RA 11901 is titled the “Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022.” It declares State policy to promote inclusive rural development by improving rural communities’ and agricultural/fisheries households’ access to financial services and programs that increase productivity, enhance market efficiency, modernize agriculture/fisheries, and improve beneficiaries’ welfare through active participation of banking institutions.

It refers to loans and investments to finance activities that enhance productivity and increase income of agricultural and fisheries households, including (among others) activities under the Agri-Fisheries Modernization Act framework, off-farm/fishery entrepreneurship, agricultural mechanization/modernization, agri-tourism, ESG/green projects, digitalization/automation, acquisition of land authorized under the Agrarian Reform Code, marketing/processing/distribution/shipping/logistics, storage, public rural infrastructure, health/water/sanitation projects, livelihood and skills enhancement, and other analogous activities.

An ARB is a farmer granted land under PD 27, RA 9700 (CARPER), and related agrarian reform benefits, and a regular farmworker who is landless, regardless of tenurial arrangement, who benefited from land redistribution. It also includes registered ARB cooperatives/associations/other farm groups endorsed by the nearest DAR and ARB households.

RSBSA is an electronic compilation of basic information on farmers, farmworkers, and fisherfolk, including profiles and additional data such as farm parcels and fisheries, used for policy formulation and planning. Under RA 11901, the LBP and DBP may use the Special Fund for lending to farmers and fisheries registered in the RSBSA.

Eligible are the beneficiaries named in the Act (e.g., farmers, fisherfolk, ARBs/ARCs, settlers, agricultural lessees, amortizing owners, farmworkers, fishworkers, owner-cultivators, compact farmers, tenant farmers, household MSMEs, and their cooperatives/organizations/associations in good standing). Financing is based on feasibility, paying capacity, production estimates, and/or securities/assets they can provide; capitalization is not a stated basis for eligibility.

All banking institutions (government or private), except newly established banks for five (5) years from commencement of operations, must set aside a mandatory agricultural and fisheries financing requirement of at least twenty-five percent (25%) of their total loanable funds.

Total loanable funds are defined by the BSP. For the first year of effectivity, computation starts from 20 April 2010 (the effectivity of RA 10000), after which subsequent years use funds generated starting from the second year of RA 11901’s effectivity.

Examples include: (1) investing in debt securities (including those issued by DBP/LBP) where proceeds fund Section 4 activities; (2) opening deposit accounts and/or investing in fixed term deposit products with RFIs; (3) rediscounting eligible paper covering agriculture/fisheries/agrarian reform credits; (4) investing in shares of stock of RFIs or lending wholesale to RFIs (wholesale loans credited as compliance only for the wholesale lender); (5) lending for construction/upgrading of infrastructure (farm-to-market roads, post-harvest facilities, public rural infrastructure benefiting rural communities); (6) lending to agri-businesses with supply-chain arrangements directly with rural beneficiaries; (7) undertaking Agricultural Value Chain Financing (AVCF); (8) engaging in sustainable finance; and others.

The Act requires that loans/investments counted as compliance must not be funded by proceeds from the issuance of debt securities and/or deposits/lending of other banks that were already counted as compliance. It also provides a special counting multiplier for loans generally benefiting ARBs, ARCs, or other priority sectors as may be determined by the ACPC.

Loans that generally benefit ARBs, ARCs, or other priority sectors (as determined by ACPC) shall be counted at ten times (10x) their outstanding amount (or as otherwise prescribed by ACPC) for purposes of determining compliance with the mandatory agricultural and fisheries financing requirement. ACPC also reviews adequacy of compliance modes after implementation and prescribes related rules within the Act’s framework.

BSP shall impose administrative sanctions and other penalties. Penalties for noncompliance or undercompliance are computed at one-half of one percent (0.5%) of the amount of noncompliance or undercompliance, or at rates prescribed by the BSP Monetary Board.

From penalties collected, five percent (5%) is retained by BSP for administrative expenses. Twenty percent (20%) is allocated as a fund for agricultural- and fishery-related organizational, capacity- and institution-building programs equally implemented by LBP and DBP.

The Special Fund consists of penalties due from banks on noncompliance/undercompliance with RA 10000 mandatory agri-agra credit requirements collected after RA 11901’s effectivity (net of BSP retention and the 20% capacity-building allocation), plus penalties collected under Section 9. Allocation: 35% to DAR for titling and parcelization of CLOA-covered landholdings; 65% becomes a credit facility with minimal interest rates and minimum collateral requirements equally managed by LBP and DBP with their geographic coverage.

In the DBP share (within the 32.5% portion stated), two and one-half percent (2.5%) in the 32.5% DBP share shall be allocated to Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP) as long as the National Government is a majority shareholder of AAIIBP.

BSP must furnish annual reports on compliance with the mandatory requirement, including info on amounts of agri-agra penalties collected and remitted, to the ACPC and Congress. BSP also monitors compliance. Oversight is exercised by the Congressional Oversight Committee on Agricultural and Fisheries Modernization (COCAFM), which conducts an independent review of use of the Special Fund.

The mandatory credit quota provisions cease to have effect on the 10th year from approval of the Act (sunset clause). All unutilized funds allocated for any implementing agency and all loan collections must be remitted to the General Fund.

BSP, in consultation with LBP, DBP, AAIIBP, CDA, DA, DAR, the banking industry, microfinance organizations, and other relevant agencies, must promulgate rules and regulations necessary to implement the Act within sixty (60) working days after approval.