FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
S.B. No. 25jlS 
Introduced by SEN, MANNY VILLAR 
EXPLANATORY NOTE 
'10 
NOV 15 P 5 :29 
Microcredit is the extension of very small loans (microloans) to those in poverty designed to 
spur entrepreneurship. These individuals lack collateral, steady employment and a verifiable credit 
history and therefore cannot meet even the most minimal qualifications to gain access to traditional 
credit. Microcredit is a part of microfinance, which is the provision of a wider range of financial 
services to the very poor. 1 
In many developing countries, the self-employed comprise more than 50 percent of the labor 
force. Access to small amounts of credit at reasonable interest rates - instead of the exorbitant ones 
often charged by traditional moneylenders - allows poor people to move from initial, perhaps tiny, 
income-generating activities to small microenterprises. In most cases, microcredit programs offer a 
combination of services and resources. to their clients including savings facilities, training, 
networking, and peer support? 
[n this way, microcredit allows families to work to end their own poverty - with dignity. 
Microcredit programs around the world, using a variety of models, have shown that poor people 
achieve strong repayment records - often higher than those of conventional borrowers. Repayment 
rates are high because, through a system, of peer support and pressure used in many microcredit 
models, borrowers are responsible for each other's success and ensure that every member of their 
group is able to pay back their loans? In the Philippines, 32.9%4 of the estimated 99,900,177 
Filipinos5 live below the poverty line. Of these, nearly three quarters live in rural areas. Despite 
their limited business scopes, micro-enterprises have a significant and positive effect on the 
economy. The most appropriate vehicle for countryside-led growth micro-finance remains the Land 
Bank of the Philippines. As a government universal bank, Landbank's vision is to be a dominant 
financial institution in the countryside lea(iing the nation to economic prosperity. Financial services 
for the poor have proved to be a powerful instrument for poverty reduction that enables the poor to 
build assets, increase incomes, and reduce their vulnerability to economic stress. However, the 
challenge of providing financial services to them remains. 
In view of the foregoing, the approval of this initiative is earnestly sought. 
1 http://en.wikipedia.org/wiki/Microcredit 
2 http://www . m i crocreditsu m m it.org/ about/what_is _ m i crocredit/ 
'Ibid. 
MANNY VIL oAR 
, http://www.indexmundLcom/philippines/population_below_povertYJine.html 
5 http://www.mahalo.com/population-of-philippines 
1 


FIFTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
, 
2t::Q~ 
~,B, No, 
U u v 
'W 
NOV15 P5:29 
Introduced by SEN. MANNY VILLAR 
AN ACT 
TO INSTITUTIONALIZE MICRO"CREDIT FINANCING AMENDING FOR THIS 
PURPOSE REPUBLIC ACT NO. 3844, AS AMENDED, OTHERWISE KNOWN AS 
"THE CODE OF AGRARIAN REFORM IN THE PHILIPPINES." APPROPRIATING 
FUNDS THEREFO~, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Republic of the 
Philippines in Congress assembled: 
SECTION 1. Paragraph 6 of Section 75 of Republic Act No, 3844, as amended, is hereby 
further amended to read as follows: 
x 
x 
x 
"6, To grant loans for farmers' cooperatives/ assocIatIons to facilitate 
production, MARKETING AND DELIVERY AND/OR DISTRIBUTION of crops 
and 
acquisition of essential EQUIPMENT. MACHINERY, TOOLS AND 
commodities AS WELL AS TO EXTEND UNCOLLATERALIZED LOANS OF 
NOT LESS THAN TWO THOUSAND PESOS (P2,000,00) AND NOT MORE 
THAN 
TWENTY 
THOUSAND 
PESOS 
(P20,OOO,OO) 
TO 
PRIVATE 
INDIVIDUALS OR GROUPS OR AGGRUPATIONS OF PERSONS TO FINANCE 
MICRO-VENTURES, LIVELIHOOD PROJECTS, SMALL-SCALE CRAFTS, 
CAPITAL FOR RETAIL OR OTHER SMALL-SCALE BUSINESSES OR 
OCCUPATIONS 
PROVIDED 
THAT 
SUCH 
PRIVATE 
GROUPS 
OR 
AGGRUPATIONS 
ARE 
REGISTERED 
WITH 
THE 
DEPARTMENT OF 
FINANCE," 
SEC. 2. Sec, 80 of the same Act, aS,amended, is hereby further amended (0 read as follows: 
"Sec, 80, Modes of Payment, - The Bank shall finance the acquisition of 
farm lots as WELL AS MICRO-PROJECTS, VENTURES AND UNDERTAKINGS 
PROVIDED IN PAR, 6 OF SECTION 75 OF THIS ACT under any of (he following 
modes of settlement: 
x 
x 
x " 
SEC. 3. Sec, 81 ofthe same Act is hereby further amended, by adding two new paragraphs to 
be known as par. 81-A and SI-B, to read as follows: 
"Sec, 81-A-, - TO FINANCE THE MICRO-LENDING UNDERTAKINGS 
AND TO SUPPORT THE MICRO-FINANCE OPERATIONS OF THE BANK AS 
ENVISIONED 
IN 
THIS 
ACT, 
INCLUDING 
THE 
EMPLOYMENT, 
DEPLOYMENT AND TRAINING or ADDITIONAL PERSONNEL AS WELL AS 
THE CREATION OF NEW OFFICERS OR BRANCHES, THERE IS HEREBY 
APPROPRIA TED THE SUM OF FIFTY MILLION PESOS (P50,OOO,OOO,OO) OUT 
2 


OF THE FUNDS OF THE NATIONAL TREASURY 
APPROPRIA TED, 
WHICH 
SUM 
SHALL 
FORM 
CAPITALIZATION OF THE BANK." 
NOT OTHER WISE 
PART 
OF 
THE 
"SEC. 81-13. - THE BANK SHALL ALLOCATE 25% OF ITS LOAN 
PORTFOLIO TO FINANCE MICRO-LOANS AUTHORIZED UNDER THIS ACT." 
SEC. 4. Sec. 86-A of the same Act is hereby further amended to read as follows: "Sec. 86-A. 
Powers and Responsibilities of the Board., - The Board of Directors shall have, among others, the 
following specific powers and responsibilities: 
"1. Formulate policies, rules and regulations for the effective operation of the Bank, 
AS WELL AS TO CARRY OUT THE PROVISIONS OF nils ACT; 
"2. 
x 
x 
x 
"3. Establish such branches, [and] agencies OR OFFICES as may be deemed 
necessary and convenient FOR THE EFFECTIVE IMPLEMENTATION OF ITS 
MANDA TE 
FOR 
THE 
.AGRI-LENDING 
AND 
MICRO-LENDING 
FINANCING; 
1'4. 
x 
x 
x 
"5. 
x 
x 
x 
"6. 
x 
x 
x 
"7.TO PROVIDE FOR THE RECRUITMENT OF ADDITIONAL OR FIELD 
PERSONNEL TO CONDUCT INFORMATION AND TRAINING PROGRAMS 
ON 
MICRO-FINANCING, 
PROPER 
ENFORCEMENT 
OF 
PROGRAM 
POLICIES AND 
PROCEDORES, AND THE NECESSARY LENDING 
TECHNOLOGY TERMS OR MECHANISM FOR MICRO- LENDING AS 
PROVIDED IN THIS ACT; AND 
"8. 
TO 
SUBMIT 
TO 
CONGRESS 
AN 
ANNUAL 
REPORT 
OF 
ITS 
MICRO LENDING OPERATIONS WITH EMPHASIS ON THE NUMBER OF 
BENEFICIARIES, REPAYMENT RATES, REACH OUT ACTIVITIES AND 
SUCI-I OTHER RELEVANT MATTERS." 
SEC. 5. Sec. 100 of the same Act ishereby amended to read as follows: 
'''Sec. I 00. Penalty for Violation of the Provisions of this Chapter. - Any 
director, officer, employee or agent of the Bank who violates or permits the violation 
of any of the provisions of this Chapter or any person aiding or abetting the violation 
of any of the provisions of this CHapter, shall be punished by a fine of not to exceed 
[ten] FIFTY thousand pesos (P50,,000.00) or by imprisonment of not more than five 
years, or both, such fine and imprisonment at the discretion of the Court." 
'SEC. 6. - The Department of Finance shall, in consultation with the Land Bank of the 
Philippines and the Department of Trade and Industry, Department of Social Welfare and 
Development, Department of Science and Technology, Department of Labor and Employment, 
Department of Agriculture and the Departinent of Agrarian Reform, promulgate the necessary rules 
and regulations for the immediate and effective implementation of this Act within thirty (30) days 
from the effectivity of this Act 
3 


SEC. 7. Separability Clause. - In the event that any provision of this Act, or part thereof, it is 
hereby declared invalid 01' unconstitutional, the remaining provisions thereof shall be considered 
valid and binding. 
SEC. 8. Effectivity. - This Act shall take effect fifteen (15) days after its publication in the 
Official Gazette or in at least two (2) newsp.apers of general circulation whichever comes earlier. 
Approved, 
4