SEV ENTEENTH CONGRESS OF THE 
)
REPUBLIC OF THE PHILIPPINES 
)
Second Regular Session 
)
SENATE
S. No. 1686
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Introduced by Senator Ralph G. Recto
AN ACT
EXPEDITING 
THE 
TITLING 
OF 
LANDS 
AWARDED 
UNDER 
THE 
COMPREHENSIVE 
AGRARIAN 
REFORM 
PROGRAM, 
LIFTING 
THE 
RESTRICTIONS ON THE UTILIZATION OF SUCH LANDS AS COLLATERAL FOR 
SECURING 
AGRICULTURAL 
LOANS, 
AND 
OTHER SIMILAR FINANCIAL 
INSTRUMENTS, AND FOR OTHER PURPOSES
Rural credit flow supports economic, agricultural and social activities in rural areas -  
from the procurement of farm inputs to the payment of educational expenses of the farmer’s 
dependents. A study of the Agricultural Credit Policy Council (ACPC) on agricultural credit 
costs and interest rate sensitivity of small farmers' revealed that more than 80% of the farmer- 
and fisherfolk-respondents contracted loans for agricultural and non-agricultural purposes. 
Without credit, farming is reduced to a subsistence activity and a poverty trap1 2 for small 
landholders and other agricultural workers.
Despite the significance of a stable rural credit market in the lives of farmers and 
fisherfolk, participation of the formal lending institutions in the agricultural industry has been 
limited. The ACPC study highlighted several concerns in the prevailing rural and agricultural 
credit market. First, only a quarter of the agricultural loans were contracted from formal sources, 
with only one percent (1%) sourced from government agencies and instrumentalities3. Second, 
12% of non-borrowing respondents did not contract any loan because they believed they have 
inadequate collateral. Third, 36% of formal lenders admitted that they have rejected loan 
applications for having insufficient collateral4. Thus, it is not surprising that nearly eight years 
since the enactment of Republic Act No. 10000, or The Agri-Agra Credit Reform Act of 2009, 
direct compliance of Philippine financial institutions to the credit quota requirement remained at 
27%5.
The weak presence of a formal rural credit market can be traced back to the 
Comprehensive Agrarian Reform Law (CARL). Among its provisions, CARL prohibits farmer- 
beneficiaries from selling, transferring or conveying the land for a period of ten (10) years, and 
from mortgaging the rights to the awarded land until full payment has been conveyed. This 
prohibition, and the absence of self-sustaining agro-economic institutions in lieu of the landlord- 
tenant relationship, isolated the farmer from the market for his product, as well as from the 
sources of technology and financing. It also abetted in the materialization of other problems such 
as illicit rental, sale and mortgaging of awarded lands, infonnal creditors that charge usurious 
loan rates, and ultimately, the emergence of a new class of people -  the landed poor6.
1 Cuevas, A. C. and Sumalde, Z. M. (2015). Costs of Agricultural Credit and Interest Rate Sensitivity of Small Farmers: An
Empirical Study. Quezon City: Agricultural Credit Policy Council.
2 Fabella. R.V. (2003). "Comprehensive Agrarian Reform Program and the Coase Theorem.” Discussion Paper No. 0302.
Quezon City: University of the Philippines School of Economics.
5 Cuevas, A. C. and Sumalde. Z. M. (2015).
4 Cuevas, A. C. and Sumalde, Z. M. (2015).
5 Figures exclude alternative compliance. Data retrieved from http://www.hsp.gov.ph/hanking/phs_new/71.htm
6 Fahella, R.V. (2014).Comprehensive Agrarian Reform Program (CARP): Time to Let Go. Discussion Paper No. 2014-02.
Quezon City: University of the Philippines School of Economics.
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