Em 12 DATES SAN 18 20

& TIMES 129 tm
oO we
<5 iS

Republic of the Philippines
House of Representatives
Quezon City

EIGHTEENTH CONGRESS
Second Regular Session

House BillNo.___ 8423

Introduced by REPRESENTATIVE ERIC L. OLIVAREZ

EXPLANATORY NOTE

The Constitution of the Philippines provides that the Congress shall
give highest priority to the enactment of measures that protect and enhance
the right of all the people to human dignity, reduce social, economic, and
political inequalities, and remove cultural inequities by equitably diffusing
wealth and political power for the common good. Likewise, the Constitution
of the Philippines also provides that the State shall promote comprehensive
rural development and agrarian reform. These two (2) constitutional
provisions are imperative in creating measures and policies that will
contribute in eradicating poverty in the Philippines.

The agricultural sector of the Philippines plays a huge role in our
country; some might even say that it is the most essential industry in our
country. However, being part of the most essential industry in the country
does not mean that the people there enjoy a decent standard of living.
Rural communities today are still faced with challenges which even include
access to basic services.

A dynamic agricultural sector is an important foundation of rural
development. This Bill is inclined in answering the needs of the agricultural
sector through developing the roles of banking institutions as stakeholders


in rural development. The creation of an Agriculture, Fisheries and Rural
Financing System is the forefront of this Bill. This financing system shall
consist of loans, investments, and grants that will enhance the productivity
and income of the agricultural sector which shall thereby lead to a
sustainable development of rural communities.

In view of the foregoing, the passage of this Bill is earnestly sought.

QOe rhe olKeney


eens

Republic of the Philippines
House of Representatives
Quezon City

EIGHTEENTH CONGRESS
Second Regular Session

House Bill No. __8423

Introduced by REPRESENTATIVE ERIC L. OLIVAREZ

AN ACT MANDATING BANKING INSITUTIONS TO STRENGTHEN THE
FINANCING SYSTEM FOR AGRICULTURAL, FISHERIES AND RURAL
DEVELOPMENT IN THE PHILIPPINES

Be it enacted in the Senate and the House of Representatives of the Republic of the
Philippines in Congress assembled:

SECTION 1. Short Title. - This Act shall be known as the “The Rural Agricultural
and Fisheries Financing Enhancement Act of 2021”.

SECTION 2. Declaration of Policy. - \t is hereby declared the policy of the State
to promote comprehensive rural development and agrarian reform in order to accelerate
economic development. Towards this end, the State shall create measures in order to
provide a more equitable distribution of opportunities, income, and wealth, a sustained
increase in the amount of goods and services produced by the nation for the benefit of
the people, and an expanding productivity in order to raise the quality of life for all
especially the underprivileged.

SECTION 3. Definition of Terms. —

a. Agri-Business shall refer to agriculture and fishery-related activities conducted
by farmers, fisherfolk processors, distributors, and consumers which produce,
process, transport, market, and distribute agricultural and fishery products.


eT
15
16
7

18
19
20
21
22

2B
24
25
26
a
28
29
30

31
32
33

35
36

37

39

b. Agricultural or Fisheries Household shall refer to a household who has at least
one (1) member who is a farmer, fisherman, agrarian reform beneficiary,
farmworker, owner-cultivator, compact farmer, and the like;

c. Farmer refers to a person who works for value as a laborer in an agricultural
enterprise regardless of whether their compensation is paid on a daily, weekly,
monthly, or “pakyaw” basis;

d. Farmer's and Fisherfolk’s Organizations shall refer to farmers’ and fisherfolks’
cooperatives, associations, or corporations which are composed of small
agricultural producers, farmers, farmworkers, agrarian reform beneficiaries, and
fisherfolk who voluntarily join together to form business enterprises or non-
business organizations which they themselves own and control;

e. Fisherfolk shall refer to persons who are engaged in the catching, culturing,
and/or processing of fishery and/or aquatic resources.

SECTION 4, Agriculture, Fisheries and Rural Financing System. - An
Agriculture, Fisheries and Rural Financing System is hereby established for the purpose
of improving the income and productivity, and, overall, the quality of life of the rural
beneficiaries.

Agriculture, fisheries, and rural financing, for purposes of this Act, shall refer to
loans, investments, and grants to finance activities that focus on improving productivity
and increasing the income of agricultural and fisheries households. In effect, agricultural
sector productivity and competitiveness shall be promoted as well as sustainable
development of rural communities.

These activities shall include, but shall not be limited to, off-farm activities,
agricultural modernization, agri-tourism, green finance projects, acquisition of lands
authorized under the Agrarian Reform Code of the Philippines and its amendments,
efficient and effective marketing, processing, distribution and storage of agricultural and
fishery commodities, public rural infrastructure, as well as programs that shall address
the developmental needs of rural communities, projects that promote the livelinood of the
rural community beneficiaries and all other analogous activities as may be determined by
the Agricultural and Fisheries Finance and Capacity-Building Council (AFFCC).

SECTION 5. Rural Community Beneficiaries. - The aforementioned rural
community beneficiaries shall refer to those actually named as such, or to cooperatives,
associations, MSMEs, or organizations of such beneficiaries without regard to the
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, investments, and grants.

SECTION 6. Credit Allocation. — All banking institutions, both government and
non-government, with the exceptions of newly established banks for a period of five (5)
years from the date of commencement of bank operations shall allocate credit or a


31
32

33

35
36

minimum mandatory agricultural and fisheries financing requirement of at least twenty-
five (25%) of their total loanable funds.

The total loanable funds generated by a banking institution shall be defined by the
Bangko Sentral ng Pilipinas.

SECTION 7. Credit Allocation Compliance. - Banks may comply with the
mandatory credit allocation requirement by lending to rural community beneficiaries to
finance agricultural and fishery-related activities identified under the Agriculture &
Fisheries Modernization Act of 1997, agricultural modernization, agri-tourism, green
finance projects, marketing, processing, distribution and storage of agricultural and
fishery commodities, livelihood projects, skills enhancement or capacity-building
programs.

The following shall also be accepted as compliance of the credit allocation
requirement as provided for by this Act:

a. Invest in debt securities including debt securities issued by the Development
Bank of the Philippines (DBP) and the Land Bank of the Philippines (LBP).
Provided, that the proceeds from said debt securities shall be used to finance
the activities mentioned in Section 4 of this Act. Provided further, that the
proceeds from debt securities issued by the DBP and LBP shall be separately
accounted for and shall not be considered for purposes of computing loanable
funds under Section 6 hereof;

b. Open deposit accounts with rural financial institutions. Provided, that said
deposit accounts shall be separately accounted for by the depository bank and
shall not be considered for purposes of computing the loanable funds under
Section 6 hereof;

c. Directly invest in shares of stock, or lend wholesale to rural financial institutions:
Provided, that the wholesale loans shall be credited as compliance of the bank
acting as wholesale lender alone;

d. Rediscount with banks eligible paper covering agriculture, fisheries and
agrarian reform credits: Provided, that rediscounted paper shall no longer be
eligible as compliance on the part of the originating bank;

e. Lend for the construction and upgrading of rural infrastructure that will promote
the agriculture fisheries and agrarian reform sector;

f. Lend to agricultural business enterprises that maintain agricultural commodity
supply chain arrangements directly with rural community beneficiaries;

g. Undertaking agricultural value chain financing that shall be beneficial to rural
communities.


@Vaueune

10
uu
2
3B

33
34
35
36

37
38
39

Provided, that the loans and investments that are counted as compliance shall
not be funded by proceeds from the issuance of debt securities, and/or lending of
other banks that have been counted as compliance with the mandatory credit:
Provided further, that the loans to finance activities shall generally that shall be
granted to agrarian reform beneficiaries, agrarian reform communities, or other
priority sectors shall be counted at not more than ten (10) times their outstanding
amount, or as otherwise prescribed by the BSP, for purposes of determining
compliance with the mandatory agricultural and fisheries financing requirement.

SECTION 8. Review of Compliance Modes. — The modes enumerated in the
preceding section shall be subject to review by the AFFCC after its implementation and
the same shall determine whether said modes are adequate to support the financing
requirements of rural communities. It shall recommend to Congress the same for
appropriate action.

SECTION 9. Annual Reports. — The BSP shall report annually to Congress the
compliance with the mandatory agricultural and fisheries financing requirement as
provided for by this Act.

SECTION 10. Penalty Clause. - The BSP shall impose administrative sanctions
and other penalties on the lending institutions for violation of any of the provisions of this
Act. Penalties on noncompliance or under compliance with the mandatory agricultural and
fisheries financing requirement shall be computed at one-half of one percent (0.5%) of
noncompliance or under compliance or at rates prescribed by the BSP Monetary Board.
Ten percent (10%) of the penalties collected shall remain with the BSP in order to
shoulder administrative expenses for its regulatory functions in connection to this Act.

SECTION 11. Agribusiness Management Capacity and Institution-Building
Fund. - There shall be created a special fund which shall be the Agribusiness
Management Capacity and Institution-Building Fund which shall be used to finance
agricultural and fishery-related activities including organizational capacity and
institutional-building programs for cooperatives and other duly-registered organizations
related to agriculture, fisheries and rural undertakings. In relation to this, banking
institutions may choose to provide contributions to said fund in order to comply with the
mandatory credit allocation set forth in this Act.

The initial amount of the Agribusiness Management Capacity and Institution-
Building Fund shall be at least ten (10) billion pesos which shall include penalties due
from banks on their noncompliance or under compliance of the mandatory Agri-Agra
credit requirement under Republic Act No. 10000, collected after the effectivity of this Act.

In case of a shortfall, the banks shall contribute a maximum amount of two (2)
billion pesos, which shall be chargeable against future penalties under this Act but shall
not be considered as a mode of compliance as set forth hereof.


eure

we ayan

SECTION 12. Application for Funding. — All banks, duly-registered training and

capacity-building organizations, cooperatives and other duly-registered organizations
may apply with the AFFCC for funding their capacity and institution-building programs
and activities.

SECTION 13. Agricultural and Fisheries Finance and Capacity-Building

Council (AFCC). — There shall be created an Agricultural and Fisheries Finance and
Capacity-Building Council which shall be composed of designated representatives from
the following agencies:

a. The Department of Agriculture, as Chairperson;
. The Bangko Sentral ng Pilipinas;
. The Department of Agrarian Reform;
. The Department of Trade and Industry;
. The Cooperative Development Authority;
The Land Bank of the Philippines;
. The Development Bank of the Philippines;

.. Nine (9) representatives from the private sector one of whom shall be appointed
as Vice Chairperson.

zsenmeoaoc

The private sector representatives shall include representatives from:
a. The Rural Bankers Association of the Philippines;
. The Bankers Association of the Philippines;
. The Chamber of Thrift Banks;
. The Cooperative Banks Federation of the Philippines;
. The Microfinance Council of the Philippines;
The Philippine Chamber of Commerce and Industry; and

. A representative from the cooperative sector, the farmers, and fisherfolk
sector, respectively.

er>epaogs

SECTION 14. Functions and Duties of the AFFCC. - The AFFCC shall have the

following functions and duties:

a.

Establish a target amount for the Special Fund in order to meet the organizational
and capacity-building requirements of cooperatives and other duly-registered
organizations of rural agricultural and fisheries households over a period of ten
(10) years;

Determine eligible recipients of the Special Fund;

. Determine activities and programs that shall be finances through the Special Fund;


a
22
23

24
25
26

7

29

d. Ensure effective implementation and programs financed by the Special Fund and
employ resources from banking industry which are capable of providing project
coordination and fund management services;

e. Ensure compliance with the reporting, monitoring, evaluation and audit
requirements of the Special Fund and activities financed.

SECTION 15. Oversight Committee. - For purposes of monitoring the
implementation of the provisions of this Act, an oversight committee shall be created
which shall be composed of the following:

a. The Chairperson of the Committee on Banks and Financial Intermediaries of

the House of Representatives;

b. The Chairperson of the Committee on Banks, Financial Institutions and

Currencies of the Senate.

c. Arepresentative from the Office of the President; and
d. Arepresentative from the Commission on Audit.

SECTION 16. Sunset Provision. — The provisions related to the mandatory credit
allocation under Section 5 of this Act shall cease to be effective ten (10) years from
effectivity of this Act.

SECTION 17. Implementing Rules and Regulations. - The appropriate
government agency shall establish the Implementing Rules and Regulations of this Act
within ninety (90) days after the passage hereof.

SECTION 18. Separability Clause. — If any provision of this Act is declared invalid
or unconstitutional, the other provisions not affected thereby shall remain valid and
subsisting.

SECTION 19. Repealing Clause. - All acts, executive orders, memorandum
circulars/guidelines and other issuances or parts thereof, which are inconsistent with
this Act, are hereby repealed or modified accordingly.

SECTION 20. Effectivity. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in two (2) newspapers of general circulation

Approved.