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FOURTEENTH CONGRESS OF THE REPUBLIC)  
OF THE PHILIPPINES 
)  
Third Regular Session  
9 
SEP-9 
SENATE 
S.B. No3431 
~ .. 
(In substitution of Senate Bill Nos. 75,363, 791, 833 and 1828) 
Prepared by the Committee on Agriculture and Food 
AN ACT 
PROVIDING FOR AN AGRICULTURE AND AGRARIAN REFORM CREDIT AND 
FINANCING SYSTEM THROUGH BANKING INSTITUTIONS 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
ARTICLE I 
GENERAL PROVISIONS 
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SECTION 1. Short Title. This Act shall be known as the 1/ Agri-Agra Reform 
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Credit Act of 2009" 
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SECTION 2. Declaration of Policy. It is hereby declared the policy of the State to 
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promote equal access to opportunities under an en."ironment of sustained growth and 
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expanding productivity as the key to raising the quality of life of alL Towards this end, 
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the state shall promote rural development by enhancing access of the rural agricultural 
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sector to financial services and programs that increase market efficiency and promote 
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modernization in the rural agricultural sectors. 
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SECTION 3. Definition ofTerms. As used in this act, the term 
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a) Accredited Rural Financial Institution'refers to any financial institution 
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accredited by the Bangko Sentral ng Pilipinas (BSP) whose portfolios are 
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substantially agri-agra related as defined by the implementing rules and 
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regulations; 
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b) Agrarian Reform Beneficiary refers to. farmers who were granted lands 
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under Presidential Decree No. 27 and Republic Act No. 9077 or the 
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"Comprehensive Agrarian Reform Program Extension with Reforms" and 
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regular farm workers who are landless, irrespective of tenurial 
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arrangement who benefited from the redistribution of lands, regardless of 
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crops or fruits produced, to include the totality of factors and support 
services designed to lift the economic status of the beneficiaries and all 
other arrangements alternative to the physical distribution of lands, such 
as production or profit sharing, labor 'administration and the distribution 
of shares of stock which will allow beneficiaries to receive a just share of 
the fruits of the lands they work; 
c)  Agricultural Guarantee Fund Pool (AGFP) refers to the five percent (5%) of 
the 
2007 
surplus of the 
government-owned and/or controlled 
corporations and financial institutions including the Philippine Gaming 
and Amusement Corporation (PAGCOR), Philippine Charity Sweepstakes 
Office (PCSO), Sodal Security Sy.stem (SSS), Government Service 
Insurance System (GSIS), as mandated by Administrative Order 225-A 
series of 2008, and the ninety percent (90%) of the penalties collected from 
banking institutions for non-compliance and under-compliance as 
provided under this Act; 
d)  Agricultural Lessee refers to any person who, with or without help from his 
immediate farm household, cultivates the land owned by another for a 
certain price in money, in produce or in both; 
e)  Agro-industry Modernization Credit and Financing Program (AMCFP) refers 
to the umbrella credit/financing program of the goverrunent for the 
agriculture and fisheries sector, created under RA 8435, otherwise known 
as AFMA of 1997. By design, AMC~P funds are provided as loans to 
government financial institutions (GFIs) called credit wholesalers, which 
in turn relend them to qualified credit retailers that include rural banks, 
thrift banks, cooperative banks, non-government organizations (NGOs), 
National Food Authority (NFA) and other associations/people's 
organizations engaged in lending to small farmers and fisherfolk; 
f)  Amortizing Owners refer to land owners who still amortize payment for the 
land to a private individual or to the State; 
g)  Compact Farmers refer to those farmers with adjoining farms operating as a 
single unit under one management, farm plan and budget; 
h)  Farmer refers to a natural person whose primary livelihood is cultivation 
of land or the production of agrieulture crops either by himself, or 
primarily with the assistance of his immediate farm household, whether 
the land is owned by him, or by another person under a leasehold or share 
tenancy agreement or arrangement with the owner thereof; 


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i)  Farm worker 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 compensation is paid on a daily, weekly, monthly or 
II 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; 
j)  Farmers' Cooperatives refer to organiza,tions composed primarily of small 
agricultural producers, farmers, farm workers, or other agrarian reform 
beneficiaries who voluntarily organize themselves for the purposed of 
pooling land, manpower, technological, financial or other economic 
resources, and operated 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; 
k)  Farmers' and Fisherfolks' Organizations or Associations refer to farmers' and 
fisherfolks' cooperatives, associations or corporations duly registered with 
appropriate government agencies and which are composed primarily of 
small agricultural producers, farmers, farm workers, agrarian reform 
beneficiaries, fisher folk who voluntarily join together to form business 
enterprises or non-business organizations which they themselves own, 
control and patronize; 
1)  Financial Services refer to services extended by banks/financial institutions 
such as, but not limited to credit/lending, deposits, rediscounting; 
m) Fisherfolk refers to people directly or personally and physically engaged in 
taking and/or culturing and processing fishery and/or aquatic resources; 
n)  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 cages, fish corrals/traps, fishponds, prawn farms, sea 
farms, salt beds, fish ports, fishing boat or trawlers, of fish processing 
and/or packing plants, but excluding administrators, security guards and 
overseers; 
0)  Owner-cultivators refer to natural persons who own lands either by 
purchase, inheritance, or land distribution by the State. Owner-Cultivators 
can operate the farm themselves, supervise wage labor or delegate 
operations to tenant-farmers; 


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p)  Philippine Crop Insurance Corporation - a government owned and controlled 
corporation created by virtue of Presidential Decree 1467 to provide 
insurance protection to farmers against losses arising from natural 
disasters as well as plant diseases and pest infestation, initially to palay 
crops and later on to other crops (definition is based on PD 1467) 
q)  Quedan and Rural Credit Guarantee Corporation - a non-bank government 
financing institution (GFI) under the policy supervision of the Department 
of Agriculture created under Republic Act 7393 geared towards the 
establishment of an effective credit delivery system and a guarantee 
facility 
that would 
promote 
inventory 
financing 
of 
agri-aqua 
commodities, production and post-harvest production facilities, farm and 
fishery machineries and equipment, investment in production inputs and 
labor, and the development of rural" livelihood enterprise (Definition is 
based on RA7393- Quedancor charter and background) 
r)  Settlers refer to persons who range from forest-clearing pioneer (included 
indigenous people) with a poor subsistence economy to the better 
equipped and more experienced farmers and finally to agricultural 
contractors whose aim is to open up larger agricultural areas with the help 
of capital, machinery, and specialized types of farming; 
s)  Tenant Farmer refers to one who cultivates another's land under a sharing 
or leasehold agreement. 
ARTICLE II  
AGRICULTURAL CREDIT, INSURANCE AND FINANCING SYSTEM  
SECTION 4. Agriculture, Fisheries and Agrarian Reform Credit, Insurance and 
Financing System. There shall be evolved an agriculture, fisheries and agrarian reform 
credit, insurance and financing system to improve'the productivity of the agriculture 
and fisheries sectors, particularly the farmers, fisherfolk, and agrarian reform 
beneficiaries, namely: settlers, agricultural lessees, amortizing owners, farmworkers, 
fishworkers, owner-cultivators, compact farmers, farmers' and fisherfolks' cooperatives, 
organizations and associations, through government and private banking institutions. 
Agriculture and agrarian reform credit, as used herein shall consist of loans to 
finance activities and purposes including but not limited to agricultural production, 
promotion of agribusiness and exports, acquisition: of work animals, farm and fishery 
equipment and machinery, seeds, fertilizers, poultry, livestock, feeds and other similar 
items, acquisition of lands authorized under the Agrarian Reform Code of the 
Philippines and its amendments; construction, acquisition and repair of facilities for 
production, processin& storage and marketing and such other facilities in support of 
Agriculture and fisheries; and efficient and effective merchandising of agricultural and 


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fishery commodities stored and/ or processed by the facilities aforecited in domestic 
and foreign commerce. 
SECTION 5. Agriculture and Agrarian Refonn, Credit Beneficiaries. The credit 
mentioned in the preceding Section shall be extended to the beneficiaries named therein 
or to cooperatives and associations of 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. 
SECTION 6. Credit Quota. All banking institutions, whether government or privatel 
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shall 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%) of the 
loanable funds shall be made available for agrarian reform beneficiaries mentioned in 
Section 4 hereof: Provided, hO'lDever, that loanable funds as used in this Section shall refer 
to funds generated from the date of effectivity of this Act. 
Provided, further: that the twenty-five percent (25%) credit quota is subject to a jOint 
review by the Department of Agriculture, Department of Agrarian Reform and the 
Bangko Sentral ng Pilipinas after three (3) years of implementation to determine 
whether the law has been effective in accomplishing its goals. The findings shall be 
submitted to Congress. 
SECTION 7. Modes of Compliance. The Bangko Sentral ng Pilipinas, the Department of 
the Agriculture, and the Department of Agrat;ian Reform in consultation with 
concerned agencies and sectors shall promulgate such rules and regulations as may be 
necessary to implement the provisions of this Act within ninety (90) days after the 
approval of this Act. Such rules and regulations shall take effect fifteen (15) days after 
their publication in a newspaper of general circulation in the Philippines. Subject to 
such rules and regulations, banking institutions may be allowed to: 
a) Invest in bonds issued by the Development Bank of the Philippines 
(DBP) 
and the Land Bank of the Philippines (LBP) and/or open special deposit 
accounts (SDAs) with accredited rural financial institutions defined by the 
implementing rules and regulations; Provided, that the proceeds from said 
bonds and SDAs shall be used exclusively for on-lending to the agriculture 
and agrarian reform sectors; Provided further that the proceeds from said 
bonds and SDAs shall be separately accounted for by the DBP, LBP and the 
Depository Thrift Banks, Cooperative banks and Rural banks and shall not be 
considered for 
purposes of computing the loanable funds under Section 6 
hereof of the said banks; Provided furthe:, that loanable funds channeled as 
compliance under this subsection shall not be counted as compliance 
under 
Subsections B, C, D, and E even if said funds are later 


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used by conduit banks in activities similar to those provided for in Subsection 
B, C, D, and E; 
b) Rediscount with Universal Banks and Commercial Banks, including local 
branches of foreign banks eligible paper covering agriculture, fisheries 
and agrarian reform credits, including loans covered by guarantees of 
Quedancor and the Philippine Crop Insurance System: Provided that, such 
rediscounted paper shall no longer be eligible as compliance on the part of 
the originating bank; 
c)  Lend for the construction and upgrading of infrastructure including but not 
limited to farm-to-market roads, as we~l as the provision of post harvest 
facilities and other public infrastructure that will benefit the agriculture, 
fisheries and agrarian reform sector; 
d)  Lend wholesale to rural financial institutions accredited by the Bangko 
Sentral ng Pilipinas: Provided that, the credit facility shall be exclusively used 
for on-lending to the agriculture, fisheries and agrarian reform sector: 
Provided, further, that the wholesale loans shall be credited as compliance of 
the wholesale lender alone: Provided that, allowable alternative modes of 
compliance should directly target the ~griculture, fisheries and agrarian 
reform sector; 
e) Invest in shares of stock of Quedan and Rural Credit Guarantee Corporation 
QuedanCor and the Philippine Crop Insurance Corporation. 
SECTION 8. The alternative compliance enumerated in the preceding Section shall also 
be subject to a joint review by the Department of Agriculture, Department of Agrarian 
Reform and the Bangko Sentral ng Pilipinas after three (3) years of implementation to 
determine whether said modes of compliance directly target the agriculture, fisheries 
and agrarian reform sector. The findings shall be submitted to Congress. 
ARTICLE III  
MISCELLANEOUS PROVISIONS  
SECTION 9. Annual Reports. The Bangko Sentral ng Pilipinas shall furnish reports on 
the compliance with the mandatory credit allocation to the Department of Agriculture, 
Department of Agrarian Reform and Congress on a yearly basis. 
SECTION 10. Penalty Clause. The Bangko Sentral ng Pilipinas shall impose 
administrative sanctions and other penalties on the lending institutions for non­
compliance with the provisions of this Act. 


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Penalties on noncompliance shall be computed at one percent of non-compliance and 
under-compliance and shall be directed to the development of the agri-agra sector. 
Ninety percent (90%) of the penalties collected shall go to be allocated between the 
Agricultural Guarantee Funds Pool (AGFP) and the Philippine Crop Insurance 
Corporation (PCIC) according to the demands of public interest and the needs of the 
agri-agra sector as provided for in the implementing rules and regulation of this Act. 
and tThe remaining ten percent (10%) shall be given to Bangko Sentral ng Pilipinas to 
cover administrative expenses. Should the fund sourced from AO 225-A series of 2008 
be depleted, the penalties collected under this Act shall continue to be used as 
guarantee cover for loans to farmers under a common Rice Program 
SECTION 11. Repealing Clause. Presidential Decree 717t the second paragraph under 
Section 8 of Republic Act No. 7900t otherwise known as the High Value Crops 
Development Act of 1995, and Section 9 of Republic Act No. 7721 t otherwise known as 
Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines, are 
all hereby repealed. Other laws, presidential decrees, executive orders, rules and 
regulations, or parts thereof inconsistent with the provisions of this act are repealed or 
modified accordingly. 
SECTION 12. Separability Clause. If any partt section or provision of this act is held 
invalid or unconstitutional other provisions not affected thereby shall remain in force 
and effect. 
SECTION 13. Transitory Provision. Prior to the effectivity of the implementing Rules 
and Regulations of this Act, the provisions of Presidential Decree Nol. 717 shall remain 
in force. 
SECTION 14. Effectivity. This act shall take effect fifteen (15) days after publication in 
the official gazette or in a newspaper of general circulation. 
Approvedt