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* . I C .  SEcRE‘rhRy 
FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
9 JUL -2 
:I ~< 
OF THE PHILIPPINES 
1 
First Regular Session 
1 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
EXPLANATORY NOTE 
Farmers must have access to cheap, timely and adequate credit. Rural 
credit must be available to small farmers at reasonable cost in order to achieve 
desired productivity. 
According 
to 
the 
Congressional 
Commission 
on 
Agricultural 
Modernization, rather than formal banking institutions, farmers usually prefer 
local businessmen or traders who not only lend for production, but also buy the 
farmers’ produce. Small borrowers or farmers prefer to deal with these informal 
lenders because they can get their loan quickly with less paperwork and, 
sometimes, no collateral. The usual complain lodged against these informal 
lenders, however, is the usurious interest rates they charge. 
The framers of Presidential Decree 717 attempted to resolve the need to 
provide credit by ensuring that funds are made available through the formal 
banking system. The Agri-Agra Law or PD 717 mandates all commercial banks 
to set aside 25% of their loanable funds for agricultural lending - 15% for 
agricultural production and 10% for agrarian reform. 
PD 717, however, allowed these banks to divert the 10% agrarian reform 
share to government securities. Furthermore, a substantial portion of the 15% 
share for agricultural production is lent to large agribusiness corporations. Banks 
prefer to lend to agribusiness enterprise because of the higher risk of loan default 
or non-repayment by the small farmers. 
Even with PD 717, access to credit remains a major problem. AGRICOM 
states that in 1996, it was reported that only one third of small farmer borrowers 
was to avail themselves of credit from the banks. In 1992, of the total PI26 
billion agricultural loans released by the banks, only 11% went to small farmers 
and fishermen. Even the Land Bank shifted its policies to be able to undertake 
non-agricultural banking. As of March 1997, the Land Bank‘s loans to small 
farmers and fisherfolk amounted to P23.2 billion compared with P57.3 billion for 
non-agriculture. 
The proposed measure aims to correct this loophole by: a) removing the 
provision allowing financial institutions to invest in government securities; b) 
setting a ceiling as to who may have access to credit, in order to ensure that 
small farmers and fishers shall be the primary beneficiaries of the funds; c) 
expand or broaden the modes of compliance and expand the conduit networks in 
anticipation of the total loanable funds that may be made available. 
This 


measure provides penalties for erring banks and its officials to ensure strict 
compliance by financial institutions. 
This bill envisions better access by small farmers to formal credit. 
Furthermore, the bill provides for alternative compliance which provides for direct 
support to agriculture such as infrastructure. With credit made available in the 
countryside and infrastructure given priority by the government, the promotion of 
growth in the countryside, through agriculture, looks promising. 
For these considerations, the approval of this bill is earnestly sought. 


~~ . ~~; 
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:. ,i 4, r:: 
QFFt<;Y& fd;~ L :i. SEcRErAt.(y 
FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
1 
First Regular Session 
) 
-7 
f 
JUL-2 
A;y:j:3 
S E N A T E  
Senate Bill No. 3 6 3 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
BROADENING THE SCOPE OF COMPLIANCE AND EXPANDING THE 
PURPOSE PRESIDENTIAL DECREE 717, OTHERWISE KNOWN AS THE 
CONDUIT NETWORK FOR AGRI-AGRA CREDIT, AMENDING FOR THIS 
“AGRI-AGRA LAW’ 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Section 1 of Presidential Decree 717 is hereby amended to 
read as follows: 
“SECTION 1. There shall be evolved an AGRICULTURE, 
FISHERIES, AND, agrarian reform credit and financing system to 
improve the productivity of agriculture and FISHERIES, particularly 
farmers, MUNICIPAL FISHERFOLK, and [for the beneficiaries] 
agrarian reform beneficiaries, namely: 
tillers, tenant-farmers, 
settlers, agricultural lessees, amortizing owners, owner-cultivators, 
farmers cooperative, agro-industrial enterprises, corporate farmers, 
agricultural processing plants, post harvest facilities, and compact 
farms through government and private banking institutions for the 
production of other types of loans for the acquisition of work 
animals. 
AGRICULTURE, FISHERIES, AND agrarian reform credit, 
as used herein, shall include production or other types of loans for 
acquisition of work animals, farm 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 and/or acquisition 
of facilities for production, processing, storage and marketing; and 
efficient and effective merchandising of agricultural commodities 
stored andlor processed by the facilities aforecited in domestic and 
foreign commerce.” 
SEC 2. Section 2 of Presidential Decree 717 is hereby amended to read 
as follows: 
“SECTION 2. The credit mentioned in the next preceding 
section may be extended to the beneficiaries therein WITH 


CAPITALIZATION OF NOT MORE THAN FIFTY MILLION PESOS 
(P50,000,000.00) 
OR 
TO 
COOPERATIVES 
OF 
SUCH 
BENEFICIARIES REGARDLESS OF CAPITALIZATION based on 
the feasibility of the project and their paying capacity, their 
estimated production, andlor securities they can provide as well as 
such assets as may be acquired by them from the proceeds of the 
loan," 
SEC 3. Section 3 of the same decree is hereby amended to read as 
follows: 
"SECTION 3. All banking institutions, whether government 
or private, shall set aside at least 25% of their loanable funds for 
THE 
PURPOSE 
OF 
LENDING THE 
SAME 
TO 
THE 
AGRICULTURE AND FISHERIES SECTORS [agriculture credit in 
general, of which at lest ten percent (10%) of the loanable funds 
shall be made available for] AND agrarian reform beneficiaries 
mentioned in Section 1 hereof; Provided, however, That loanable 
funds are used in this Section shall refer to funds generated from 
the date of the effectivity of this Decree: Provided, further, That the 
National Economic Development Authority may increase or 
decrease such percentages whenever so recommended by the 
Department of Agrarian Reform and the [Central Bank of the 
Philippines] BANGKO SENTRAL NG PILIPINAS taking into 
consideration the magnitude of the credit needs of the beneficiaries 
of agrarian reform." 
SEC 4. Section 4 of the same decree is hereby amended to read as 
follows: 
"SECTION 4. The BANGKO SENTRAL NG PILIPINAS in 
consultation with [andlor upon the recommendation of] the 
DEPARTMENT OF AGRICULTURE AND THE Department of 
Agrarian Reform, shall promulgate such rules and regulations as 
may be necessary to implement the provisions of this Decree. 
Subject to such rules and regulations, banking institutions may be 
allowed to: 
Invest in such government securities as may be 
declared eligible by the [Central Bank of the 
Philippines] BANGKO SENTRAL NG PILIPINAS, 
any portion of the amount set aside for agrarian 
reform credit not actually loaned out; Provided, 
however, That the issuing government, entity 
shall stand to monetize, encash or repurchase 
such securities whenever funds are needed by 
the banks holding the said securities, for lending 
to the beneficiaries of agrarian reform; 
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 THRIFT 
BANKS LOCATED OUTSIDE THE NATIONAL 
(a) 
(b) 


CAPITAL REGION (NCR), WITH COOPERATIVE 
BANKS AND RURAL BANKS; PROVIDED, THAT 
THE PROCEEDS FROM SAID BONDS AND 
SDAs SHALL BE USED EXCLUSIVELY FOR 
FISHERIES, 
AND 
AGRARIAN 
REFORM 
SECTORS; 
PROVIDED 
FURTHER, 
THAT 
PROCEEDS FROM SAID BONDS AND SDAs 
SHALL BE SEPARATELY ACCOUNTED FOR 
BY THE DBP, LBP AND THE DEPOSITORY 
THRIFT BANKS AND SHALL BE CONSIDERED 
FOR 
PURPOSES 
OF 
COMPUTING 
THE 
LOANABLE 
FUNDS 
UNDER 
SECTION 
3 
HEREOF OF THE SAID BANK; 
PROVIDED 
FINALLY, THAT SAID BONDS SHALL BE 
REDEEMABLE ANYTIME: 
ON-LENDING 
TO 
THE 
AGRICULTURE, 
(c) 
Rediscount with the [Central Bank of the 
Philippines] COMMERCIAL BANKS eligible paper 
covering AGRICULTURE, 
FISHERIES AND 
agrarian reform credits; PROVIDED, THAT SUCH 
REDISCOUNTED PAPERS SHALL NO LONGER 
BE ELIGIBLE AS COMPLIANCE ON THE PART 
OF THE ORIGINATING BANK; 
LEND 
IN 
BUILD-OPERATE-TRANSFER 
SCHEMES FOR THE FINANCING OF AGRI- 
(4 
RELATED ACTIVITIES AND RURAL SUPPORT 
SYSTEMS, INCLUDING BUT NOT LIMITED TO 
FARM TO MARKET ROAD NETWORKS, POST 
HARVEST FACILITIES, STORAGE FACILITIES, 
FISHPORTS, IRRIGATION SYSTEMS AND 
MARKETING FACILITIES SUCH AS LOCAL 
FOOD TERMINAS THAT WILL BENEFIT THE 
AGRICULTURE, FISHERIES AND AGRARIAN 
REFORM BENEFICIARIES; PROVIDED, THAT 
THE FEASIBILITY STUDY DESIGN AND WORK 
PROGRAMS 
OF 
THE 
INFRASTRUCTURE 
PROJECTS SHALL BE PREPARED BY THE 
PROVINCIAL AND/OR 
MUNICIPAL 
LOCAL 
GOVERNMENT UNITS (LGUs) CONSISTENT 
WITH THEIR LAND USE PLAN AND/OR 
MUNICIPAL 
DEVELOPMENT 
PLANS, 
IN 
CONSULTATION WITH: 
(1) THE 
NATIONAL 
IRRIGATION 
ADMINISTRATION AND DEPARTMENT 
OF PUBLIC WORKS AND HIGHWAYS 
FOR 
IRRIGATION 
SYSTEMS 
AND 
FARM TO MARKET ROADS; 
(2) THE DEPARTMENT OF AGRICULTURE 
AND/OR NATIONAL FOOD AUTHORITY 
FOR 
POST 
HARVEST 
FACILITIES, 
STORAGE 
FACILITIES 
AND 
MARKETING FACILITIES INCLUDING 
LOCAL FOOD TERMINALS; 


(3) THE PHILIPPINE PORT AUTHORITY 
AND 
THE 
PHILIPPINE 
FISHERIES 
DEVELOPMENT 
AUTHORITY 
FOR 
COLD 
STORAGE 
FACILITIES AND 
FISHPORTS; 
PROVlDED 
FURTH€R, 
THAT 
THE 
P‘t.5 
MILLION 
CEILING 
FOR 
QUALIFIED 
BENEFICIARIES UNDER SECTION 2 HEREOF 
DOES NOT APPLY IN THIS INSTANCE. 
EXTENDED 
DEVELOPMENT 
LOANS 
AS 
PROVfDED UNDER SECTION 9 OF R.A. 7721; 
AND 
LEND TO FARMERS, FARMERS ASSOCIATION 
OR COOPERATIVES FOR THE PRODUCTION, 
MARKETING AND DISTRIBUTION OF HIGH 
VALUE CROPS UNDER R.A. 7900.” 
SEC 5. 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. In addition, the President, members of the Board of 
Directors and other officers of the erring lending institution shall be individually 
liable for imprisonment of not less than six (6) months and a fine of not more than 
Five Hundred Thousand Pesos (P500,OOO.OO) each; Provided, That said erring 
bank officer shall ,be barred from occupying positions in banking institutions 
thereafter. 
SEC 6. Repealing Clause. - The provision in the second paragraph of 
Section 9 of R.A. 7900, which states that banks lending at least five percent (5%) 
of their loanable funds directly to the farmers associations or cooperatives are 
exempted from the compliance agreement of P.D. 717, is hereby repealed. All 
other laws, executive decrees or issuances, or any parts thereof which are 
inconsistent with the provisions of this Act are hereby repealed or amended 
accordingly. 
SEC 7. Separability Clause. - If any of the provisions of this Act are 
declared invalid or unconstitutional, the remaining provisions not affected hereby 
shall remain valid. 
SEC 8. Effectivity, - This Act shall take effect fifteen (15) days after its 
publication in at least two (2) newspapers of general circulation. 
Approved,