THIRTEENTH CONGRESS OF THE REPUBLIC) 
OF THE PHILIPPINES 
1 
First Regular Session 
1 
Introduced by Senator Juan M. Flavier 
- EXPLANATORYNOTE 
Congress has already enacted into law such landmark legislations as R.A. 
No. 6810 the Magna Carta for Countryside and Barangay Business Enterprises 
othgwise known as Katakalan ng 20, and R.A. No. 7368 the Countrywide 
Industrialization Act of 1992. 
what is needed, however, to make small and medium scale enterprises 
and industries thrive in the countryside is capitaf and access to credit. Under the 
Agri-Agra Law (P.D. 717) the inadequacy of credit would be alleviated by 
requiring the banks to set aside 25% of their loanable funds for agricultural 
lending - 15% for agricultural production and 10% for agrarian reform. P.D. 717, 
however, allowed banks to divert the 10% agrarian reform share to government 
securities, which most commercial banks use to purchase government securities. 
Moreover, a substantial portion of the 45% share for agricultural production is 
lent to large agri-related multi-national corporations. 
This bill seeks to redirect the 25% loanable funds in favor of small 
farmers and smdl and medium scale enterprises. With credit available in the 
countryside, business enterprises are expected to thrive, thus, providing more 
jobs and livelihood opportunities to our people. 
A 
The immediate passage of this bill is urged. 
' f  


30 p02:04 
THIRTEENTH CONGRESS OF THE REPUBLIC) 
OF THE PWlLlPPiNES 
1 
First Regular Session 
1 
I 
S E N  
.KI' 
S. NO. 
Introduced by Senator Ftavier 
AN ACT 
AMENDING PRESIDENTIAL DECREE NO. 717, OTHERWISE KNOWN AS 
FUND, WITH STRICT EMPHASIS ON RURAL CREDIT FOCUSING OM SMALL 
FARMERS. FISHERMEN AND ENTERPRISES WITH CAPITALIZATIONS NOT 
EXCEEDING 500,000 PESOS 
THE AGRI-AGRA LAW, TO MAXIMIZE THE USAGE OF THE AGRI-AGRA 
Be if enacfed by the Senate 
Philippines in Congress assembled: 
SECTION 1. Title. - This Act 
Act of 2004." 
and the House of Representatives of the 
shall be known as the "Revised Agri-Agra 
SECTION 2. Declaration of Policy. - It is hereby declared the policy of 
the State to alleviate poverty and promote vigorous growth in the countryside 
though the full extensionlaccess to rural credit. 
SECTION 3. Definition of Terms. - For the purposes of this Act, the 
following terms are defined as foflows: 


Small Farmers and Fishermen. 
Small farmers and fishermen are those whose earnings do not exceed 
Three Thousand Pesos (P3,OOO.OO) per month with 1989 as the base year. 
SECTION 4. Coverage and Allocation of Funds. 
(a) It shall be mandatory for all banks to apportion at least twenty-five 
percent (25%) of their loanable funds for agriculturelagrarian reform 
beneficiaries. 
(b) At least seventy-five percent (75%) of this Agri-Agra Fund shall be 
clearly set aside and strictly utilized for rural credit. The Land Bank of 
The Philippines, the Philippine National Bank and the Development 
Bank of the Philippines shall act as the lead lending and collection 
conduits of financial institutions with special attention to commercial 
banks. 
(c) The use of the remaining twenty-five percent (25%) of the Agri-Agra 
Funds shall be left to the discretion of the financial institutions 
involved. 
(d) Financial institutions shall no longer be allowed to use the Agri-Agra 
Funds to buy government securities. (In effect, Section 4(a) of 
Presidential Decree No. 71 7 is hereby repealed.) 


(e) Enterprises and cooperative organizations qualified to avail of the 
Agri-Agra Funds are those with capitalization not exceeding Five 
hundred thousand pesos (P500,OOO.oQ). 
SECTION 5. Network. 
(a) The Central Bank shall immediately allow the LBP, the DBP and the 
PNB to increase their branches in the countryside to strengthen their 
roles as the main conduits of the Agri-Agra Funds. 
(b) The Central Bank shall also encourage the establishment of new rural 
banks to further facilitate the easy dispersal of the Agri-Agra funds. 
(c) Rural banks shall be allowed to give accreditations to existing informal 
lenders. These informal money lenders can now integrate into the 
formal banking system with the following incentives: 
(1) These lenders shall have easy access to credit supply from the 
banks they affiliate with; 
(2) The banks involved shall shoulder part of the lenders’ collection 
losses; and 
(3) As agents of rural banks, the moneylenders shall be entitled to 
commissions that will be determined by the Central Bank. 


(d) In exchange for the above incentives, the accredited moneylenders 
shall charge the same lending rate as the rate of the rural banks, 
which accredit them. 
SECTION 6. Drawdown of Funds. 
(a) In cognizance of the size of the whole Agri-Agra Funds, the full 
drawdown of the Agri-Agra Fund from the financial institutions shall be 
done gradually within a period of five (5) years from the approval of 
this Act. 
(b) The LBP, the DBP, and the PNB shall formulate a program that will 
allow the countryside financial establishments to adequately disperse 
the Agri-Agra Fund within the time limit set by the law. 
SECTION 7. Agricultural Promissory Notes. 
(a) The LBP, the DBP, the PNB, and interested commercial banks are 
hereby authorized to create a special instrument herein referred to as 
the Agricultural Promissory Note (APN), with annual interest rate of 
three percent (3%), which shall be the investment instrument for 
participating banks, who are willing to place their funds in accordance 
with this Act. 


(b) Funds invested in APN shall be used exclusively for agricultural loans 
and for the benefit of agrarian reform beneficiaries. 
(c) A special accred'itation committee shall be created by the President to 
accredit commercial banks qualified to issue APN's. 
SECTION 8. Monitoring. - The Central Bank, the LBP, the DBP and the 
PNB shall strengthen their monitoring functions in coordination with all relevant 
entities in the rural areas to ensure the efficient distribution of the Agri-Agra Fund 
to small farmers, fishermen and producers' cooperatives. 
SECTION 9. Penal Clause. - The Central Bank shall impose the heavy 
penalties on erring commercial banks, rural banks, accredited cooperatives and 
accredited moneylenders for any abusive use of the Agri-Agra Fund. The 
penalties shall be in the form of imprisonment of the bank president, bank 
manager, cooperative head and moneylenders for misuse of the Agri-Agra Fund 
or a fine of not less than Three hundred thousand pesos (P300, 000.00). 
SECTION IO. Implementing Guidelines. - The Central Bank, in 
coordination with LBP and other relevant agencies, shall formulate the necessary 
guidelines and/or mechanisms within fifteen (I 
5) working days after approval of 
this Act. 


SECTION I I. 
Repealing Clause. - Any other provisions of laws, decrees 
and regulations inconsistent with the provisions of this Act are hereby repealed or 
modified accordingly. 
SECTION 12. Effectivity. - This Act shall take effect upon its approval. 
Approved,