Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

FIFTEENTH CONGRESS:
First Regular Session

8260

. House Bill No.

Introduced by HONORABLE JEFFREY P. FERRER

EXPLAN:

rORY NOTE

Agricultural credit is an important stimulus for the development of the agriculture sector
and the economy. I is a preferential strategy 10 bring about economic activity in the
countryside and bring about positive changes in the life of the farmer and workers in the
agricultural sector the result of which has a direct impact on the sustainable growth of
our economy.

This bill therefore seeks to introduce reforms in agricultural finance and rural credit at
the same time address the much needed support services required by agrarian reform
beneficiaries as a consequence of the comprehensive agrarian reform law. It is also
aimed at promoting competition and growth among bank and non-bank financial
institutions serving the rural financial market in a more stable financial environment and
will vigorously mobilize capital resources towards the countryside,

Further, this measure seeks to introduce more efficiency in rural financial credit,
eliminate excess demand for credit and induce banks and non-banks to be more effective +
in their intermediation functions 10 promote a market oriented policy in extending
financial services to the most important sector in our economy.

The immediate approval of this bill is therefore recommended.



Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

FIFTEENTH CONGRESS
First Regular Session

House Bil

Introduced by HONORABLE JEFFREY P. FERRER

“AN ACT — PROVIDING
BENEFICIARD
ESTABLISHIN
PURPOSES”

FARMERS AND AGRARIAN REFORM
GREATER ACC! TO AGRICULTURAL CREDIT
A POLICY FOR ITS IMPLEMENTATION AND FOR OTHER

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

SECTION 1. Title, -This Act shall be known as the “AGRICULTURAL CREDIT
/NHANCEMENT ACT OF 2010."

SEC, 2. Declaration of Policy. -It is hereby declared the policy of the State to promote
the modernization and rapid expansion of the agricultural sector by enhancing improve
access to financial credit for farmers and agrarian reform beneficiaries by extending
low interest and subsidized credit schemes that will ensure productivity, adequate food
supply and address the food security requirements of the country:

The National Government shall guaranty protection and provide low cost credit to
Farmers, workers of the Agricultural Sector and Agrarian Reform Beneficiaries (ARBS)
offer them the opportunity to develop and progress in an environment of financial
stability and sustainable development in order to achieve social justice. equity and equat
protection of law under the constitution.

SEC. 3. Indefeasibility of EP/CLOA Titles. -Emancipation Patents (EPs) and
Certificates of Land Ownership Award (CLOAs), shall enjoy the same indefeasibility and
security afforded to all titles as provided under Presidential Decree (P.D.) No. 1529. For
this purpose, farmer beneficiaries. who receive EPs or CLOAs pursuant to the
Comprehensive Agrarian Reform Program are hereby deemed innocent purchaser for
value and are entitled to the rights and protection as such persons under existing laws

SEC.4. Coverage. -This Act shall apply to the following categories of agricultural lands


4.1 Lands with agricultural lessees, whether or not it has been the subject of the
landowner's prior exercise of retention rights granted by law, without prejudice 10 the
rights of the agricultural lessee;

4.2. Lands covered and fully paid under the Comprehensive Agrarian Reform Program
(CARP) and past the 10-year prohibition period;

4.3 Lands covered by homestead grants and free-patents;

4.4 Lands covered by the CARP but not yet fully paid and are either within or past the
10-year prohibition period;

4.5 Lands covered and fully paid under the CARP but stilt within the 10-year prohibition
period.

SEC, 5. Acceptability of Homestead Patents, Agricultural Leasehold, EP, CLOA, Titles
as Loan Collateral and Guarantee. -All agricultural lands enumerated under Section 4
of this Act shall be accepted as collateral by any government, or private financial
institution, whether bank or non-bank financial institution, to secure loans of registered
owners in the Certificate of Land Ownership Award, Emancipation Patent, Homestead
Patent, Free Patent, Original Certificate of Title or Transfer Certificate of Title

SEC. 6. Use of Loan Proceeds. -The proceeds of loans that may be granted under this
Act shall be used solely to finance any agricultural activities such as production,
processing, storage and post-harvest facitities, shallow tube well and pump irrigation,
distribution and

marketing of agricultural products, and other related agricultural activities on the land
being used as collateral.

SEC.7. Land Bank Authorization of the Loan and Additional Requirements. -Ail loans
that are to be granted by lending institutions are deemed to he automatically approved
with authorization and consent of the Land Bank of the Philippines (LBP) and the
Department of Agrarian Reform (DAR) provided that any or all prior encumbrance
existing in favor of the LBP shall be respected.

SEC. 8. DAR and LBP Land Valuation for Credit.-The DAR and LBP shall undertake
a policy of releasing information and data of the valuation formula and provide
mandatory technical assistance t0 bank and non-bank financial institutions requiring
such information to aid them in determining the value of the lands offered as security by
borrowers.

SEC. 9. Guaranteed Access to Credit by DBP_-Farmer-beneficiaries who are owners of
encumbered or non-transferable lands classified under Sub-sections 4.4 and 4.5 and


farmer-lessees shall be provided a credit guarantee by the Development Bank of the
Philippines (DBP): Provided that the guaranice covers shall not exceed eighty percent
(80%) of the principal amount of the loan. That ail loans guaranteed by DBP pursuant to
this Act, the principle of exclusion under Article 2058 and pertinent provisions of the
New Civil Code shalt not apply.

SEC. 10. Default and Foreclosure of Mortgage. — In case of Default and Foreclosure of
Mortgage, banks and non-bank financial instituions may proceed against the security of *
the loan in accordance with existing laws and subject 10 the following provisions of this
Act: In cases of encumbered and non-transferable lands classified under Sub-sections 4.4
and 4.5, the bank and non-bank financial institutions shall be paid the guaramee only
afier assigning the loan receivables to the DBP after which the DBP shail assign the loan
receivables to the LBP. In cases of mortgages of expected harvests of farmer-lessees, the
DBP shall proceed to claim all or a portion of the actual harvests until the outstanding
debi of the farmer-lessee shall have been paid.

SEC, 11. Auctions of Agricultural Land. -In all cases of foreclosed mortgages, no
bidder in the auction shall be allowed to bid nor shall the agricultural land be sold to any
person not qualified to own agricultural land as determined by the DAR in accordance
with Sections 6 and 70 of R.A. No. 6637.

SEC, 12. Exercise of Right of Redemption. -the principal owner or agrarian reform
beneficiary shall have the right to redeem the land inclusive of interest payments. The
right of redemption under this section may be exercised within one (1) year from the date
of registration of the sale, and shall have priority over any other

Right of legal redemption.

SEC. 13. Guarantee Fund. -There is hereby created a Guarantee Pund for agricultural
and agrarian borrowers with an amount of at least Five Billion Pesos (P5,
000,000,000.00) which shall be managed and administered by DBP. An initial amount of
One billion pesos (P 1,000,000,000.00) shail be sourced from fifiy percent (30%) of the
total funding allocation of the Comprehensive Agrarian Reform Program-Credit
Guarantee Fund for Agricultural Landowners (CARP-CGFAL), Two Billion
(P2,000,000,000.00) Pesos from the proceeds of the saies of the Assets Privatization
Trust (APT), receipts from assets recovered by the Presidential Commission on Good
Government (PCGG), and a portion of the twenty-five percent (25%) allocation for
support services under Sec. 36 of R.A. No. 6657. of the total guarantee fund, Two Billion
(P2,000,000,000.00) Pesos shall be sourced and included in the Annual General
Appropriations Act

SKC. 14. Exemption from Capital Gains Tax-
Any transaction of sale, transfer or conveyance of lands under this Act shail be exempt
from the payment of capital gains tax, registration fees, and all other taxes and fees for
the conveyance or transfer as provided for under Sections 66 and 67 of R.A. No, 663



SEC. 15. Simplification of Loan Procedures. -DAR, LBP, DA and DBP, in consultation
with concerned government agencies, farmers, cooperatives and the banking sectors
shall formulate, within ninety (90) days after the approval of this Act, a simplified,
efficient and practical procedure for processing and approving loan applications which
would demand only the necessary and most indispensable requirements from the loan
applicant.

SEC. 16. Penalties. —Failure of Banks and Non-Bank institutions to comply to the
provisions of this act or provide the necessary credit service to client farmers and
agrarian reform beneficiaries shall be sentence to a penalty of imprisonment of prision
mayor and a fine of not less than Five hundred thousand pesos including the cancellation
of their business licenses and permit 10 operate.

SEC. 17. Implementing Rules and Regulations (IRR). -The DAR, DA, DOF and LBP. in
consultation with concerned government agencies, farmers, cooperatives and the banking
sectors, shall formulate the implementing rules and regulations of this Act within ninety
(90) days after its approval. Such rules and regulations shall take effect fifteen (15) days
afier the publication in a newspaper of general circulation in the Philippines.

SEC.18. Repealing Clause. -All existing laws, Executive Orders, issuances, rules and
regulations, inconsistent with the provisions of this Act are hereby repealed or modified
accordingly,

SEC.19. Separability Clause. -in the event any of the provision of this Act is declared
unconstitutional, the vatidity of the other provisions shall not be affected by said
declaration.

SEC.20. Effectivity Clause. -This Act shall take effect immediately after publication in
the Official Gazette or in at least two (2) national newspaper of general circulation.

Approved,