FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
OF THE PHILIPPINES 
1 
First Regular Session 
) 
S.B. No. - 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
This bill seeks to ensure the availability of more credit to farmers, fisherfolks and agrarian 
reform beneficiaries by removing the option of investing in government securities as a form of 
alternative compliance under the Agri-Agra Law. 
Presidential Decree No. 717 or the Agri-Agra Law was created in 1975 to enhance the flow 
of credit to agriculture. It mandates that all banks shall set aside 25% of their loanable funds for 
agricultural credit, of which 10% is for the beneficiaries of agrarian reform and 15% for agricultural 
credit. Over the years, the means of compliance with the law has been broadened to include 
alternatives such as: development loans to finance educational institutions, hospitals, socialized 
housing and LGUs; investmmt in commercial papers issued by firms engaged in agricultural 
products; investment in Emergency Readiness Assurance Program (ERAP), agrarian reform and 
Pag-ibig funds; loans to high value commercial crops projects; and investment in Quedancor. 
From 1993, when the Bangko Sentral started to monitor the banks' compliance. to Agri-Agra 
law until 2002, the loanable funds that may be extended for agriculture and agrarian reform credit 
are as follows: P285.01 billion (1993); P386.26 billion (1994); P520.43 billion (1995); P596.43 billion 
(1996); P714.21 billion (1997); M76.97 billion (1998); P990.63 billion (1999); P888.42 (2000); P935.71 
billion (2001); and P956.81 (2002). Of these amounts, banks were able to surpass the 25% total 
comp:iance set forth by law due to over compliance with 15% requirement for agricultural credit, 
but failure to comply with the 10% requirement for agrarian reform credit. In 2002 alone, P56.6 
billion or 66.8% of the P84.68 billion total amount for agrarian reform credit compliance was done 
thru purchase of treasury bills and other government securities. Essentially, the agrarian reform 
quota addresses the credit needs of small farmers. This is the reason why despite the over 
compliance of banks with the Agri-Agra law, there is still a failure to enhance small farmers' access 
to bank credit. 
This bill aims to correct that loophole by removing the provision a!lowing banks to invest 
in government securities. 
Likewise, this propost$ measure removes the distinction between agriculture and agrarian 
reform credit, thereby treating the 25% loan quota as a generic one. This will allow banks flexibility 
in allocating their quota among different beneficiary sub-sectors and borrowers are given their 
share of the responsibility in ensuring that the projects that they undertake are viabIe. Moreover, 
this bill ensures that the agri-agra credit will be extended to small farmers, fisherfolks and agrarian 
reform beneficiaries by putting a ceiling to the capitalization that will be required from them by 
banks in the amount of P50,000,000. 
Finally, this bill broadens the modes of compliance to include direct support to agriculture 
such iis infrastructure, and expands the conduit networks in anticipation of the total loanable 
funds that may be made available. 
In view of the foregoing, the passage of this bill is earnestly sought. 
LOREN LEGARDA ' 
Senator 


iEIVATE 
OFFICE OF THE SECRETARY , 
I& 
FOURTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
First Regular Session 
) 
Introduced by Senator Loren Legarda 
AN ACT BROADENING THE SCOPE OF COMPLIANCE AND EXPANDING THE 
CONDUIT NETWORK FOR AGRI-ACRA CREDIT, AMENDING FOR THIS 
PURPOSE PRESIDENTIAL DECREE 7l7 OTHERWISE KNOWN AS THE AGRI- 
AGRA LAW 
Be it enacted by the Senate and the House of Representatives of ‘the Philippines, in Congress 
assembled: 
SECTION 1. Section 1 of P.D. 717 is hereby amended to read as follows: 
”SECTION 1. There shall be evolved an AGRICULTURAL, 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-cultivations, 
farmers cooperative, ago-industrial enterprises, corporate farmers,, agricultural 
processing plants, post harvest facilities, and compact farms through government 
and private banking institutions for the production or other types of loans for the 
acquisition of work animals 
AGRICULTURE, FISHIRIES, AND agrarian reform credit, as used herein, shall 
include production or other types of loans for acquisition of work akmals, farm 
equipment and machinery, seeds, fertilizers, poultry, livestock feed?, and other 
similar terms; 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 and/or processed by the 
facilities aforecited in domestic and foreign commerce. 
SEC. 2. Section 2 is hereby amended to read as follows: 
“SEC. 2. The credit mentioned in the next preceding section may be extended to the 
beneficiaries therein WITH CAPITALIZATION NOT EXCEEDING FIFTY 
MILLION PESOS 
(50,000,000,00) 
OR TO COOPERATIVES ‘OF SUCH 
BENEFICIARIES REGARDLESS OF CAPITALIZATION based on the feasibility 
of the project and their paying capacity; their estimated production, and/or 
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: 


SEC. 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, FISHERldS [agricultural credit in general, of which at least ten percent 
(10%) of the loanable funds shall be made available for] AND agrarian reform 
beneficiaries SECTORS mentioned in Section 1 hereof Provided, however, that loanable 
funds as used in this Section shall refer to funds generated from the date of effectivity of 
this Decree [SI. [Provided, further that the National Economic Development Authority 
may increase or decrease such percentages whenever so recommend by the Department of 
Agrarian Reform and the Central Bank of the Philippines 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: 
"SEC. 4. 
The [Central Bank of the Philippines] BANGKO SENTRAL NG 
PILIPINAS, 
in consultation with and/or 
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: 
[(a) 
Invest, in such government securities as may be declared eligible by the 
Central Bank of the Philippines, any portion of the amount set aside for agrarian 
reform credit not actually loaned out; Provided, however, that the issuing 
government entity shall stand ready 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; and] 
(a) 
INVEST IN BONDS ISSUED BY THE DEVELOPMENT BANK OF THE 
PHILIPPINES (DBP) AND THE LAND BAWKOF THE PHILIPPINES (LBP) 
AND/OR OPEN SPECIAL DEPOSIT ACCOUNTS (SDA's) WITH THRIFT 
BANKS LOCATED OUTSIDE THE NATIONAL CAPITAL REGION (NCR), 
WITH THE COOPERATIVE BANKS AND RURAL BANKS: PROVIDED THAT 
THE PROCEEDS FROM SAID BONDS AND SDA's SHALL BE USED 
AND AGRARIAN REFORM SECTORS; PROVIDED, FURTHER THAT, 
PROCEEDS FROM SAID BONDS AND SDA's SHALL BE SEP$RATELY 
ACCOUNTED FOR BY THE DBP, LBP, AND THE DEPOSITORY THRIFT 
BANKS, COOPERATIVE BANKS AND RURAL BANKS AND SHALL NOT BE 
UNDER SECTIOG 3 HEREOF OF THE SAID RANK; PROVIDED, FINALLY, 
THAT SAID BONDS SHALL BE REDEEMABLE ANYTIME. 
EXCLUSIVELY FOR ON-LENDING TO THE AGRICULTURE, FISHERIES 
CONSIDERED FOR PURPOSES OF COMPUTING THE LOANABLE FUNDS 
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-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 TERMINALS THAT WILL BENEFIT THE AGRICULTURE, 
FISHERIES AND AGRARIAN REFORM BENEFICIARIES; PROVIDED THAT 
THE FEASIBILITY STUDY DESIGN AND WORK PROGRAMS OF THE 


INFRASTRACTURE PROJECTS SHALL BE PREPARED BY THE PROVINCIAL 
AND/OR MUNICWAL LOCAL GOVERNMENT UNITS (LGUs) CONSISTENT 
WITH THEIR LAND USE PLAN AND/OR MUNICIPAL DEVELOPMENT 
PLANS, IN CONSULTATION WITH. 
THE 
NATIONAL 
IRRIGATION 
ADMINISTRATION 
AND 
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS FOR 
IRRIGATION SYSTEMS AND FARM TO MARKET ROADS; 
(1) 
THE DEPARTMENT OF AGRICULTURE AND/OR NATIONAL 
FOOD 
AUTHORITY 
FOR 
POST 
HARVEST 
FACILITIES, 
STORAGE 
FACILITIES 
AND 
MARKETING 
FACILITIES 
INCLUDING LOCAL FOOD TERMINALS; 
(2) 
THE PHILIPPINE PORT AUTHORITY AND THE PHILIPPINE 
FISHERIES DEVELOPMENT AUTHORITY FOR COLD STORAGE 
FACILITIES AND FISHPORTS: 
(3) 
PROVIDED 
ETJRTHER 
THAT 
THE 
CEILING 
FOR 
QUALIFIED 
BENEFICIARIES UNDER SECTION 2 HEREOF DOES NOT APPLY IN THIS 
INSTANCE; 
(D) 
EXTEND DEVELOPMENT LOANS AS PROVIDED UNDER 
SECTION 9 OF RA 7721; AND, 
(E) 
LEND TO FARMERS, FARMERS ASSOCIATION OR 
COOPERATIVES FOR THE PRODUCTION, MARKETING 
AND DISTRIBUTION OF HIGH VALUE CROPS UNDER RA 
7900. 
' 
IN ADDITION, THE BANGKO SENTRAL NG PILIPINAS AND THE DEPARTMENT 
OF AGRICULTURE AND THE DEPARTMENT OF AGRARIAN REFORM SHALL 
JOINTLY MONITOR THE COMPLIANCE OF BANKS WITH THE PROVISIONS OF 
THIS ACT AND SHALL SUBMIT AN ANNUAL REPORT ON THE SAME TO THE 
PRESIDENT OF THE PHILIPPINES AND CONGRESS, THROUGH THE LATTER'S 
APPROPRIATE COMMITTEES. 
SEC. 5. 
THE PROVISION IN THE SECOND PARAGRAPH OF SECTION 9 OF 
REPUBLIC ACT NO. 7900 OTHERWISE KNOWN AS THE "HIGH VALUE CROPS 
DEVELOPMENT ACT OF 1995", 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 REQUIREMENT OF P.D. NO. 717", is hereby repealed. All other laws, 
executive decrees or issuances, or any parts thereoi, which are consistent with the 
provi.;ions of this Act, are hereby repealed or amended accordingly. 
SEC. 
6. 
THE 
BANGKO 
SENTRAL 
NG 
PILIPINAS 
SHALL 
IMPOSE 
ADMINISTRATIVE SANCTIONS AND OTHER PENALTIES ON THE LENDING 
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 
INSTITUTIONS FOR NON-COMPLIANCE WITH THE PROVISIONS OF THIS ACT. 


PESOS (P500,000,00) EAGX, OR BOTH, AT THE DISCRETION OF THE COURT; 
PROVIDED, FURTHER, THAT SAID ERRING BANK OFFICER SHALL BE BARRED 
FROM OCCUPYING POSITIONS IN ANY BANKING INSTITUTION THEREAFTER. 
SEC. 7. REPEALING CLAUSE. - ALL LAWS, PRESIDENTIAL DECREES, EXECUTIVE 
ORDERS, RULES AND REGULATIONS, WHICH ARE CONTRARY TO THE 
PROVISION OF THIS ACT, ARE HEREBY REPEALED, AMENDED AND MODIFIED 
ACCORDINGLY. 
SEC. 8. SEPARABILITY CLAUSE. - IF ANY PART OF THIS ACT SHALL BE HELD 
TO BE UNCONSTITUTIONAL OR INVALID, OTHER PARTS OR PROVISIONS 
HEREOF WHICH ARE NOT AFFECTED THEREBY SHALL CONTINUE TO BE IN 
FULL FORCE AND EFFECT. 
SEC. [6] 9 EFFECTIVITY. - This [Decree] ACT shall take effect [immediately] FIFTEEN 
(15) DAYS AFTER ITS PUBLICATION IN ENGLISH OR FILIPINO IN THE OFFICIAL 
GAZETTE OR IN AT LEAST TWO (2) NEWSPAPERS OF GENERAL CIRCULATION, 
WHICHEVER COMES FIRST. 
Approved,