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Republic of the Philippines

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First Regular Session
House Bill No. 5681

Introduced by Representative Junie E. Cua
Lone District, Quirino

EXPLANATORY NOTE

When the Agri-Agra Reform Credit Act (RA 10000) was enacted, it was optimistically
regarded as a cure-all for the many ills plaguing our country's agriculture sector, and for
good reason. Based on the conventional wisdom prevailing at the time, farmers were
hindered by the lack of funds with which to purchase farming implements and inputs, and
that the solution, quite obviously, would be to provide them with access to credit by
mandating banks to allocate a good portion of their resources for such purpose.

Unfortunately, the idea that was meant to revolutionize the industry fell short of
achieving its goal. Because banks found it a hardship to invest in an industry perceived to
be fraught with risks, the concept of institutionalizing mandatory lending merely resulted in
widespread non-compliance with the law. Farmers, with their small farms and monocrops,
eam very little, which is insufficient to support their families, let alone have enough savings
as capital for the next cropping. Banks opted to pay the mandated penalties rather than
lend to farmers and agrarian reform beneficiaries. As a consequence, resources that could
have been funneled to promote and enhance agricultural productivity remain locked up in
limbo, while our farming communities continue to languish in poverty without any concrete
means to uplift themselves.

The Philippine Statistics Authority reported that the agriculture sector has remained
‘one with the highest poverty incidence in the country. While poverty in the rural areas may
be attributable to the overall decline in agricultural productivity over the years, meaningful
reforms are very much needed to improve the plight of our farmers and agrarian reform
beneficiaries.


The proposed measure seeks to institutionalize a framework that is more responsive
to the needs of the agricultural sector while providing for ways for the banking industry to
take on a more expansive role in line with a policy approach that is coordinated, systematic,
broad-based, and inclusive. The concept that banks are not merely credit providers but
stakeholders in rural development is an underlying yet unrealized principle in the present
law. By creating a special fund devoted exclusively to capacity building, and encouraging
banks to contribute to such fund as a mode of alternative compliance with the mandatory
credit allocation, the proposed measure is effectively cementing the role of the financial
sector as stakeholder and critical growth partner of the State in countryside development.

The proposed amendments further seek to extend the benefits of the law to a
broader section of the rural economy such as the farming households, and other agriculture
related sectors. By authorizing banks to fund a wider range of economic activities to comply
with mandatory credit requirements, the absorptive capacity of the farming industry is
enhanced through capacity building initiatives, programs and activities that improve the
sector's competitiveness and increase agricultural output. And because banks are naturally
predisposed to extend credit to individuals and entities with demonstrable ability to pay,
linkages in the supply chain further ensure that the financial benefits ultimately trickle down
to the grassroots level.

Finally, the proposed measure hopes to organize the farmers and fisherfolk into
cooperatives or associations that are professionally managed to make them profitable and
viable.

When farmers and fisherfolk have profitable and viable ventures, they develop the ability to
pay lenders which is key to the availment of bank credit.

Agriculture employs at least one-third of our labor force. Agricultural workers are
responsible for producing the raw materials used by the manufacturing industry. Our farmers
are the unsung heroes endlessly toiling to ensure that there is sufficient food for every
Filipino. As legislators, it is our singular duty to protect their interest and look after their
welfare.

In view the foregoing, the passage of this bill is earnestly sought.

NE E. CUA


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

18" Congress
FirstRegularSession

House Bill No. 5681

Introduced by REP. JUNIE E, CUA
Lone District, Quirino

AN ACT MANDATING BANKING INSTITUTIONS
TO STRENGTHEN THE FINANCING SYSTEM
FOR AGRICULTURAL, FISHERIES AND RURAL DEVELOPMENT
IN THE PHILIPPINES,

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 of 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 PARTCIPATION OF BANKING
INSTITUTIONS.

SEC. 3. Definition of 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 he/she works. THETERM
SHALL ALSO INCLUDE REGISTERED AGRARIAN REFORM BENEFICIARIES'
COOPERATIVES/ASSOCIATIONS/OTHER FARM GROUPS, RESPECTIVELY

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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/finaneing program of the government for the agriculture and fisheries
sector created under Republic Act No. 8435.

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() Amortizing Owners refer to landowners who amortize payment for the land to a
private individual or to the State.

(J) Compact Farmers refer to those farmers with adjoining farms operating as a single
unit under one management, farm plan and budget.

(K) Farmer refers to a natural person whose primary livelihood is cultivation of land
or the production of agricultural crops, agroforest products, AND/OR livestock, either by
himself/herself, or primarily with the assistance of his/her immediate farm household,
whether the land is owned by him/her or by another person under a leasehold or share
tenancy agreement or arrangement with the owner thereof.

(L) Farmworker refers to a natural person who renders service for value as an
employee or laborer in an agricultural enterprise or farm regardless of whether his/her
compensation is paid on a daily, weekly, monthly or "pakyaw" basis. The term includes an
individual whose work has ceased as a consequence of, or in connection with, a pending
agrarian dispute who has not obtained a substantially equivalent and regular farm
employment.

(M) Farmers’ Cooperatives refer to organizations composed primarily of small
agricultural producers, farmers, farmworkers, or other agrarian reform beneficiaries who
voluntarily organize themselves for the purpose of pooling land, manpower, technological,
financial or other economic resources, and operate on the principle of one member, one vote.
A juridical person may be a member of a cooperative, with the same rights and duties as a
natural person.

(N) Farmer's and Fisherfolk's Organizations or Associations refer to farmer's and
fisherfolk's cooperatives, associations or corporations duly registered with appropriate
government agencies and which are composed primarily of small agricultural producers,
farmers, farmworkers, agrarian reform beneficiaries, fisherfolk who voluntarily join together
to form business enterprises or non-business organizations which they themselves own,
control and patronize.

(O) FARM-TO-MARKET ROAD REFERS TO A ROAD LINKING THE
AGRICULTURE AND FISHERIES PRODUCTION SITES, COASTAL LANDING POINT
AND POST-HARVEST FACILITY TO THE MARKET AND ARTERIAL ROAD AND
HIGHWAY.

(P) Financial Services refer to services extended by banks/financial institutions such
as, but not limited to, credit/lending, deposits, rediscounting, and insurance.

(Q) Fisherfolk refers to people directly or personally and physically engaged in
CATCHING and/or culturing and processing fishery and/or aquatic resources.

(R) Fishworker refers to a person whether or not regularly employed in commercial
fishing and related industries, whose income is either from wages, profit sharing or stratified
sharing basis, including those working in fishpens, fish corral/traps, fishponds, prawn farms,
sea farms, salt beds, fish ports, fishing boat or trawlers, or fish processing and/or packing
plants, but excluding administrators, security guards and overseers.

(S) GREEN FINANCE REFERS TO FINANCIAL SERVICES AND PRODUCTS
DESIGNED TO PROMOTE THE FLOW OF FINANCE TOWARDS GREEN ECONOMIC

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ACTIVITIES AND PROJECTS. ASIDE FROM FINANCING TO PROMOTE CLIMATE
CHANGE ADAPTATION AND MITIGATION, GREEN FINANCE ALSO COVERS
ENVIRONMENTAL IMPROVEMENT AND EFFICIENCY IMPROVEMENT IN
NATURAL CAPITAL PRESERVATION AND RESOURCE MOBILIZATION.

(T) MICRO, SMALL AND MEDIUM ENTERPRISE (MSME) REFERS TO ANY
BUSINESS ACTIVITY OR ENTERPRISE DEFINED AS SUCH UNDER EXISTING
LAWS.

(U) NEWLY-ESTABLISHED BANK REFERS TO A DOMESTIC OR FOREIGN
BANK WITHOUT BANKING PRESENCE IN THE PHILIPPINES PRIOR TO THE
ISSUANCE OF ITS CERTIFICATE OF AUTHORITY TO OPERATE. IT SHALL NOT
INCLUDE BANKS THAT HAVE BEEN FORMED THROUGH THE ACQUISITION,
PURCHASE OF OWNERSHIP OF THE VOTING STOCK OF AN EXISTING
DOMESTIC BANK OR THE MERGER OR CONSOLIDATION OF BANKS.

(V) Owner-Cultivators refer to natural persons who own lands by purchase,
inheritance, or land distribution by the State. Owner-Cultivators can operate the farm
themselves, supervise wage labor or delegate operations to farmers.

(W) Philippine Crop Insurance Corporation (PCIC) refers to a government-owned and
-controlled corporation which provides insurance protection to the country's agricultural
producers, particularly the subsistence farmers against crop losses arising from natural
calamities such as typhoons, rising sea levels, floods, drought, earthquakes, volcanic
eruptions, plant diseases and pest infestation, and non-crop agricultural asset losses due to
perils for which the asset has been insured against.

(X) POST-HARVEST ACTIVITIES REFER TO THRESHING, DRYING,
MILLING, GRADING, STORING, AND HANDLING OF PRODUCE AND SUCH
OTHER ACTIVITIES OF A SIMILAR NATURE SUCH AS STRIPPING, WINNOWING,
CHIPPING AND WASHING.

(Y) POST-HARVEST FACILITIES REFER TO THRESHERS, MOISTURE
METERS, DRYERS, WEIGHING SCALES, MILLING EQUIPMENT, FISH PORTS, FISH
LANDINGS, ICE PLANTS AND COLD STORAGE FACILITIES, PROCESSING
PLANTS, WAREHOUSES, BUYING STATIONS, MARKET INFRASTRUCTURE AND
TRANSPORTATION FACILITIES, AND SUCH OTHER FACILITIES, SUPPORTING
POST-HARVEST ACTIVITIES.

(Z) PUBLIC RURAL INFRASTRUCTURE REFERS TO INFRASTRUCTURE IN
RURAL COMMUNITIES SUCH AS HIGHWAYS, STREETS, BRIDGES, TUNNELS,
RAILWAYS, RAILROAD, TRANSPORT SYSTEMS, PORTS, AIRPORTS,
HYDROPOWER PROJECTS, CANALS, DAMS, IRRIGATION, GOVERNMENT
BUILDINGS AND HOUSING PROJECTS, PUBLIC SCHOOLS, PUBLIC HOSPITALS,
PUBLIC HEALTH CENTERS, PUBLIC MARKETS, SLAUGHTERHOUSES,
WAREHOUSES, SOLID WASTE MANAGEMENT, SEWERAGE, FLOOD CONTROL,
DRAINAGE, DREDGING AND OTHER SIMILAR INFRASTRUCTURE PROJECTS.

(AA) RURAL COMMUNITY REFERS TO AREAS THAT ARE DEFINED AS
SUCH BY THE PHILIPPINE STATISTICS AUTHORITY.

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(AB) RURAL FINANCIAL INSTITUTION (RFI) REFERS TO ANY FINANCIAL
INSTITUTION ESTABLISHED AND IS OPERATING IN A RURAL COMMUNITY.

(AC) Settlers refer to persons who range from the forest-clearing pioneers, including
indigenous people, with a subsistence economy to the better equipped and more experienced
farmers.

(AD) Tenant Farmer refers to one who cultivates another's land under a sharing or
leasehold agreement.

ARTICLE II
AGRICULTURAL FISHERIES AND RURAL FINANCING SYSTEM

SEC. 4. Agriculture, Fisheries and Rural Financing System. — There shall be AN
AGRICULTURAL, FISHERIES AND RURAL financing system to improve the
WELFARE, COMPETITIVENESS, INCOME AND productivity of the RURAL
COMMUNITY BENEFICIARIES, particularly the farmers, fisherfolk, agrarian reform
beneficiaries, AGRARIAN REFORM COMMUNITIES, settlers, agricultural lessees,
amortizing owners, farmworkers, fishworkers, owner-cultivators, compact farmers, TENANT
FARMERS, AND MEMBERS OF THEIR HOUSEHOLD AND THEIR MSMES, AS
WELL AS farmer's and fisherfolk's cooperatives, organizations and associations, through
government and private banking institutions.

AGRICULTURAL, FISHERIES and RURAL FINANCING, as used herein, shall
consist of loans, INVESTMENTS AND GRANTS to finance activities THAT SHALL
ENHANCE PRODUCTIVITY AND INCREASE INCOME OF AN AGRICULTURAL
AND FISHERIES HOUSEHOLD, THEREBY PROMOTING AGRICULTURAL SECTOR
PRODUCTIVITY AND COMPETITIVENESS, AS WELL AS SUSTAINABLE
DEVELOPMENT OF RURAL COMMUNITIES. THESE SHALL INCLUDE, but not BE
limited to, 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, acquisition of lands authorized under the
Agrarian Reform Code of the Philippines and its amendments, efficient and effective
MARKETING, PROCESSING, DISTRIBUTION AND STORAGE OF AGRICULTURAL
AND FISHERY COMMODITIES, PUBLIC RURAL INFRASTRUCTURE, AS WELL AS
PROGRAMS THAT SHALL ADDRESS THE DEVELOPMENTAL NEEDS OF RURAL
COMMUNITIES, SUCH AS, BUT NOT LIMITED TO, PROJECTS THAT PROMOTE
THE LIVELIHOOD, SKILLS ENHANCEMENT, AND OTHER CAPACITY-BUILDING
ACTIVITIES OF THE RURAL COMMUNITY BENEFICIARIES AND ALL OTHER
ACTIVITIES CONSISTENT OR ANALOGOUS TO THE FOREGOING, AS MAY BE
DETERMINED BY THE AGRICULTURAL AND FISHERIES CAPACITY-BUILDING
FINANCE POLICY COUNCIL (AFCFPC).

SEC. 5. Rural Community Beneficiaries. - The FINANCING mentioned in the
preceding section shall be extended to the RURAL COMMUNITY beneficiaries named
therein or to cooperatives, associations, MSMES OR ORGANIZATIONS in good standing of
such beneficiaries, regardless of capitalization based on the feasibility of the project and their
paying capacity, their estimated production, and/or securities they can provide as well as such
assets as may be acquired by them from the proceeds of the loan, INVESTMENTS AND
GRANTS.

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SEC. 6. Credit Quota. — All banking institutions, whether government or private,
EXCEPT NEWLY-ESTABLISHED BANKS FOR A PERIOD OF FIVE (5) YEARS FROM
DATE OF COMMENCEMENT OF THE BANKS’ OPERATIONS, shall set aside A
CREDIT QUOTA, OR A MINIMUM MANDATORY AGRICULTURAL AND
FISHERIES FINANCING REQUIREMENT OF at least twenty-five percent (25%) of their
total loanable funds.

THE TOTAL LOANABLE FUNDS GENERATED BY A_ BANKING
INSTITUTION SHALL BE DEFINED BY THE BSP. DURING THE FIRST YEAR OF
EFFECTIVITY OF THIS ACT, THE TOTAL LOANABLE FUNDS GENERATED SHALL
BE COMPUTED STARTING FROM 20 APRIL 2010, THE EFFECTIVITY OF REPUBLIC
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 of 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;

(©) 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 RURAL COMMUNITY;

(f LEND TO AGRI-BUSINESS ENTERPRISES THAT MAINTAIN
AGRICULTURAL COMMODITY SUPPLY-CHAIN ARRANGEMENTS DIRECTLY
WITH RURAL COMMUNITY BENEFICIARIES;

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(G) UNDERTAKE AGRICULTURAL VALUE CHAIN FINANCING TO
ACTORS/ PLAYERS IN THE AVC THAT BENEFITS RURAL COMMUNITIES; AND

(I) 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:

PROVIDED, THAT THE LOANS AND INVESTMENTS THAT ARE COUNTED
AS COMPLIANCE ARE NOT FUNDED BY PROCEEDS FROM THE ISSUANCE OF
DEBT SECURITIES, AND/OR LENDING OF OTHER BANKS THAT HAVE BEEN
COUNTED AS COMPLIANCE WITH THE MANDATORY CREDIT: PROVIDED,
FURTHER, THAT LOANS TO FINANCE ACTIVITIES THAT SHALL GENERALLY
BENEFIT AGRARIAN REFORM _ BENEFICIARIES, AGRARIAN REFORM
COMMUNITIES, OR OTHER PRIORITY SECTORS, AS MAY BE DETERMINED BY
THE AFCFPC, SHALL BE COUNTED AT TEN TIMES (10X) THEIR OUTSTANDING
AMOUNT, OR AS OTHERWISE PRESCRIBED BY THE BSP, FOR PURPOSES OF
DETERMINING COMPLIANCE WITH THE MANDATORY AGRICULTURAL AND
FISHERIES FINANCING REQUIREMENT.

SEC. 8. The MODES OF compliance enumerated in the preceding section shall be
subject to review by the AFCFPC after implementation to determine whether THESE ARE
ADEQUATE TO SUPPORT THE FINANCING REQUIREMENTS OF RURAL
COMMUNITIES AND RECOMMEND TO CONGRESS FOR APPROPRIATE ACTION.

SEC. 9. Annual Reports. — The BSP shall furnish reports on the compliance with the
mandatory AGRICULTURAL AND FISHERIES FINANCING REQUIREMENT to the
Congress on a yearly basis. THE BSP SHALL, AS PART OF ITS REGULATORY
FUNCTIONS, MONITOR THE COMPLIANCE BY THE BANKS WITH THE
REQUIREMENTS OF THIS ACT.

SEC. 10. Penalty Clause. — The BSP shall impose administrative sanctions and other
penalties on the lending institutions for VIOLATION OF ANY OF the provisions of this Act.
Penalties on noncompliance OR UNDERCOMPLIANCE shall be computed at one-half of
one percent (0.5%) of noncompliance OR undercompliance, OR AT RATES PRESCRIBED
BY THE BSP MONETARY BOARD. UPON COLLECTION OF THE PENALTIES, THE
BSP SHALL REMIT THE SAME TO THE AFCFPC FOR DEPOSIT TO THE SPECIAL
FUND CREATED UNDER ARTICLE III OF THIS ACT. TEN percent (10%) OF THE
PENALTIES COLLECTED shall be RETAINED BY the BSP to cover administrative
expenses.

ARTICLE III

AGRIBUSINESS MANAGEMENT CAPACITY AND INSTITUTION-BUILDING FUND.
AND PROGRAM

SEC. 11. BANKS MAY ALSO COMPLY WITH THE MANDATORY CREDIT
REQUIREMENT BY PROVIDING CONTRIBUTIONS TO AN AGRIBUSINESS
MANAGEMENT CAPACITY AND INSTITUTION-BUILDING FUND (SPECIAL FUND)
TO FINANCE AGRICULTURAL- AND FISHERY-RELATED CAPACITY AND
INSTITUTION-BUILDING PROGRAMS OF RURAL COOPERATIVES AND OTHER
DULY-REGISTERED ORGANIZATIONS OF RURAL AGRICULTURAL AND
FISHERIES HOUSEHOLDS, TO IMPROVE THEIR VIABILITY AND PRODUCTIVITY,

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THE AFCFPC SHALL ENTER INTO AN AGREEMENT WITH THE BANKING
INDUSTRY ON THE CONTRIBUTIONS AND 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 AFCFPC. 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 AFCFPC.

SEC, 12. THE INITIAL CONTRIBUTION TO THE SPECIAL FUND SHALL
INCLUDE PENALTIES DUE FROM BANKS ON THEIR NONCOMPLIANCE OR
UNDERCOMPLIANCE WITH THE MANDATORY AGRI-AGRA CREDIT
REQUIREMENT UNDER REPUBLIC ACT NO. 10000, COLLECTED AFTER THE
EFFECTIVITY OF THIS ACT, NET OF THE TEN (10) PERCENT AMOUNT TO BE
RETAINED BY THE BSP. THE SAID AMOUNT SHALL NOT BE LESS THAN TEN
BILLION PESOS. ANY SHORTFALL SHALL BE CONTRIBUTED BY THE BANKS.

SEC. 13. THE AFCFPC SHALL PERIODICALLY ASSESS THE ADEQUACY OF
THE FUND CAPITAL IN FINANCING THE AGRICULTURAL AND CAPACITY-
BUILDING REQUIREMENTS OF RURAL COOPERATIVES AND OTHER DULY-
REGISTERED ORGANIZATIONS OF RURAL AGRICULTURAL AND FISHERIES
HOUSEHOLDS.

SEC 14. BANKS, DULY-REGISTERED TRAINING AND CAPACITY-
BUILDING ORGANIZATIONS, RURAL AND AGRICULTURAL COOPERATIVES
AND OTHER DULY-REGISTERED ORGANIZATIONS OF RURAL AGRICULTURAL
AND FISHERIES HOUSEHOLDS MAY APPLY WITH THE AFCFPC FOR GRANT
FUNDING FOR THEIR AGRICULTURAL, CAPACITY AND INSTITUTION-BUILDING
PROGRAMS AND ACTIVITIES.

ARTICLE IV.
AGRICULTURAL AND FISHERIES
CAPACITY-BUILDING FINANCE POLICY COUNCIL (AFCFPC)

SEC. 15. AGRICULTURAL AND FISHERIES CAPACITY-BUILDING FINANCE
POLICY COUNCIL (AFCFPC). — THERE SHALL BE CREATED AN AGRICULTURAL
AND FISHERIES CAPACITY-BUILDING FINANCE POLICY COUNCIL (AFCFPC)
WHICH SHALL BE COMPOSED OF: THE SECRETARY, DEPARTMENT OF
AGRICULTURE (DA), AS CHAIR; THE GOVERNOR, BANGKO SENTRAL NG
PILIPINAS (BSP); THE DIRECTOR-GENERAL, NATIONAL ECONOMIC AND
DEVELOPMENT AUTHORITY (NEDA); THE SECRETARY, DEPARTMENT OF
BUDGET AND MANAGEMENT (DBM); THE SECRETARY, DEPARTMENT OF
AGRARIAN REFORM (DAR); THE SECRETARY, DEPARTMENT OF FINANCE
(DOF); THE SECRETARY, DEPARTMENT OF TRADE AND INDUSTRY (DTI); THE
PRESIDENT, LAND BANK OF THE PHILIPPINES (LBP); THE PRESIDENT,
DEVELOPMENT BANK OF THE PHILIPPINES (DBP); THE PRESIDENT, PHILIPPINE
INSTITUTE FOR DEVELOPMENT STUDIES (PIDS), AND ELEVEN (11)
REPRESENTATIVES FROM THE PRIVATE SECTOR, ONE OF WHOM SHALL BE
APPOINTED AS VICE-CHAIRMAN, AS MEMBERS. THE PRIVATE SECTOR
REPRESENTATIVES SHALL INCLUDE THE PRESIDENT, RURAL BANKERS
ASSOCIATION OF THE PHILIPPINES (RBAP); THE PRESIDENT, CHAMBER OF
THRIFT BANKS (CTB); THE CHAIR, COOPERATIVE BANKS FEDERATION OF THE

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PHILIPPINES (BANGKOOP); THE PRESIDENT, BANKERS ASSOCIATION OF THE
PHILIPPINES (BAP); THE CHAIR, MICROFINANCE COUNCIL OF THE PHILIPPINES,
INC. (MCPI); THE PRESIDENT, PHILIPPINE CHAMBER OF COMMERCE AND
INDUSTRY (PCCI); THE PRESIDENT, PHILIPPINE COUNCIL FOR AGRICULTURE
AND FISHERIES (PCAFI), BANKERS INSTITUTE OF THE PHILIPINES, INC.
(BAIPHIL), AND A REPRESENTATIVE EACH FROM THE COOPERATIVE SECTOR,
THE FARMERS, AND THE FISHERFOLK SECTOR.

SEC. 16. POWERS, DUTIES AND FUNCTIONS OF THE AFCFPC. — THE
AFCFPC SHALL HAVE THE FOLLOWING POWERS, DUTIES, AND FUNCTIONS:

a) TO SET TARGETS FOR ANNUAL CONTRIBUTIONS TO THE
SPECIAL FUND TO BE COMMITTED BY THE BANKS IN AN
AMOUNT THAT IS SUFFICIENT TO MEET THE ORGANIZATIONAL,
AND THE CAPACITY BUILDING REQUIREMENTS OF THE RURAL
COOPERATIVES AND OTHER DULY-REGISTERED
ORGANIZATIONS OF RURAL AGRICULTURAL AND FISHERIES
HOUSEHOLDS OVER A PERIOD OF TEN (10) YEARS;

b) TO IDENTIFY ELIGIBLE GRANT RECIPIENTS OF THE SPECIAL
FUND;
¢) TO IDENTIFY ELIGIBLE AGRICULTURAL- AND FISHERY-

RELATED CAPACITY BUILDING PROGRAMS THAT MAY BE
FINANCED BY THE SPECIAL FUND; AND.

d) TO UNDERTAKE REPORTING, MONITORING, EVALUATION AND
AUDIT REQUIREMENTS OF THE SPECIAL FUND AND ACTIVITIES
FINANCED.

ARTICLE V
MISCELLANEOUS PROVISIONS

SEC. 17. SUNSET PROVISIONS. THE PROVISIONS RELATED TO THE
MANDATORY CREDIT QUOTA UNDER ARTICLE II AS WELL AS THE
MANAGEMENT AND ADMINISTRATION OF THE SPECIAL FUND UNDER
ARTICLE III SHALL CEASE TO HAVE EFFECT, TEN (10) YEARS FROM APPROVAL
OF THIS ACT.

SEC. 18. Repealing Clause. THE PROVISIONS OF REPUBLIC ACT NO. 10000,
EXECUTIVE ORDER NO. 113 AND ANY OTHER 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. 19. Separability Clause. ~ If any part, section or provision of this Act is held
invalid or unconstitutional, other provisions not affected thereby shall remain in force and
effect.

SEC. 20. Transitory Provision. - THE BSP SHALL PROMULGATE SUCH RULES
AND REGULATIONS AS MAY BE NECESSARY TO IMPLEMENT ARTICLES I AND
IL OF THIS ACT WITHIN NINETY (90) DAYS AFTER THE APPROVAL OF THIS ACT.
PRIOR TO THE EFFECTIVITY OF THE IMPLEMENTING RULES AND
REGULATIONS OF ARTICLES | AND II OF THIS ACT, THE PROVISIONS OF
REPUBLIC ACT NO. 10000 SHALL REMAIN IN FORCE.

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MEANWHILE, THE AFCPC SHALL PROMULGATE SUCH RULES AND
REGULATIONS AS MAY BE NECESSARY TO IMPLEMENT ARTICLES III AND IV
OF THIS ACT WITHIN NINETY (90) DAYS AFTER APPROVAL OF THIS ACT.

SEC. 21. Effectivity. — This Act shall take effect fifteen (15) days after its publication
in the Official Gazette or in a newspaper of general circulation.

Approved.

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