THIRTEENTH CONGRESS OF THE REPUBLI 
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First Regular Session 
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OF THE PHILIPPINES 
N A T  
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S. No 
Introduced by Senator S. R. OsmeAa I l l  
EXPLANATORY NOTE 
The biggest challenge the current administration faces right now is how to 
ensure that society’s poorest sectors reap the benefits of development. Almost half of 
the country’s 80 million Filipinos live below the poverty line. Of these, nearly three 
quarters live in rural areas. The unemployment rate stood at 11.4% for 2003, the 
highest in the Asian region. 
These figures tell us that if we are to win the battle against poverty, we must 
wage it in the countryside. The micro-credit programs done in Bangladesh, Brazil and 
a few other countries have proven its worth as a vehicle for economic empowerment 
for those who least expect it. 
Micro-entrepreneurs thrive in the rural areas - sari-sari store operators, pedicab 
and tricycle drivers, candy vendors and our daily newspaper suppliers, to name a few. 
Despite their limited business scopes, micro-enterprises have a significant and 
positive effect on the economy. That’s because, first, they maximize resources 
abundant in their community. 
Second, they bank on locally available human 
resources . 
The most appropriate vehicle for countryside-led growth micro-finance remains 
the land Bank of the Philippines. Land Bank of the Philippines was created under RA 
3844, originally for the purpose of financing the purchase of agricultural estates 
offered for sale, and to resell the lands to farmer beneficiaries under a long-term 
amortization scheme. PD 251 subsequently gave Land Bank commercial banking 
powers to cros5-subsidize agrarian land transfer and loans to small farmers and 
fisherfolk. As a government universal bank, Land Bank’s vision is to be a dominant 
financial institution in the countryside leading the nation to economic prosperity. 
This measure hopes to reinforce Land Bank’s development mission by 
amending RA 3844 to institutionalize micro-credit financing as part of the Bank’s key 
operations. 
It authorizes the Bank to grant collateral-free loans ranging from Two 
Thousand Pesos (P2,OOO.OO) to Twenty Thousand Pesos (P20,OOO.OO) to private 
individuals or informal groups of persons to finance self-help ventures and small-scale 
businesses or crafts. 
To ensure the effective enforcement of this Act, Land Bank would be required 
to allocate 25% of its loan portfolio to micro-lending and to submit an annual report to 
Congress on its micro-lending operations to enable the government to monitor the 
success of micro-financing as a poverty-reduction scheme. To instill fiscal discipline 


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warranted by these amendments, the penalty imposed for violation of the provisions of 
this Act is increased to Fifty Thousand Pesos (P50,OOO.OO) 
from the current Ten 
Thousand Pesos (PI 0,000.00). 
Financial services for the poor have proved to be a powerful instrument for 
poverty reduction that enables the poor to build assets, increase incomes, and reduce 
their vulnerability to economic stress. However, the challenge of providing financial 
services to them remains. 
In view of the foregoing, the approval of this bill is earnestly requested. 
SERGIO OSMENA Ill 
Senator 


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THIRTEENTH CONGRESS OF 
First Regular Session 
OF THE PHILIPPINES 
THE REPUBLIC 
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SENAT 
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Introduced by Senator 
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AN ACT 
PURPOSE REPUBLIC ACT NO. 3844, AS AMENDED, OTHERWISE KNOWN AS 
“THE CODE OF AGRARIAN REFORM IN THE PHILIPPINES.” APPROPRIATING 
FUNDS THEREFOR, AND FOR OTHER PURPOSES 
TO INSTITUTIONALIZE MICR-CREDIT FINANCING AMENDING FOR THIS 
Be it enacted by the Senate and the House of Representatives of the Republic of the 
Philippines in Congress assembled: 
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SECTION I .  Paragraph 6 of Section 75 of Republic Act No. 3844, as 
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amended, is hereby further amended to read as follows: 
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6. 
To grant loans for farmers’ cooperatives/ associations to 
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facilitate 
production, 
MARKETING 
AND 
DELIVERY 
AND/OR 
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DISTRIBUTION of crops and acquisition of essential EQUIPMENT, 
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MACHINERY, TOOLS AND commodities AS WELL AS TO EXTEND 
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UNCOLLATERALIZED LOANS OF NOT LESS THAN TWO THOUSAND 
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PESOS AND NOT MORE THAN TWENTY THOUSAND PESOS TO 
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PRIVATE INDIVIDUALS OR GROUPS OR AGGRUPATIONS OF 
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PERSONS 
TO 
FINANCE 
MI CRO-VENTU RES, 
LIVELIHOOD 
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PROJECTS, SMALL-SCALE CRAFTS, CAPITAL FOR RETAIL OR 
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OTHER SMALL-SCALE BUSINESSES OR OCCUPATIONS PROVIDED 
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THAT 
SUCH 
PRIVATE 
GROUPS 
OR 
AGGRUPATIONS 
ARE 
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REGISTERED WITH THE DEPARTMENT OF FINANCE.” 
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SEC.. 2. 
Sec. 80 of the same Act, as amended, is hereby further 
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amended to read as follows: 


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“Sec. 80. 
Modes of Payment. - The Bank shall finance the 
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acquisition of farm lots as WELL AS MICRO-PROJECTS, VENTURES 
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AND UNDERTAKINGS PROVIDED IN PAR. 6 OF SECTION 75 OF THIS 
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ACT under any of the following modes of settlement : 
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XXX” 
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two new paragraphs to be known as par. 81-A and 81-B, to read as follows: 
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“Sec. 81-A-. - TO FINANCE THE MICRO-LENDING UNDERTAKINGS 
SEC. 3. Sec. 81 of the same Act is hereby further amended, by adding 
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AND TO SUPPORT THE MICRO-FINANCE OPERATIONS OF THE 
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BANK 
AS 
ENVISIONED 
IN 
THIS 
ACT, 
INCLUDING 
THE 
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EMPLOYMENT, DEPLOYMENT AND TRAINING OF ADDITIONAL 
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PERSONNELl AS WELL AS THE CREATION OF NEW OFFICERS OR 
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BRANCHES, THERE IS HEREBY APPROPRIATED THE SUM OF 
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FIFTY MILLION PESOS (P50,000,000.00) OUT OF THE FUNDS OF 
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THE NATIONAL TREASURY NOT OTHERWISE APPROPRIATED, 
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WHICH SUM SHALL FORM PART OF THE CAPITALIZATION OF THE 
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BANK.” 
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SEC. 81-B. - THE BANK SHALL ALLOCATE 25% OF ITS LOAN 
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PORTFOLIO TO FINANCE MICRO-LOANS AUTHORIZED UNDER THIS 
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ACT.” 
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follows: 
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responsibilities: 
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Y .  
Formulate policies, rules and regulations for the effective operation 
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of the Bank, AS WELL AS TO CARRY OUT THE PROVISIONS OF THIS 
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ACT; 
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“2. 
xxx 
SEC. 4. Sec. 86-A of the same Act is hereby further amended to read as 
Sec. 86-A. 
Powers and Responsibilities of the Board. - 
The Board of 
Directors shall have, among others, the following specific powers and 


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“3. Establish such branches, [and] agencies OR OFFICES as may be 
deemed 
necessary 
and 
convenient 
FOR 
THE 
EFFECTIVE 
IMPLEMENTATION OF ITS MANDATE FOR THE AGRI-LENDING AND 
MICRO-LENDING FINANCING; 
”4. 
xxx 
”5. 
xxx 
“6. 
XXX 
“7. 
TO PROVIDE FOR THE RECRUITMENT OF ADDITIONAL OR 
FIELD PERSONNEL TO CONDUCT INFORMATION AND TRAINING 
PROGRAMS ON MICRO-FINANCING, PROPER ENFORCEMENT OF 
PROGRAM POLICIES AND PROCEDURES, AND THE NECESSARY 
LENDING TECHNOLOGY TERMS OR MECHANISM FOR MICRO- 
LENDING AS PROVIDED IN THIS ACT; AND 
“8. 
TO SUBMIT TO CONGRESS AN ANNUAL REPORT OF ITS 
MICRO-LENDING OPERATIONS WITH EMPHASIS ON THE NUMBER 
OF BENEFICIARIES, REPAYMENT RATES, REACH OUT ACTIVITIES 
AND RELEVANT MATTERS.” 
SEC. 5. Sec. I00 of the same Act is hereby amended to read as follows: 
“Sec. 100. 
Penalty for Violation of the Provisions of this Chapter. - 
Any director, officer, employee or agent of the Bank who violates or 
permits the violation of any of the provisions of this Chapter or any person 
aiding or abetting the violation of any of the provisions of this Chapter, 
shall be punished by a fine of not to exceed [ten] FIFTY thousand pesos 
(P50,OOO.OO) or by imprisonment of not more than five years, or both, 
such fine and imprisonment at the discretion of the Court.” 
Sec. 6. - The Department of Finance shall, in consultation with the Land 
Bank of the Philippines and the Department of Trade and Industry, Department 
of Social Welfare and Development, Department of Science and Technology, 
Department of Labor and Employment, Department of Agriculture and the 


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whichever comes earlier. 
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Approved, 
Department of Agrarian Reform, promulgate the necessary rules and regulations 
for the immediate and effective implementation of this Act within thirty (30) days 
from the effectivity of this Act. 
SEC. 7. This Act shall take effect fifteen (15) days after its publication in 
the Official Gazette or in at least two (2) newspapers of general circulation