-building programs of
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cooperatives and other duly-registered organizations of rural agricultural and fisheries
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households. The Special Fund shall be sufficient to ensure effective implementation of
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the aforementioned activities and programs. For this purpose, banks may comply with
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the mandatory credit requirement by providing contributions to the Special Fund.
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SEC. 12. The initial amount of the Special Fund shall at least be PIO billion
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and shall include penalties due from banks on their non-compliance or under-
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compliance with the mandatory Agri-Agra credit requirement under Republic Act No.
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10000, collected after the effectivity of this Act, net of the ten (10) percent amount to
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be retained by the BSP. In case of a shortfall, the banks shall advance a maximum
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amount of P2 billion, which shall be chargeable against future penalties under this Act, 
and shall not be considered as a mode of compliance under Section 11 hereof.
SEC. 13. The AFFCC shall enter into an agreement with the banking industry 
on the management of the Special Fund as well as the implementation of the activities 
and programs of the Special Fund, in accordance with the approval of and guidelines 
prescribed by the AFFCC. The agreement shall also require the banking industry to 
monitor and evaluate the activities financed by the Special Fund, and report its findings 
to the AFFCC.
SEC 14. 
Banks, duly-registered training and capacity-building organizations, 
cooperatives and other duly-registered organizations of, or that support rural 
agricultural and fisheries households may apply with the AFFCC for funding for their 
capacity and institution-building programs and activities.
ARTICLE IV
AGRICULTURAL AND FISHERIES 
FINANCE AND CAPACITY-BUILDING COUNCIL (AFFCC)
SEC. 15. 
Agricultural And Fisheries Finance and Capacity-Building Council 
(AFFCC). — There shall be created an Agricultural and Fisheries Finance and Capacity- 
Building Council (AFFCC) which shall be composed of the Heads, or their designated 
representatives, of the following agencies: the Department of representatives, of: the 
Bankers Association of the Philippines (BAP), as Vice Chair; the Agriculture (DA), as 
Chair; the Bangko Sentral ng Pilipinas (BSP); the Department of Agrarian Reform 
(DAR); the Department of Trade and Industry (DTI); the Cooperative Development 
Authority (CDA); the Land Bank of the Philippines (LBP); the Development Bank of the 
Philippines (DBP); and nine (9) representatives from the private sector as members, 
one of whom shall be appointed as Vice-Chair. The private sector representatives 
shall include the heads, or their designated Rural Bankers Association of the Philippines 
(RBAP); the Chamber of Thrift Banks (CTB); the Cooperative Banks Federation of the 
Philippines (BANGKOOP); the Microfinance Council of the Philippines, Inc. (MCPI); the 
Philippine Chamber of Commerce and Industry (PCCI); and a representative each from 
the cooperative sector, the farmers, and the fisherfolk sector.
SEC. 16. Powers, Duties and Functions o f the AFFCC. — The AFFCC shall have 
the following powers, duties, and functions:
a)
b)
c)
d)
e)
to set the target amount for the Special Fund to meet the organizational- 
and capacity-building requirements of cooperatives and other duly- 
registered organizations of rural agricultural and fisheries households over 
a period often (10) years;
to determine the annual requirement of the Special Fund; 
to identify eligible recipients of the Special Fund;
to identify eligible agricultural- and fishery-related activities and capacity 
building programs that may be financed by the Special Fund; 
to ensure the effective implementation and programs financed by the 
Special Fund;
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f) to periodically assess the adequacy of the fund capital in financing the 
capacity-building requirements of rural cooperatives and other duly- 
registered organizations of rural agricultural and fisheries households; and
g) to ensure compliance with the reporting, monitoring, evaluation and audit 
requirements of the Special Fund and activities financed.
6 
ARTICLE V
7 
MISCELLANEOUS PROVISIONS
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SEC. 17. Audit -  The Special Fund shall be audited by the Commission on Audit
9 
(COA) in accordance with existing auditing laws, rules and regulations.
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SEC. 18. Oversight Committee. -  There shall be an oversight committee
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composed of the following: the Chairperson of the Committee on Banks and Financial
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Intermediaries of the House of Representatives, Chairperson of the Committee on
13 
Banks, Financial Institutions and Currencies of the Senate, a representative from the
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Office of the President and a representative from the Commission on Audit (COA); to
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oversee the implementation of the provisions of this Act.
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SEC. 19. Sunset Provisions. The provisions related to the mandatory credit
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quota under Article II as well as the management and administration of the special
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fund under Article III shall cease to have effect, ten (10) years from approval of this
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Act.
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SEC. 20. Repealing Clause. -The provisions of Republic Act No. 10000,
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Executive Order No. 113 and any other laws, presidential decrees, executive orders,
22 
rules and regulations, or parts thereof inconsistent with the provisions of this Act are
23 
hereby repealed or modified accordingly.
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SEC. 21. Separability Clause. -  If any part, section or provision of this Act is
25 
held invalid or unconstitutional, other provisions not affected thereby shall remain in
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force and effect.
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SEC. 22. Transitory Provision. -  The BSP shall promulgate such rules and
28 
regulations as may be necessary to implement Articles I and II of this Act within ninety
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(90) days after effectivity of this Act. Prior to the effectivity of the implementing rules
30 
and regulations of Articles I and II of this Act, the provisions of Republic Act No. 10000
31 
shall remain in force.
32 
The BSP shall organize a Task Force which shall promulgate such rules and
33 
regulations as may be necessary to implement Articles III and IV of this Act within
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ninety (90) days after effectivity of this Act.
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SEC. 23. Effectivity. -  This Act shall take effect fifteen (15) days after its
36 
publication in the Official Gazette or in a newspaper of general circulation.
37 
Approved,
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