AN ACT STRENGTHENING THE FINANCING SYSTEM, INCLUDING CAPACITY-BUILDING AND ORGANIZATION, FOR AGRICULTURE, FISHERIES, AND RURAL DEVELOPMENT IN THE PHILIPPINES, REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 10000 OR "THE AGRI-AGRA REFORM CREDIT ACT OF 2009"

Eighteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-sixth day of July, two thousand twenty one.

[ REPUBLIC ACT NO. 11901, July 28, 2022 ]

AN ACT STRENGTHENING THE FINANCING SYSTEM, INCLUDING CAPACITY-BUILDING AND ORGANIZATION, FOR AGRICULTURE, FISHERIES, AND RURAL DEVELOPMENT IN THE PHILIPPINES, REPEALING FOR THE PURPOSE REPUBLIC ACT NO. 10000 OR "THE AGRI-AGRA REFORM CREDIT ACT OF 2009"

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. — This Act shall be known as "The Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022."

Section 2. Declaration of Policy. — It is hereby declared the policy of the State to promote inclusive and broad-based economic growth by ensuring equal access to opportunities under an environment of sustained growth and expanding productivity as the key to raising the quality of life for all. Towards this end, the State shall promote rural development by enhancing access of rural communities and agricultural and fisheries households to financial services and programs that increase productivity, enhance market efficiency, and promote modernization and improve the welfare and economic prospects of beneficiaries in rural communities through active participation of banking institutions.

The Landbank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) shall continue to promote savings and credit in the rural areas by offering affordable deposit products such as the basic deposit account for deposits and low interest rates for loans.

The lending cooperatives, microfinance institutions, retail banks, rural and thrift banks shall apply minimum interest rates for wholesale loans obtained from government banks.

Likewise, the LBP and DBP shall use their resources to innovate, develop, promote and invest in digital, automation technology, branchless banking and cash agent operations to reach remote barangays and municipalities; using e-commerce, online transactions, bank-on-wheels, point of sale devices with retailers and non-banking institutions, lottery kiosks and mobile phone applications in making banking services accessible to the rural public.

The State also recognizes the importance of designing and implementing capacity-building programs that will develop and improve skill sets and competencies of farmers, fisherfolk, agrarian reform beneficiaries, and other agricultural workers which will allow them to operate productive, profitable and viable agricultural and business ventures, as well as enhance their paying capacity and access to formal financing channels.

Section 3. Definition of Terms. — As used in this Act:

Section 4. Agriculture, Fisheries and Rural Development Financing System. — There shall be an agriculture, fisheries, and rural development financing system to improve the productivity, income, competitiveness and welfare of the rural community beneficiaries, particularly the farmers, fisherfolk, ARBs, ARCs, settlers, agricultural lessees, amortizing owners, farmworkers, fishworkers, owner-cultivators, compact farmers, tenant farmers, and members of their household and their MSMEs, as well as farmer's and fisherfolk's cooperatives, organizations and associations, through government and private banking institutions.

Agriculture, fisheries and rural development financing, as used herein, shall consist of loans and investments to finance activities that shall enhance productivity and increase income of an agricultural and fisheries household, thereby promoting agricultural sector productivity and competitiveness, as well as sustainable development of rural communities. These shall include, but not be limited to: activities identified under the AMCFP as enumerated under Title 1, Chapter 3, Section 23 of Republic Act No. 8435, off-farm/fishery entrepreneurial activities, agricultural mechanization/modernization, agri-tourism, environmental, social and governance projects, including green projects, digitalization/automation of farming, fishery and agri-business activities and processes, acquisition of lands authorized under the Agrarian Reform Code of the Philippines and its amendments, efficient and effective marketing, processing, distribution, shipping and logistics, and storage of agricultural and fishery commodities, public rural infrastructure, as well as programs that shall promote the health and wellness of farmers, fisherfolk and ARBs, including members of their households, such as water and sanitation projects for rural communities, and address the developmental needs of rural communities, such as, but not limited to, projects that promote the livelihood, skills enhancement, and other capacity-building activities of the rural community beneficiaries and all other activities consistent or analogous to the foregoing.

Toward this end, banking institutions are expected to design and offer financial products and services that suit the specific requirements of their agricultural clients, taking into account their cash flows and the gestation and harvest period of the agricultural produce/activity/project being financed.

Section 5. Rural Community Beneficiaries. — The financing mentioned in the preceding section shall be extended to the rural community beneficiaries named therein or to cooperatives, associations, MSMEs or organizations in good standing 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 loan and investments.

Section 6. Credit Quota. — All banking institutions, whether government or private, except newly-established banks for a period of five (5) years from the date of commencement of the banks' operations, shall set aside a credit quota, or a minimum mandatory agricultural and fisheries financing requirement of at least twenty-five percent (25%) of their total loanable funds.

The total loanable funds generated by a banking institution shall be defined by the BSP. During the first year of effectivity of this Act, the total loanable funds generated shall be computed starting from 20 April 2010, the effectivity of Republic Act No. 10000, after which the bank's total loanable funds shall be determined based on funds generated starting from the second year of the effectivity of this Act.

Section 7. Modes of Compliance. — Banks may comply with the mandatory credit requirement by lending to rural community beneficiaries, to finance agricultural and fishery-related activities as enumerated under Section 4 of this Act. Banks may also comply with the mandatory financing requirement through other means as follows:

Provided, That the loans and investments that are counted as compliance are not funded by proceeds from the issuance of debt securities, and/or deposit/lending of other banks that have been counted as compliance with the mandatory credit: Provided, further, That loans to finance activities that shall generally benefit ARBs, ARCs, or other priority sectors, as may be determined by the Agricultural Credit Policy Council (ACPC), shall be counted at ten times (10x) their outstanding amount, or as otherwise prescribed by the ACPC, for purposes of determining compliance with the mandatory agricultural and fisheries financing requirement.

The modes of compliance enumerated in this section shall be subject to review by the ACPC after implementation to determine whether these are adequate to support the financing requirements of rural communities and recommend to Congress for appropriate action.

The BSP, the Department of Agriculture (DA) and the DAR may provide inputs to the review process in their capacity as members of the ACPC.

Further, the BSP shall be authorized to identify other actions that may be considered as eligible modes of compliance with the mandatory credit to rural community beneficiaries.

Section 8. Annual Reports. — The BSP shall furnish reports on the compliance with the mandatory agriculture, fisheries and rural development financing requirement, including information on amount of agri-agra penalties collected and remitted to the implementing agencies as identified under Sections 9, 10 and 11 of this Act, to the ACPC and the Congress on a yearly basis. The BSP shall, as part of its regulatory functions, monitor the compliance by the banks with the requirements of this Act.

Section 9. Penalty Clause. — The BSP shall impose administrative sanctions and other penalties on the lending institutions for violation of any of the provisions of this Act. Penalties on noncompliance or undercompliance shall be computed at one-half of one percent (0.5%) of noncompliance or undercompliance, or at rates prescribed by the BSP Monetary Board. Upon collection of the penalties, the BSP shall remit the same to the implementing agencies as identified under Sections 9, 10 and 11 of this Act. Five percent (5%) of the penalties collected shall be retained by the BSP to cover administrative expenses and twenty percent (20%) shall be allocated as fund for agricultural- and fishery-related organizational- capacity- and institution-building programs and activities to be implemented equally by the LBP and DBP: Provided, That these programs shall result in equipping the ARBs, duly registered farmers, as well as members of their household and their MSMEs, and agrarian reform communities with the appropriate knowledge and skills to improve their welfare, competitiveness, income and productivity. For this purpose, the LBP and DBP may coordinate with and/or tap the services of qualified training providers as well as the ACPC and the Cooperative Development Authority (CDA), on the design and delivery of these capacity-building programs.

Section 10. Special Fund. — The Special Fund shall consist of penalties due from banks on their noncompliance or undercompliance with the mandatory agri-agra credit requirement under Republic Act No. 10000, collected after the effectivity of this Act, net of the five percent (5%) amount to be retained by the BSP and the twenty percent (20%) to be allocated as fund for agricultural- and fishery-related organizational- capacity- and institution-building programs and activities in accordance with Section 9 of this Act, and penalties collected under Section 9 of this Act.

The annual penalties for noncompliance and undercompliance with the mandatory agri-agra credit that are collected by the BSP under this Act shall be remitted directly to the implementing agencies, within one (1) year and six (6) months from imposition of the same, for distribution in accordance with the provisions under Sections 9, 10 and 11 of this Act.

Section 11. Use of the Special Fund. — The Special Fund under Section 10 of this Act shall be allocated to the following implementing agencies in this manner:

The LBP and DBP shall utilize the Special Fund for lending to farmers and fisheries registered in the RSBSA, farmers and fisheries cooperatives and associations, and microfinance institutions.

In the case of the DBP share, to promote financial inclusion in Islamic communities, particularly the ARBs in the Bangsamoro Region, two and one-half percent (2.5%) in the thirty-two and one-half percent (32.5%) share of DBP shall be allocated to Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP) for as long as the National Government is a majority shareholder of AAIIBP.

All loan repayments and other collections shall be used to fund credit facility of the LBP, DBP and AAIIBP under this section: Provided, That LBP, DBP and AAIIBP shall be allowed to reimburse direct costs incurred in the management of the fund, but in no case shall these reimbursements exceed two percent (2%) of the average quarterly loan balance.

Section 12. Sunset Clause. — The provisions related to the mandatory credit quota for agriculture, fisheries, and rural development under Section 6 of this Act shall cease to have effect on the tenth (10th) year from the approval of this Act: Provided, That all unutilized funds allocated for any of the implementing agencies and all loan collections shall be remitted to the General Fund.

Section 13. Congressional Oversight. — The Congressional Oversight Committee on Agricultural and Fisheries Modernization (COCAFM) shall exercise oversight functions over the implementation of this Act. In line with this, COCAFM shall conduct an independent review of the use of the Special Fund administered by the implementing agencies.

Section 14. Implementing Guidelines. — The BSP, in consultation with the LBP, DBP, AAIIBP, CDA, DA, DAR, the banking industry, microfinance organizations and other relevant agencies, shall promulgate such rules and regulations as may be necessary to implement the provisions relating to the mandatory agricultural and fisheries financing requirement, within sixty (60) working days after approval of this Act.

Section 15. Separability Clause. — If any part, section or provision of this Act is held invalid or unconstitutional, other provisions not affected thereby shall remain in force and effect.

Section 16. Repealing Clause. — Republic Act No. 10000 is hereby repealed. Any other provisions of laws, decrees, regulations, and administrative orders inconsistent with the provisions of this Act are hereby repealed or amended accordingly.

Section 17. Effectivity. — This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation.

Approved,

This Act which is a consolidatgion of Senate Bill No. 2492 and House Bill No. 6134 was passed by the Senate of the Philippines and the House of Representatives on May 23, 2022.

Approved: Lapsed into law on JUL 28 2022 without the signature of the President, in accordance with Article VI Section 27 (1) of the Constitution.

RODRIGO ROA DUTERTE
President of the Philippines