THIRTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES) 
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Second Regular Session 
S.8. NO. 
Introduced by Senator ALFRED0 S. LIM 
EXPLANATORY NOTE 
Governors or mayors, with the approval of their local legislative 
bodies, in behalf of their localities, had been resorting to borrowings 
from banks or other lending institutions to finance certain projects with 
an amortization period for full .payment extending even beyond their 
terms of office. 
The practice makes their successors to office burdened with the 
obligation of paying the loans thereby already depriving the new 
elected officials of the needed funds to finance their own projects upon 
their assumption to office. 
It is high time that we limit the amortization period of such loans 
to the term of office of the governor or mayor and approved by 
members of the local legislative bodies contracting them so that with 
this limitation, the borrowing chief executive and members of the 
board or council of the locality will be more concerned and obligated to 
pay the loan they contract during their term rather than pass on the 
obligation of paying it to their successors who in the first place should 
not be burdened with it. 
Senator 


THIRTEENTH CONGRESS OF THE) 
REPUBLIC OF THE PHILIPPINES) 
Second Regular Session 
Introduced by Senator ALFRED0 S. LIM 
AN ACT 
LIMITING THE PERIOD OF AMORTIZATION OF LOANS 
CONTRACTED BY LOCAL GOVERNMENTS TO THE 
TERM OF OFFICE OF THE LOCAL EXECUTIVES 
CONCERNED, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representative of 
the Philippines in Congress assembled: 
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SECTION 1. Declaration of Policy. - It is the policy of the State to 
recognize certain needs of local governments to contract loan or 
incur financial obligation necessary for their development 
programs. It is equally the state's policy to ensure that the 
authority is exercised responsibly. Finally, it is the state's policy 
to provide the governors and mayors and their local legislative 
bodies the opportunity to fulfill their mandates with funds 
through fresh revenues undiminished by unpaid debt or financial 
obligation incurred by their predecessors. 
SECTION 2. Loan/Financial Obligation Amortized Before End of 
Term. - Any provision of law to the contrary notwithstanding, 
loans or other financial obligations contracted in behalf of 


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provinces, cities or municipalities by their respective governors 
or mayors and approved by their respective legislative bodies 
shall be amortized and paid in full not later than one month 
before the end of the term of office of said governors or mayors 
and members of the board or council who approved the 
contracting of the said loan or of incurring the financial 
obligation. 
SECTION 3. Undertaking of Governors and Mayors on Loans. - 
Banks, financing or lending institutions, local or foreign, lending 
money to provinces and cities or underwriting any financial 
obligation shall require the governor or mayor and the members 
of the legislative bodies approving the contracting of such loans 
or financial obligations to execute an undertaking that the 
province or city they represent shall amortize and pay in full the 
principal and interest including bank charges of the said loan or 
financial obligation not later than one (1) month before the end 
of the term of office of said governors, mayors and members of 
the legislative bodies approving them. 
SECTION 4. Limitation on Amortization Deemed Stipulated. - 
All loan agreements and financial obligations between the 
local governments and the lenders shall contain a stipulation that 
the entire loan together with interest and bank charges shall be 
amortized in full not later than one (1) month before the end of 
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the term of office of the mayor, governor and members of the 


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legislative bodies who approved to contract them: Provided, 
However, that even without the incorporation of the stipulations 
in the covering documents on said loan or financial agreement, 
the same shall be deemed incorporated therein. 
SECTION 5. Effect of Non - Payment Upon Expiration of Term. - 
If 
the loan and/or its increment including interests is not paid in 
full before the end of the term of the office of the mayor or 
governor and members of the local legislative bodies who 
approved to contract the loan or incur the financial obligation, 
the province or city in whose behalf the said obligation is 
contracted shall be discharged from ‘liability thereon and the 
unpaid amortization, if any, shall become the solidary liability of 
the said mayor or governor and members of the local legislative 
bodies who approved the contracting of said loan or incurring the 
financlal obligation: Provided, However, that if the failure to 
amortize is due to the fault or negligence of the personnel of the 
mayor or governor or the local legislative bodies duty bound to 
make the necessary remittance or payment, the said personnel 
shall be solidarily liable with the said officials: provided, Finally, 
that the mayor or governor or members of the local legislative 
bodies who approved the contracting of said loans who fail to 
settle said obligation incurred during the term for which they 
were elected shall not be eligible to run for any public office until 
the financial obligation is fully paid. 


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SECTION 6. Loans Covered. - This Act shall apply to all loans 
contracted upon the effectivity hereof. Loans contracted prior to 
the effectivity hereof shall remain the obligation of the province 
or city but the governor or mayor shall strictly comply with the 
amortization payment provided for in the loan agreement with 
the lending bank, lending or financing institution. 
Approved, 
SECTION 7. Repealing Clause. - All laws, decrees, executive 
orders and Republic Acts inconsistent herewith are hereby 
deemed repealed. 
SECTION 8. Effectivity. - This Act shall take effect upon its 
approval.