FOURTEENTH CONGRESS OF THE 
Second Regular Session 
apumrc OF THE PHILIPPINES 
S E N A T E  
INTRODUCED BY THE HONORABLE MAR ROXAS 
EXPLANATORY NOTE 
Agricultural credit has an important role in the development of agriculture sector. 
Through credit, economic agents in the agricultural sector who suffer from a cash-flow 
problem and a liquidity constraint may produce sub-optimal inputs use and, therefore, 
output. However, the volume of institutional credit to the agriculture sector is considered 
inadequate and the sector has received a much smaller share of formal credit than the non- 
agricultural sector. 
The full realization of the Comprehensive Agrarian Reform Program's vision has been 
stymied by inadequate investments in the agrarian reform sector, particularly the dearth 
credit facilities available to agrarian reform beneficiaries (ARBs). Aside from the limited 
public resources to extend credit to ARBs, the hesitation of private lending institutions to 
provide credit windows to ARBs has exacerbated the drought in investments in the sector. 
Economic analysts suggest that one of the factors that limits the availability and 
access to credit of ARBs is the eroded collateral value of agricultural, and more so, agrarian 
lands. Researches postulate that improving the plight of peasants and the opening of avenues 
for credit inflow will require a positive environment for land markets. 
This bill therefore seeks to address the credit needs of peasants while at the same time 
provides security from risks for formal lending institutions. It intends to increase credit 
opportunities and investments in the rural agricultural sector by enhancing the value of 
farmlands as credit instruments in the financial market. 
Further, this measure seeks to provide the much needed policy environment that 
would facilitate the increase in the flow of capital inputs to the agricultural sector, which in 
turn, are expected to improve rural productivity and income. 
In view of the foregoing, the immediate enactment of this measure is earnestly 
sought. 


FOURTEENTH CONGRESS OF THE 
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REPUBLIC OF THE PHILIPPINES 
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Second Regular Session 
NOV 27 PI :39 
S E N A T E  
INTRODUCED BY THE HONORABLE MAR ROXAS 
AN ACT 
PROVIDING FARMERS BROADER ACCESS TO AGRICULTURAL CREDIT 
AND INSTITUTING MECHANISMS THEREFOR, AND FOR OTHER 
PURPOSES 
Be it enacted by the Senate and the House of Representatives in Congress assembled: 
SECTION 1. Title. - This Act shall be known as the 'IAgricultural Credit Act of2008." 
SEC. 2. Declaration of Policy, - 
I t  is hereby declared the policy of the State to 
promote accelerated growth with equity and modernization of the agricultural sector to 
increase productivity and income by enhancing access and efficient use of agricultural credit 
by the agrarian sector and providing better environment for bank and non-bank financial 
institutions to extend agricultural credit to the said sector. 
Towards this end, the 
government shall ensure that the agrarian reform beneficiaries (ARBS) and other members of 
the agricultural sector shall be given optimum opportunity to develop in order to raise 
productivity, promote efficiency and equity, and increase income pursuant to the 
fundamental policy of the State to promote social justice and sustainable development. 
Henceforth, Certificates of Land Ownership Award (CLOAs) and Emancipation Patents 
(EPs), being indefeasible titles registered under the Torrens System, shall be made 
instruments for securing credit for farmers and direct investments to the agricultural sector. 
SEC. 3. Indefeasibility of EP/CLOA Titles. - Emancipation Patents (EPs) and 
Certificates of Land Ownership Award (CLOAs), being titles brought under the operation of 
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the Torrens System, shall enjoy the same indefeasibility and security afforded to all titles 
under the said Torrens System as provided under Presidential Decree (P.D.) No. 1529. For 
this purpose, farmer beneficiaries who receive EPs or CLOAs pursuant to the Comprehensive 
Agrarian Reform Program are hereby deemed innocent purchaser for value and are entitled 
to the rights and protection as such persons under existing laws. Failure of any person with 
interests in such land, to file any action or petition to assail the coverage of such land within 
the period prescribed under Section 16 of R.A. No. 6657 and existing issuances shall be 
deemed to be a waiver to assert any and all rights that may prevent such lands from being the 
subject of coverage; Provided, That in no case shall any petition for cancellation of registered 
CLOAs and EPs be entertained if the same is filed later than one (1) year after the date of 
registration. 
The land ownership rights of farmer beneficiaries and the protection of their rights 
shall commence on the date of registration of the EP or the CLOA. 
SEC. 4. Coverage. - This Act shall apply to the following categories of agricultural 
lands devoted to agricultural activity, taking into account the pertinent provisions of agrarian 
reform laws and other related laws particularly the prohibitions on sale, transfer, or 
conveyance of agricultural lands: 
4.1 
4.2 
4.3 
4.4 
Lands with agricultural lessees, whether or not it has been the subject of the 
landowner’s prior exercise of retention rights granted by law, without 
prejudice to the rights of the agricultural lessee; 
Lands covered and fully paid under the Comprehensive Agrarian Reform 
Program (CARP) and past the 10-year prohibition period; 
Lands covered by homestead grants and free-patents; 
Lands covered by the CARP but not yet fully paid and are either within or past 
the 10-year prohibition period; 
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4.5 
Lands covered and fully paid under the CARP but still within the lo-year 
prohibition period. 
SEC. 5. Acceptability of Loan Collateral and Guarantee. - All agricultural lands 
enumerated under Section 4 of this Act shall be accepted as collateral by any formal lending 
institution, whether bank or non-bank financial institution, to secure loans of the registered 
owners as appearing in the Certificate of Land Ownership Award, Emancipation Patent, 
Homestead Patent, Free Patent, Original Certificate of Title or Transfer Certificate of Title. 
Likewise, expected harvests of farmer-lessees as appearing in the registered agricultural 
leasehold contract shall be accepted as collateral by formal financial institutions to secure 
loans of the same. Farmer-beneficiaries who own agricultural lands under Sections 4.4-4.5 
may avail of production loans using the guarantee scheme provided for under this Act. 
SEC. 6. Use ofLoan Proceeds. - The proceeds of loans that may be granted under this 
Act shall be used solely to finance any agricultural activities such as production, processing, 
storage and post-hai-vest facilities, shallow tube well and pump irrigation, distribution and 
marketing of agricultural products, and other related agricultural activities on the land 
being used as collateral, or in the case of farmer-lessees, on the land subject of the leasehold 
contract, Lands enumerated under 4.4 and 4.5, cannot be used as security or collateral for 
any obligation except the obligation to pay for the land acquisition cost of the government 
or any other amount that may be owed to the government resulting from the availment of 
production loans. 
SEC. 7. Land Bank Authorization of the Loan and Additional Requirements. - For 
partially paid and unpaid lands used as collateral under this Act, all loans that are to be 
granted by lending institutions are deemed to be with authorization and consent of the 
Land Bank of the Philippines (LBP) and the Department of Agrarian Reform (DAR) 
subordinated to any or all prior encumbrance existing in favor of the LBP. 
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The consent of the co-owners, in the case of co-owned lands, and the ratification of 
the majority of the members, in the case of cooperative-owned lands, shall likewise be 
obtained without prejudice to the submission of standard documentary requirements of 
banks and other formal lending institutions for the processing of loans as provided by 
pertinent banking laws, rules and regulations. 
SEC. 8. Valuation. - In order to assist bank and non-bank financial institutions to be 
fuIly aware of the land valuation formula under the agrarian reform program, the DAR and 
LBP shall undertake measures to disseminate the said valuation formula and provide 
technical assistance to bank and non-bank financial institutions such that they may be able 
to evaluate the value of lands under Section 4 offered as security by borrowers. 
SEC. 9. Access to Guarantee. - Farmer-beneficiaries who are owners of encumbered or 
non-transferable lands classified under Sub-sections 4.4 and 4.5 and farmer-lessees shall be 
provided a credit guarantee by the Development Bank of the Philippines (DBP): Provided, 
That the guarantee cover shall not exceed eighty percent (80%) of the principal amount of 
the loan: Provided, firther, That the principal amount of the loan shall not exceed the 
amount determined by DBP and the Department of Agriculture (DA) based on the 
agricultural activity and locality in which such is proposed: Provided, firtherrnore, That 
credit guarantees shall be subject to prior approval by DBP: Provided, finally That for all 
loans guaranteed by DBP pursuant to this Act, the principle of excussion under Article 2058 
and pertinent provisions of the New Civil Code shall not apply. 
SEC. 10. 
Event ofDefiult and Foreclosure ofMoHgage. - In the event of default of 
the borrower under this Act, the bank and non-bank financial institutions may proceed 
against the security of the loan in accordance with existing laws and subject to the provisions 
of this Act: Provided, That in the case of encumbered and non-transferable lands classified 
under Sub-sections 4.4 and 4.5, the bank and non-bank financial institutions shall be paid 


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the guarantee only after assigning the loan receivables to the DBP after which the DBP shall 
assign the loan receivables to the LBP: Provided, further, That DBP shall be paid the amount 
of the claim paid to the banks upon redemption: Provided, firtherrnore, That if the farmer- 
beneficiary has not yet hlly paid the amortization of the land awarded to hiin under the 
CARP, the agricultural productivity loan shall be added to the total loans owed by the 
beneficiary to the government: Provided, finally, That in case the farmer-beneficiary, 
availing of the loan with guarantee owns land classified under Sec. 4.4, the agricultural 
productivity loan and the guarantee thereon shall be granted on the basis of pertinent 
eligibility criteria but not including the use of the awarded land as security or collateral 
thereto 
Creditors of farmer-lessees shall be paid by che guarantee provided by the DBP. For 
this purpose, farmer-lessees shall execute a waiver on their claim on the expected harvests 
from the land they till in favor of DBP: Provided, That such waiver shall not include more 
than seventy-five per centum (75%) of the expected harvests from the land subject of the 
leasehold contract. 
The LBP and the DAR shall provide for an appropriate mechanism to ensure that loan 
due the government are paid taking into account the objectives of malting all agricultural 
lands productive. 
Foreclosure of mortgages constituted over unencumbered and transferable lands 
categorized under Sub-Sections 4.1, 4.2, and 4.3 shall be governed by existing laws subject to 
Section 71, 72(b) and 73-A of the Comprehensive Agrarian Reform Law: Provided, That 
private lenders may not bid in the auction nor acquire title to the agricultural land unless 
they have complied with Section 11 of this Act. 
LBP foreclosure of mortgages constituted over encumbered and non-transferable 
lands categorized under Sub-sections 4.4 and 45 shall be in accordance with Section 26, 
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paragraph two (2) and Section 37, paragraph four (4) of Republic Act (R.A.) No. 6657. 
Provided, That foreclosure of lands categorized under Sub-section 4.5 shall be in accordance 
with the terms and conditions to be determined by the LBP and the DAR. 
For mortgages of expected harvests of farmer-lessees, the DBP shall impose the waiver 
executed by himiher under this Act and claim all or a portion of the actual harvests until 
such time that the outstanding debt of the farmer-lessee shall have been paid. 
SEC. 11. Bidders in Auctions of Agi-fculturaal Land. - In all cases of foreclosure of 
mortgages constituted over lands described in Section 4 and Sub-sections 4.1, 4.2, and 4.3, of 
this Act, whether by the LBP or any other bank and non-bank financial institutions, no 
bidder in the auction shall be allowed to bid nor shall the agricultural land be sold to any 
person not qualified to own agricultural land as determined by the DAR in accordance with 
Sections 6 and 70 of R.A. No. 6657. 
SEC. 12. Exercise ofRedemption Rght. - In case the landholding is sold to a third 
person through public auction for failure of the borrower to pay the loan, the owner or 
agrarian reform beneficiary shall have the right to redeem the same at a reasonable price and 
consideration including interest thereon: Provided, That the entire landholding must be 
redeemed: Provided, further, That if there are more than one redemptionist owner or 
agrarian reform beneficiary, each shall be entitled to the said right of redemption only to the 
extent of the area actually cultivated by him or can afford to pay but not exceeding the three 
(3) hectares award limit. The right of redemption under this section may be exercised within 
one (1) year from the date of registration of the sale, and shall have priority over any other 
right of legal redemption. 
SEC. 13. Monitoring of Loan Proceeds. - The DAR and the DA shall be primarily 
responsible for the monitoring of the utilization of loan proceeds of borrowers under this 
Act: Provided, That bank and non-bank financial institutions shall provide semi-annual 
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reports to the Bangko Sentral ng Pilipinas (BSP), furnishing copies to DAR, DA-Agricultural 
Credit Policy Council (ACPC) and DBP on the status of the loans as well as issues affecting 
the implementation of the project for the latter to subinit policy corrective actions and/or 
recommendations: Pmvided, hrrher, That DBP shall likewise provide quarterly reports to 
the BSP, DAR and DA on the status of the implementation of the guarantee coverage under 
this Act. 
SEC. 14. 
Guarantee Fund. - There is hereby created a Guarantee Fund for 
agricultural and agrarian borrowers with an amount of at least Five Billion Pesos 
(P5,000,000,000.00) which shall be managed and administered by DBP. An initial amount of 
one billion pesos (Q 1,000,000,000.00) shall be sourced from fifty percent (50%) of the total 
funding allocation of the Comprehensive Agrarian Reform Program-Credit Guarantee Fund 
for Agricultural Landowners (CARP-CGFAL), proceeds of the sales of the Assets 
Privatization Trust (APT), receipts from assets recovered by the Presidential Commission on 
Good Government (PCGG), and a portion of the twenty-five percent (25%) allocation for 
support services under Sec. 36 of R.A. No. 6657. Of the total guarantee hnd, One Billion Five 
Hundred Pesos (P1,500,000,000) shall be sourced and included in the Annual General 
Appropriations Act. Other sources of funding or appropriations shall include the following: 
1. Proceeds of the Agri-Agra Reform Bonds to be issued by the Department of 
Finance (DOF) and guaranteed by the Republic of the Philippines: Provided That 
the DOF, in coordination with the DAR, may increase or decrease the amount of 
Guarantee Fund in accordance with the total level of utility and demand for 
credit: Provided, further, That one percent (1%) of the total loanable funds of all 
public and private banking institutions under the ten percent (10%) agrarian 
reform credit in Section 3 of Presidential Decree (P.D.) No. 717 (Agri-Agra Law) 
shall be invested exclusively, without any alternative mode of compliance, for the 


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purchase of the Agri-Agra Reform Bonds: Provided, firtherrnore, That the DOF 
shall determine and fix the features of the Agri-Agra Reform Bonds competitive 
with existing bonds and securities in domestic market circulation: Provided, 
finally, That the BSP shall draft the incentive program to encourage all public and 
private banking institutions to purchase such bonds; and 
2. Other government funds not otherwise appropriated. 
All funds appropriated to implement the provisions of this Act shall be considered 
continuing appropriations during the period of its implementation. 
Farmer-beneficiaries who desire to mortgage their lands through their cooperatives or 
associations shall set-up a buffer fund solely intended to guarantee the loans secured by the 
farmer-beneficiary. The cooperative or association shall set aside an amount equivalent to at 
least five percent (5%) of the loaned amount and retain an amount equivalent to at least ten 
percent (10%) of the annual net earnings of the farmer-beneficiaries from his land in 
subsequent harvests until such time that the loan is fully paid, as build-up capital of the 
buffer fund. 
To further strengthen recovery of loans, non-cooperative farmer-borrowers living in 
the same locality, will be encouraged to form or join a small group of farmer-borrowers and 
guarantee each other following the successful credit models and the micro-finance scheme. 
SEC. 15. Capacity BuildingandFeasibility Studies Fund. - The DAR, the DA and the 
LBP shall provide technical assistance in capacity building and the preparation of feasibility 
studies or investment studies as may be required by the concerned banking or lending 
institution. For this purpose, there is hereby created a capacity building and feasibility 
studies fund to support the training preparation of feasibility studies and related capacity 
building activities of agricultural borrowers. 
The Presidential Agrarian Reform Council 
(PARC) is hereby directed to set aside Three Hundred Million Pesos (P300,000,000.00) from 
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the Agrarian Reform Fund (ARF) in the initial year of implementation of the law. 
Succeeding fund requirements shall be included in the annual General Appropriations Act. 
The DAR and the LBP are hereby directed to implement measures to generate additional 
funds for this purpose. The DAR shall draft the rules aiid regulations of the utilization of the 
Fund. 
SEC. 16. CompIiance with the Agri-Agra Law (P.D. No. 717) and Otherhcentives. - 
The purchase of DBI’ Agri-Agra Reform Bonds and loans granted under this Act shall form 
part of compliance with the Agri-Agra Law (P.D. No. 717) by the lending institution. 
Any transaction of sale, transfer or conveyance of lands under this Act shall be 
exempt from the payment of capital gains tax, registration fees, and all other taxes and fees 
for the conveyance or transfer as provided for under Sections 66 and 67 of R.A. No. 6657. 
SEC. 17. SimpMcation ofLoan Procedures. - In order to expedite and help facilitate 
timely access of farmers, agrarian reform beneficiaries and their cooperatives to formal 
credit, the DAR, LBP, DA and DBP, in consultation with concerned government agencies, 
farmers, cooperatives and the banking sectors, shall formulate, within ninety (90) days after 
the approval of this Act, a simplified, efficient and practicable mechanics for processing and 
approving loan applications which would demand only the iiecessary and most indispensable 
requirements from the loan applicant. 
SEC. 18. Penalties. - For lands already covered under R.A. No. 6657, P.D. No. 27 or 
related agrarian reform laws, violations and other prohibited acts contrary to the exclusivity 
of loan purpose as defined under Section 6 hereof, such as misuse or diversion of financial 
and support services extended to agrarian reform beneficiaries or a deviation by the borrower 
in the use of loan proceeds, shall result in the cancellation of EPsKLOAs or perpetual 
disqualification to be agrarian reform beneficiaries, or both. 
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The DAR shall be responsible for monitoring compliance of the provisions under 
Sections 6 and 13 of this Act, and shall initiate the necessary action against those who violate 
the provisions thereof: Provided, That if the offender is a public official or employee found to 
be in collusion to defraud the farmer, bank and other financial institution, or the 
government, the penalty shall be imprisonment of prision mayor with 
~ absolute 
disqualification as accessory penalty and a fine of not more than double the amount of fraud 
but not less than One Hundred Thousand Pesos (PlO0,OOO.OO): Provided, further, That if the 
offender is a juridical person the penalty shall be imposed on the responsible officers thereof. 
SEC. 19. Implementing Rules and Regulations (IRR). - The DAR, DA, DOF and LBP, 
in consultation with concerned government agencies, farmers, cooperatives and the banking 
sectors, shall formulate the implementing rules and regulations of this Act within ninety (90) 
days after its approval. Such rules and regulations shall take effect fifteen (15) days after the 
publication in a newspaper of general circulation in the Philippines. 
SEC. 20. Repealing Clause. - All existing laws, Executive Orders, issuances, rules and 
regulations, or part thereof inconsistent with the provisions of this Act are hereby repealed 
or modified accordingly. Nothing in this Act shall be construed to amend existing policies, 
rules and regulations on collateral-free loans or loans using social collateral to small farmers 
and other marginalized sectors by government financial institutions and other institutions 
engaged in micro-finance activities. 
SEC. 21. Separability Clause. - In the event any of the provision of this Act is declared 
unconstitutional, the validity of the other provisions shall not be affected by said declaration. 
SEC. 22. Effecfivify Clause. - This Act shall take effect immediately after publication 
in the Official Gazette or in at least two (2) national newspaper of general circulation. 
Approved, 
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