SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
SENATE 
"13 
JIJL -4 
,"110:1 4 
S.No. 
447 
"-, " 
t 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
The country's approach to economic development should be anchored on the strategy of 
inclusive growth which addresses the increasing concern that the benefits of progress are not shared 
equitably with the poor and the vulnerable sectors of society. 
Apart from allowing the marginalized members of society to share in the fruits of 
development, the pursuit of inclusive growth must also allow them to participate in productive 
endeavors designed to attain rapid and sustainable growth and development 
The success of poverty reduction programs is more attainable under the policy of inclusive 
growth as it creates economic opportunities for the hitherto excluded poor Filipinos estimated to be 
23 Million or 26.5% of the population, or 20.9% of Filipino families. l Through inclusive growth, the 
poor can actively contribute to the development process and not just remain mere recipients of 
government welfare programs. 
The goal of inclusive growth is best achieved through the pursuit ofjinancial inclusion which 
should provide mainstream financial institutional services to the disadvantaged and low-income 
people to free them from the clutches of unscrupulous money lenders. In the Philippines, most poor 
people lack access to sustainable banking services especially credit facilities that can help improve 
their lives. 
Hence, this bill proposes to amend the charter of the Land Bank of the Philippines (LBP) to 
focus on the provision of affordable credit to the agriculture sector where most poor Filipinos belong. 
This will promote inclusive growth that will allow them to share in the responsibility and fruits of 
growth and development 
The Land Bank of the Philippines is a government financial institution that ranks among the 
top five commercial banks in the Philippines in terms of deposits, assets, loans and capitaL It was 
created inl963 by Republic Act 3844 or the Agricultural Land Reform Code. It has the most visible 
presence in the countryside among formal credit institutions. The initial purpose was limited to 
financing the acquisition by the Government of land for division and resale to small landholders as 
well as the purchase oflandholdings by agricultural lessees as provided for under the Code. 
In the fulfillment of its social mandate, it strives to balance countryside development with 
financially viability. 
Conceived as the financing arm of the agrarian reform program and granted a specific 
mandate for this purpose, the LBP has since been expanded into a full-service commercial bank. It 
provides financing for farmers and fisher folk, small and medium enterprises, microenterprises, 
livelihood and agri-business, agricultural infrastructure, agriculture projects, environment-related 
projects, socialized housing, schools and hospitals, among others. 
1 http://www.nscb.gov.ph/pressreleases/2011IPR-22011-SS2-01 pov2009~ (accessed on March 18, 2013) 


By 1973, the LBP had proved to be deficient and inadequate both in capitalization and in 
organizational structure to fully implement the financing requirements of the CARP. In an effort to 
revitalize the Bank, Presidential Decree No. 251 was issued on 21 July 1973 which expanded the 
purpose and powers of LBP. The Bank's new and broadly stated mandate under P.D. 251 was to 
provide timely and adequate financial support in all phases involved in the execution of needed 
agrarian reform. Among the expanded mandates given was the power to grant short-, medium- and 
lo~g-term loans and advances against the security of real estate and/or other acceptable assets for the 
establishment, development or expansion of agricultural, industrial, home building or home financing 
projects and other productive enterprises. 
The LBP under P.D. 251 now had the specific power to grant loans to farmers' 
cooperatives/associations to facilitate production, marketing of crops and acquisition of essential 
commodities. It could also guarantee acceptance(s), credits, loans, transactions or obligations of any 
person, co-partnership, association or corporation in favor of any financing or banking institution, 
, 
whether foreign or domestic, so long as the proceeds of such acceptances, credits, loans, transactions 
or obligations were to be utilized or earmarked for the development and/or expansion of agriculture 
and industry. 
Additionally, P.D. 251 authorized the LBP to act as trustee in accordance with the law 
governing trust corporations, and to exercise the general powers mentioned in the Corporation Code 
and the General Banking Law, so long as those powers were not inconsistent with PD 251. In effect, 
the LBP could now operate as a commercial bank. 
In 1982, Executive Order 816 abolished the Agricultural Credit Administration created under 
RA 3844 and transferred its functions (loans to small farmers) to the LBP. The rationale for this was 
the adoption of an integrated approach in providing financial assistance to farmer-beneficiaries that is 
best implemented by a single institution. 
More recently, in an effort to enhance financial inclusion, the LBP partnered with the 
Department of Agriculture for the Million Food Staples Sufficiency Program. Its initial fund of Php 
400 Million2 was lent to 8,000 small landholder-farmers in four pilot provinces at declining interest 
rates. This recent initiative and similar loan programs in the futUre need the proper direction and 
mandate that can be provided most effectively through the proposed LBP Charter amendments. 
This bill seeks to restore the original intent for the creation of the Land Bank of the 
Philippines which is to assist mainly farmers and agricultural development projects. Hence, the bil~ 
proposes to amend the charter of the bank by giving priority to the agriculture sector and puts a cap of 
20 percent to the total loan portfolio that the Bank may grant for programs and projects in sectors 
other than agriculture. At the moment, about 40 percent of the Bank's loan portfolio is made 
available for non priority sectors. 
In view of the foregoing the approval of this bill is earnestly sought. 
dbg 
2 http://www.da.gov.ph/index.php/20 12-03-27-12-04-15/20 l2-04-l7-09-30-59/207-da-lbp-to-cxtcnd-initial-p400-m-loan-
lo-ricc-farmers (accessed on March 18,2013) 


SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
'13 
JUL -4 
i\1G :14 
SENATE 
S, No. 
447 
Introduced by Senator Ralph G. Recto 
AN ACT 
PRIORITIZING THE AGRICULTURAL SECTOR IN THE GRANT OF LOANS BY THE 
LAND BANK OF THE PHILIPPINES, AMENDING FOR THE PURPOSE REPUBLIC ACT 
NUMBERED THREE THOUSAND EIGHT HUNDRED FORTY-FOUR, AS AMENDED 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Section 75 of Republic Act No. 3844, as amended by Presidential Decree Number 251, 
2 
is hereby further amended to read as follows: 
3 
"Sec. 75. Powers in General. The bank shall have the power: 
4 
"xxx; 
5 
"5. To grant short, medium and long term loans and advances against security of 
6 
real estate and/or other acceptable assets for the establishment, development or 
7 
expansion of agricultural, industrial, home building or home financing projects and 
8 
other productive enterprises: PROVIDED, THAT THE TOTAL AMOUNT OF 
9 
LOANS GRANTED FOR PROGRAMS AND PROJECTS IN SECTORS OTHER 
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THAN AGRICULTURE SHALL NOT EXCEED TWENTY PERCENT (20%) 
II 
OF THE TOTAL BANK LOAN PORTFOLIO. 
12 
"x x x." 
13 
SEC. 2. Savings Clause. - Nothing in this Act, shall affect the validity or legality of any right, 
14 
duty, or obligation created by or in respect of the Bank by virtue of its loan operations as a 
15 
commercial bank prior to this Act. Any receivables pertaining to loans granted prior to this Act, 
16 
which might be affected by this Act, shall be valid and enforceable upon the terms and conditions 
17 
under which the loans were made, including the pledge of collateral against which they were issued, 
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and all loans made and security or collateral therefore held by the bank shall remain enforceable 
19 
according to the terms unless they may be lawfully terminated in accordance with this Act, nor shall 
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this Act supersede the operation of any law protecting or preserving vested contractual rights or be 
21 
construed to change the· terms of any legal contract between the bank and any third party or to impose 
I 
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any new conditions thereon, or to dispense with any condition expressed or authorized in any such 
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contract entered into and taking effect prior to this Act. 
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. SEC. 3. 
Separability Clause. -
If any provision of this Act is held invalid or 
2:1 
unconstitutional, the same shall not affect the validity and effectivity of the other provisions hereof. 
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SEC. 4. Repealing Clause. -
Pertinent provisions of all other laws, decrees, executive 
2 
orders and rules and regulations contrary to or inconsistent with the provisions of this Act are 
3 
hereby repealed or modified accordingly. 
4 
SEC. 5. Effectivity Clause. -
This Act shall take effect fifteen (15) days after its 
5 
publication in the Official Gazette or in two (2) newspapers of general circulation. 
Approved, 
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