THIRTEENTH CONGRESS OF THE 1 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
1 
. S.B. NO. 
Introduced by Senator Jinggoy Ejercito Estrada 
Explanatory Note 
Farmers must have access to cheap, timely and adequate credit. Rural credit 
must be available to small farmers at reasonable cost in order to achieve desired 
productivity. 
According to the Congressional Commission on Agricultural Modernization, 
rather 
than 
formal 
banking 
institutions, 
farmers usually 
prefer 
local 
businessmen/traders who not only lend for production, but also buy the farmers' 
produce. Small borrowers or farmers prefer to deal with these informal lenders 
because they can get their loan quickly with less paperwork and, sometimes, no 
collateral. The usual complain lodged against these informal lenders, however, is 
the usurious interest rates they charge. 
The framers of Presidential Decree 717 attempted to resolve the need to 
provide credit by ensuring that funds are made available through the formal banking 
system. The Agr&Agra Law or PD 717 mandates all commercial banks to set aside 
25% o7"their loanable funds for agricultural lending---l5% for agricultural production 
and 10% for agrarian reform. 
PD 717, however, allowed these banks to divert the 10%-agrarian reform 
share to government securities. Furthermore, a substantial portion of the 15% share 
for agricultural production is lent to large agribusiness corporations. Banks prefer to 
lend to agribusiness enterprise because of the higher risk of loan default or non- 
repayment by the small farmers. 
Even with PD 717, access to credit remains a major problem. AGRICOM 
states that in 1986, it was reported that only one third of small farmer borrowers was 
to avail themselves of credit from the banks. In 1992, of the total PI26 billion 
agricultural loans released by the banks, only 11 percent went to small farmers and 
fishermen. Even the Land Bank, shifted its policies to be able to undertake non- 
agricultural banking. As of March 1997, the Landbank's loans to small farmers and 
fisherfolk amounted to P23.2 billion compared with P57.3 billion for non-agriculture. 
The proposed measure aims to correct this loophole by: a) removing the 
provision allowing financial institutions to invest in government securities; b) setting a 
ceiling as to who may have access to credit, in order to ensure that small farmers 
and fishers shall be the primary beneficiaries of the funds; c) expand or broaden the 
modes of compliance and expand the conduit networks in anticipation of the total 
loanable funds that may be made available. This measure provides penalties for 
erring banks and its officials to ensure strict compliance by financial institutions. 


- 
/
-
 
-_ - 
This bill envisions better access by small farmers to formal credit. 
Furthermore, the bill provides for alternative compliance which provides for direct 
support to agriculture such as infrastructure. With credit made available in the 
countryside and infrastructure given priority by the government, the promotion of 
growth in the countryside, through agriculture, looks promising. 
For these considerations, the approval of this bill is earnest sought. 
DA 
.
.
 . 
.
.
 . 


THIRTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
1 
First Regular Session 
1 
-~ 
Igtroduced by Senator Jinggoy Ejercito Estrada 
__^? - 
AN ACT BROADENING THE SCOPE OF COMPLIANCE AND EXPANDING THE 
CONDUIT NETWORK FOR AGRI-AGRA CREDIT, AMENDING FOR THIS 
PURPOSE PRESIDENTIAL DECREE 717 OTHERWISE KNOWN AS THE AGRI- 
AGRA LAW 
Be if enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. 
Section I, 
of P.D. 717 is hereby amended to’ read as 
follows: 
“SECTION I. There shall be evolved an AGRICULTURE, FISHERIES, 
AND, agrarian reform credit and financing system to improve the productivity 
of 
agriculture 
and 
FISHERIES, 
particularly 
farmers, 
MUNICIPAL 
FISHERFOLK, and [for the beneficiaries] agrarian reform beneficiaries, 
namely: tillers, tenant-farmers, settlers, agricultural lessees, amortizing 
owners, owner-cultivators, farmers cooperative, agro-industrial enterprises, 
corporate farmers, agricultural processing plants, post harvest facilities, and 
compact farms through government and private banking institutions for the 
production of other types of loans for the acquisition of work animals. 
AGRICULTURE, FISHERIES AND agrarian reform credit, as used 
herein , shall include production or other types of loans for acquisition of work 
animals, farm equipment and machinery, seeds, fertilizers, poultry, livestock 
feeds, and other similar items; acquisition of lands authorized under the 
Agrarian Reform Code of the Philippines and its amendments; construction 
and/or acquisition of facilities for production, processing, storage and 
--- 
marketing;-and 
efficient and effective merchandising of agricultural 
commodities stored and/or processed by the facilities aforecited in domestic 
and foreign commerce. 


SECTION 2 Section 2 is hereby amended as follows: 
“SECTION 2. The credit mentioned in the next preceding section may 
be extended to the beneficiaries therein WITH CAPITALIZATION OF NOT 
MORE THAN 
FIFTY MILLION PESOS (P50,000,000.00) OR 
TO 
COOPEWTIVES 
OF 
SUCH 
BENEFICIARIES 
REGARDLESS 
OF 
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 
I oa n , ” 
SECTION 3 SECTION 3 of the same decree is hereby amended to read 
as follows: 
Section 3. All banking institutions, whether government or private shall 
-set aside a t  least 25% of their loanable funds for THE PURPOSE OF 
LENDING THE SAME TO THE AGRICULTURE AND FISHERIES SECTORS 
[agriculture credit in general, of which at least ten percent (10%) of the 
loanable funds shall be made available for] AND agrarian reform beneficiaries 
mentioned in Section 1 hereof. Provided, however, that loanable funds are 
used in this Section shall refer to funds generated from the date of the 
effectivity of this Decree(s). Provided, further that the National Economic 
Development Authority may increase or decrease such percentages 
whenever so recommended by the Department of Agrarian Reform .
.
 
and the 
Central Bank of the Philippines taking into consideration the magnitude of the 
credit needs of the beneficiaries of agrarian reform.)” 
SECTION 4 SECTION 4 of the same decree is hereby amended to read 
SECTION 4. 
The BANGKO SENTRAL NG PILIPINAS, in 
consultation with {andlor upon the recommendation of } the DEPARTMENT 
OF AGRICULTURE AND THE 
Department of Agrarian Reform, shall 
promulgate such rules and regulations as may be necessary to implement the 
provisions of this Decree. Subject to such rules and regulations, banking 
institutions may be allowed to:. 
as follows: 
(a) Invest, in such government securities as may be declared eligible 
by the Central Bank of the Philippines, any portion of the amount set aside for 
agrarian reform credit not actually loaned out. Provided, however, that the 
issuing government, entity shall stand to monetize, encash, or repurchase 


such securities whenever funds are needed by the banks holding the said 
securities, for lending to the beneficiaries of agrarian reform; and} 
(a) 
INVEST IN BONDS ISSUED BY THE DEVELOPMENT BANK 
OF THE PHILIPPINES (DBP) AND THE LAND BANK OF THE PHILIP.PINES 
(LBP) AND/OR OPEN SPECIAL DEPOSIT ACCOUNTS (SDA 's) WITH 
THRIFT BANKS LOCATED OUTSIDE THE NATIONAL CAPITAL REGION 
(NCR), WITH COOPERATIVE BANKS AND RURAL BANKS: PROVIDED 
THAT THE PROCEEDS FROM SAID BONDS AND SDA's SHALL BE USED 
EXCLUSIVELY FOR ON-LENDING TO THE AGRICULTURE, FISHERIES, 
AND AGRARIAN REFORM SECTORS, PROVIDED, FURTHER, THAT: 
PROCEEDS FROM SAID BONDS AND SDAs SHALL BE SEPARATELY 
ACCOUNTED FOR BY THE DBP, LBP AND THE DEPOSITORY THRIFT 
BANKS AND SHALL BE CONSIDERED FOR PURPOSES OF COMPUTING 
THE LOANABLE FUNDS UNDER SECTION 3 HEREOF OF THE SAID 
BANK, 
PROVIDED 
FINALLY, 
THAT 
SAID 
BONDS 
SHALL 
BE 
REDEEMABLE ANYTIME. 
(b) Rediscount with the {Central Bank of the Philippines} COMMERCIAL 
BANKS eligible paper covering AGRICULTURE, FISHERIES and agrarian 
reform credits; PROVIDED THAT SUCH REDISCOUNTED PAPERS SHALL 
NO LONGER BE ELIGIBLE AS COMPLIANCE ON THE PART OF THE 
0 RIG I NATlN G BAN K./ 
4
-
z
 - 
0 LEND IN BUILD-OPERATE-TRANSFER SCHEMES FOR THE 
FINANCING OF AGRI-RELATED ACTIVITIES AND RURAL SUPPORT 
SYSTEMS, INCLUDING BUT NOT LIMITED TO FARM TO MARKET ROAD 
NETWORKS, POST HARVEST FACILITIES, STORAGE FACILITIES, 
FISHPORTS, IRRIGATION SYSTEMS AND MARKETING FACILITIES 
SUCH S LOCAL FOOD TERMINALS THAT WILL BENEFIT THE 
AGRl CU LTU RE, FISHERIES AND AGRARIAN REFORM BEN EFlC lARl ES; 
PROVIDED THAT THE FEASIBILITY STUDY DESIGN AND WORK 
PROGRAMS OF THE INFRASTRUCTURE 
PROJECTS SHALL 'BE 
PREPARED 
BY THE 
PROVINCIAL AND/OR 
MUNICIPAL 
LOCAL 
GOVERNMENT UNITS (LGUs) CONSISTENT WITH THEIR LAND USE 
PLAN AND/OR MUNICIPAL DEVELOPMENT PLANS, IN CONSULTATION 
WITH: 
(1) 
THE 
NATIONAL 
IRRIGATION 
ADMINISTRATION 
AND 
DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS FOR IRRIGATION 
SYSTEMS AND FARM TO MARKET ROADS. 


, 
- 
_/ 
-e+ - 
(2) 
THE DEPARTMENT OF AGRICULTURE ANDIOR NATIONAL 
FOOD AUTHORITY FOR POST HARVEST FACILITIES, STORAGE 
FACILITIES AND MARKETING FACILITIES INCLUDING LOCAL FOOD 
TERMINALS. 
(3) 
THE PHILIPPINE PORT AUTHORITY AND THE PHILIPPINE 
FISHERIES 
DEVELOPMENT AUTHORITY 
FOR 
COLD 
STORAGE 
FACILITIES AND FISHPORTS. 
PROVIDED FURTHER THAT THE P1.5 MILLION CEILING FOR 
QUALIFIED BENEFICIARIES UNDER SECTION 2 HEREOF DOES NOT 
APPLY IN THIS INSTANCE. 
(D) 
EXTENDED DEVELOPMENT LOANS AS PROVIDED UNDER 
SECTION 9 OF RA 7721 ; AND 
(E) 
LEND 
TO 
FARMERS, 
FARMERS 
ASSOCIATION 
OR 
COOPEFWTIVES 
FOR 
THE 
PRODUCTION, 
MARKETING 
AND 
DISTRIBUTION OF HIGH VALUE CROPS UNDER RA 7900. 
SECTION 5, The provision in the second paragraph of Section 9 of RA 7900, 
which states that banks lending at least five percent (5%) of their loanable funds 
directly to the farmers associations or cooperatives are exempted from the 
compliance agreement of P.D. 717, is hereby repealed. All other laws, executive 
decrees or issuances, or any parts thereof which are inconsistent with the provisions 
of this Act are hereby repealed or amended accordingly. 
SECTION 6. The Bangko Central ng Pilipinas shall impose administrative 
sanctions and other penalties on the lending institutions for non-compliance with the 
provisions of this Act. In addition] the President] members of the Board of Directors 
and other officers of the erring lending institution shall be individually liable for 
imprisonment of not less than six (6) months; and a fine of not more than five 
hundred thousand pesos (P500,OOO.OO) each: Provided , further that said erring 
bank officer shall be barred from occupying positions in banking institutions 
thereafter. 
SECTION 7. 
If any of the provisions of this Act are declared invalid or 
.
.
 . 
unconstitutional, the remaining provisions not affected hereby shall remain valid. 


SECTION 8, This Act shall take effect fifteen (1 5) days after its publication in 
at least two (2) newspapers of general circulation. 
- _- 
- 
Approved, 
.
.
 . 
.
.
 .