Rules for Social Reform and Poverty Act 1998

State policy and the Social Reform Agenda

The State adopts an area-based, sectoral and focused intervention so that every poor Filipino family is empowered to meet minimum basic needs across health, food and nutrition, water and environmental sanitation, income security, shelter and decent housing, peace and order, education and functional literacy, participation in governance, and family care and psycho-social integrity (Article 3).
The State actively pursues asset reform or redistribution of productive economic resources to basic sectors and adopts a system of public spending targeted towards the poor (Article 3).
The State institutionalizes and enhances the Social Reform Agenda (SRA), embodying results of consultations and summits on poverty alleviation (Article 3).
The State adopts and operationalizes nine strategies, including:
- Social reform as a continuing process through a systematic package of social interventions (Article 3(a)(1)).
- Partnership with basic sectors through appropriate and meaningful consultations and participation in governance (Article 3(a)(2)).
- Clearly defined policy programs and resource commitments to ensure accountability and transparency (Article 3(a)(3)).
- A policy environment conducive to sustainable social reform (Article 3(a)(4)).
- A multi-dimensional and cross-sectoral approach recognizing core values, cultural integrity, and spiritual diversity (Article 3(a)(5)).
- A gender-responsive approach (Article 3(a)(6)).
- Pursuit of ecological balance with basic sectors having a major stake in use, management, conservation, and protection of productive resources (Article 3(a)(7)).
- Taking into account population and development and promoting self-help and self-reliance (Article 3(a)(8)).
- SRA implementation focused on specific target areas and basic sectors (Article 3(a)(9)).
The SRA is integrated into the National Anti-Poverty Action Agenda and delivered as a multi-dimensional approach consisting of the social, economic, ecological, and governance dimensions (Article 5).
The National Anti-Poverty Action Agenda:
- Principally includes the core principles and programs of the SRA (Article 5(a)).
- Abides by social justice and addresses uncertainty faced by the poor arising from peace and order problems.
- Pursues poverty eradication as much as possible within a framework of sustainable integrated area development (Article 5).

Definitions of key terms

“Artisanal fisherfolk” refers to municipal, small-scale or subsistence fishermen using fishing gear that do not require boats or require boats below three (3) tons (Article 4(a)).
“Basic sectors” include: farmer-peasant, artisanal fisherfolk, workers in the formal sector and migrant workers, workers in the informal sector, indigenous peoples and cultural communities, women, differently-abled persons, senior citizens, victims of calamities and disasters, youth and students, children, and urban poor (Article 4(b)).
“Cooperative” means a duly registered association of at least fifteen (15) persons with a majority of which are poor, with a common bond of interest, voluntarily joining to achieve a lawful common social and economic end, organized by members who equitably contribute required share capital and accept fair share of risks and benefits (Article 4(c)).
“Capability-building” enhances the viability and sustainability of microfinance institutions through training in microfinance technologies, upgrading accounting/auditing systems, technical assistance for management information systems, monitoring of loans, and related activities; it does not refer to equity investment, seed funding, partnership seed funds, equity participation, start-up funds, or any activity that connotes infusion of capital from government or the “people’s development trust fund,” and precludes the grant of any loan or equity funds to the microfinance institution (Article 4(d)).
“Collateral-free arrangement” is a loan contracted without conventional real estate or chattel mortgage security; alternative arrangements secure repayment (Article 4(e)).
“Group character loan” is a loan contracted by a member guaranteed by a group for repayment, with the creditor able to collect from any group member, without prejudice to reimbursement rights of members who advanced payment to the actual debtor (Article 4(f)).
“Indigenous cultural communities/indigenous peoples” is as defined in Republic Act No. 8371 (“The Indigenous Peoples Rights Act of 1997”) (Article 4(g)).
“Migrant workers” is as defined in Republic Act No. 8042 (“The Migrant Workers and Overseas Filipino Act of 1995”) (Article 4(h)).
“Micro-enterprise” is any economic enterprise with capital of One Hundred Fifty Thousand Pesos (P150,000.00) and below, subject to periodic determination by the Department of Trade and Industry to reflect economic changes (Article 4(i)).
“Microfinance” is a credit and savings mobilization program exclusively for the poor to improve household asset base and expand access to savings of the poor, using viable alternative credit schemes and savings programs, including small loans, simplified loan applications, group character loans, collateral-free arrangements, alternative loan repayments, minimum savings requirements, and small denominated savers’ instruments (Article 4(j)).
“Minimum basic needs” covers survival (food and nutrition; health; water and sanitation; clothing), security (shelter; peace and order; public safety; income and livelihood), and enabling services (basic education and literacy; participation in community development; family and psycho-social care) (Article 4(k)).
“Human development index” measures social indicators of long and healthy life, knowledge and skills, and access to resources needed for decent living, using health (life expectancy at birth), knowledge (weighted adult literacy and enrollment rates), and real income per capita adjusted for poverty considerations (Article 4(l)).
“Non-governmental organizations” are duly registered non-stock, non-profit organizations focusing on upliftment of basic or disadvantaged sectors by advocacy, training, community organizing, research, access to resources, and similar activities (Article 4(m)).
“People’s organization” is a self-help group of basic or disadvantaged sectors with members having a common bond of interest who voluntarily join to achieve a lawful common social or economic end (Article 4(n).
“Poor” are individuals and families whose income falls below the poverty threshold defined by NEDA or cannot in a sustained manner afford their minimum basic needs of food, health, education, housing, and other essential amenities of life (Article 4(o)).
“Poverty alleviation” is reduction of absolute poverty and relative poverty (Article 4(p)).
“Absolute poverty” is the condition of the household below the food threshold level (Article 4(q)).
“Relative poverty” is the gap between rich and poor (Article 4(r)).
“Social reform” is the continuing process addressing basic inequities through a systematic, unified and coordinated delivery of socioeconomic programs or packages (Article 4(s)).
“Small Savers Instrument (SSI)” is an evidence of indebtedness of the Government of the Republic of the Philippines in small denominations, sold at discount from redemption value, payable to bearer, redeemable on demand according to the schedule printed on the instrument, with a discount lower than full stated rate if not held to maturity; resources generated are used primarily for micro-credit for the poor; SSIs are not eligible as legal reserve of banks and legal reserves of insurance companies operating in the Philippines (Article 4(t)).
“Urban poor” are individuals or families in urban centers and urbanizing areas whose income or combined household income falls below the poverty threshold defined by NEDA or cannot in a sustained manner afford their minimum basic needs (Article 4(u)).
“Workers in the formal sector” are workers in registered business enterprises paid wages and other compensation (Article 4(v)).
“Workers in the informal sector” are poor individuals operating very small scale businesses not registered with any national government agency, and workers in such enterprises paid subsistence-level wages or other forms of compensation (Article 4(w)).
“Youth” refers to persons fifteen (15) to thirty (30) years old (Article 4(x)).

National Anti-Poverty Commission creation and structure

The National Anti-Poverty Commission (NAPC) is created under the Office of the President to coordinate and advise on implementing the SRA (Article 6).
The Presidential Commission to Fight Poverty (PCFP), the Social Reform Council (SRC), and the Presidential Council for Countryside Development (PCCD) are abolished, and the NAPC assumes their powers and functions as successor-in-interest (Article 6).
The NAPC is governed by principles including:
- Incorporating the SRA into development plans at national, regional, sub-regional, and local levels (Article 7(a)).
- Efficiency via strengthening/streamlining processes and reducing duplication (Article 7(b)).
- Coordinating and synchronizing social reform and poverty alleviation programs (Article 7(c)).
- Policy oversight to ensure attainment of goals (Article 7(d)).
- Strengthening local government units to operationalize the SRA (Article 7(e)).
- Institutionalizing basic sectoral and NGO participation in planning, decision-making, implementation, monitoring, and evaluation (Article 7(f)).
- Ensuring adequate, efficient, and prompt delivery of basic services to the poor (Article 7(g)).
- Enjoining government financial institutions to open credit and savings windows for the poor and advocating similar creation in private banking institutions (Article 7(h)).
The President of the Philippines chairs the NAPC and appoints a Lead Convenor from government or private sector as head of the NAPC Secretariat with the rank of a Cabinet Secretary (Article 8).
The President appoints an Officer-in-Charge if the Lead Convenor is unable to perform responsibilities for any period of time (Article 8).
The NAPC has Vice-Chairpersons:
- One Vice-Chairperson for the Government Sector designated by the President (Article 8).
- One Vice-Chairperson for the Basic Sectors elected among basic sector representatives by simple majority vote and confirmed by the President (Article 8).
The NAPC membership includes specified officials and sector representatives, including Secretaries of relevant departments, the Director-General of NEDA, the Chairperson of the Board of PCFC, the Chairperson of the Presidential Commission for the Urban Poor, presidents/representatives of leagues and sector groups, plus representatives of farmers and landless rural workers, artisanal fisherfolk, urban poor, indigenous cultural communities/indigenous peoples, workers (formal and migrant; informal), women, youth and students, persons with disabilities, victims of disasters and calamities, senior citizens, NGOs, children, and cooperatives (Article 8(a)).

Sectoral councils, nominations, recall, and terms

Sectoral councils must be formed through direct nomination of qualified individuals by organized groups belonging to each sector to the Office of the President within a definite period, unless the sector and head of the coordinating government department/agency agree on a different procedure (Article 9).
After receiving nominations, a shortlist of twenty-five (25) names is submitted to the President (Article 9).
After one week from the submission deadline, the President appoints fifteen (15) members for each of the fourteen (14) sectoral councils, considering geographical and sectoral concerns (Article 9).
Each Sectoral Council determines criteria for selecting its sectoral representatives and nominates three (3) candidates in accordance with those criteria (Article 9).
If nominees already submit three (3) candidates on basis of agreed criteria to the President, the President considers the nominees without prejudice to subsequent appointment of the final fifteen (15) council members (Article 9).
Sectoral Councils monitor performance of sectoral representatives and their alternates/substitutes and initiate recall and/or exact accountability when necessary (Article 9).
Sectoral Councils have power to recall their sectoral representative for loss of confidence (Article 9).
Recall is initiated by a Sectoral Council upon majority vote at a special meeting, and a vote of 2/3 of the total members is sufficient to recall (Article 9).
Sectoral Councils may choose a different recall process; the council must submit recall procedures and accountability mechanisms to the President for approval within thirty (30) days after appointment and constitution, and if the President does not comment within thirty (30) days from receipt, the process is considered approved (Article 9).

Sectoral representatives’ appointment cycle

Sectoral councils nominate three (3) nominees from each sector within six (6) months after the effectivity of the implementing rules and regulations of the Act, and thereafter every three (3) years and in case of vacancy (Article 10).
The President appoints sectoral representatives from the submitted list within thirty (30) days after submission of the nominees (Article 10).
Sectoral representatives serve a term of three (3) years without reappointment (Article 10).
Appointment to any vacancy for basic sector representatives is only for the predecessor’s unexpired term (Article 10).

NAPC powers, Secretariat, and PDTF establishment

The NAPC coordinates national and local government agencies and the private sector to ensure full implementation of social reform and poverty alleviation programs (Article 11(a)).
The NAPC coordinates with local government units in formulation of social reform and poverty alleviation programs for their areas in conformity with the National Anti-Poverty Action Agenda (Article 11(b)).
The NAPC recommends policy and other measures to ensure responsive implementation of SRA commitments (Article 11(c)).
The NAPC ensures meaningful representation and active participation of basic sectors (Article 11(d)).
The NAPC oversees, monitors, and recommends measures to ensure effective formulation, implementation, and evaluation of policies, programs, and resource allocation/management of social reform and poverty alleviation programs (Article 11(e)).
The NAPC advocates mobilization of funds by national and local governments to finance social reform and poverty alleviation programs and capability building activities of people’s organizations (Article 11(f)).
The NAPC provides financial and non-financial incentives to local government units with counterpart resources for implementation (Article 11(g)).
The NAPC submits an annual report to Congress including operations/programs/project implementation, financial status, and other relevant data shown by the basic reform indicator (Article 11(h)).
The NAPC is supported by a Secretariat headed by the Lead Convenor, which provides technical and administrative support (Article 12(a)).
The Secretariat is formed by unification of the secretariats of the abolished PCFP, SRC, and PCCD (Article 12(a)).
The Office of the President finalizes the NAPC organizational plan, including plantilla (Article 12).
Personnel unable to be absorbed by the NAPC Secretariat receive separation pay of one-and-a-half (1 1/2) months for every year of service plus other benefits under existing retirement laws, at the option of the personnel concerned; service years covered are those under the three abolished commissions/councils (Article 12).
The People’s Development Trust Fund (PDTF) is established and monitored by the NAPC (Article 13(a)).
The PDTF has an initial Trust Fund amount of Four Billion and Five Hundred Million Pesos (P 4,500,000,000.00) funded from:
- earnings of PAGCOR,
- appropriations by Congress,
- voluntary contributions,
- grants and gifts from local and foreign sources accepted or decided by the NAPC (Article 13).
Additional amounts added to the Trust Fund form part of the corpus, unless the donor/contributor/grantor expressly provides that the amount be included in the disbursible portion (Article 13).
The President assigns administration of the PDTF to an existing government department or agency based on expertise, organizational capability, and orientation/focus; the NAPC’s role is limited to monitoring utilization of PDTF (Article 13).
Only the fruits of the PDTF are used for the purposes provided; any undisbursed fruits for the preceding year become part of the disbursible portion in the following year (Article 13).
For monitoring PDTF earnings, the NAPC shall:
- source funds for establishment and augmentation of the Trust Fund (Article 13(b)(1)),
- recommend accreditation of organizations/institutions as resource partners for institutional development and capability building activities of accredited organizations and beneficiaries of microfinance and micro-enterprise programs (Article 13(b)(2)),
- ensure validation and monitoring for funded institutional development and capability building beneficiaries (Article 13(b)(3)),
- promote research and development on livelihood and microfinance technology and publications/communications programs assisting poor beneficiaries (Article 13(b)(4)).

PDTF purposes and eligible access channels

The earnings of the PDTF are utilized for:
- consultancy and training services for microfinance institutions and beneficiaries, including support services, social and financial preparation, plan/program preparation and fund sourcing/assistance, and credit/savings monitoring and evaluation mechanisms (Article 14(a)(1)),
- scholarships or training grants for microfinance staff and officers and selected beneficiaries (Article 14(a)(2)),
- community organizing for microfinance, livelihood, and micro-enterprise training (Article 14(a)(3)),
- livelihood/micro-enterprise feasibility studies and researches (Article 14(a)(4)),
- savings mobilization and incentive programs and other similar activities (Article 14(a)(5)),
- information and communication systems such as baseline surveys, development monitoring systems, socioeconomic mapping surveys, and organizational assessments (Article 14(a)(6)),
- legal and other management support services such as registration, documentation, contract review and enforcement, financial audit, and operational assessment (Article 14(a)(7)),
- information dissemination of microfinance technology (Article 14(a)(8)),
- other microfinance-support activities as approved by the designated PDTF-administering agency (Article 14(a)(9)).
The PDTF may be accessed by registered microfinance organizations engaged in providing micro-enterprise programs to their constituents, with the restriction that the PDTF shall not be used by LGUs for personal services and maintenance and other operating expenses (Article 14(a)).
The PDTF may be accessed by local government units undertaking self-help projects where at least twenty-five percent (25%) of total PDTF earnings is used exclusively for provision of materials and technical services (Article 14(b)).

LGU role and local anti-poverty action agenda

LGUs, through their respective local development councils of the province, city, municipality, or barangay, formulate, implement, monitor, and evaluate the National Anti-Poverty Action Agenda within their jurisdictions (Article 15).
LGUs must:
- identify the poor using indicators including minimum basic needs approach and the human development index, plus location, occupation, nature of employment, and primary resource base, and formulate a provincial/city/municipal anti-poverty action agenda (Article 15(a)),
- identify and source funding for specific social reform and poverty alleviation projects (Article 15(b)),
- coordinate, monitor, and evaluate LGU efforts with the private sector on planning and implementation of local programs (Article 15(c)),
- coordinate and submit progress reports to the NAPC regarding local action programs (Article 15(d)).
LGU powers under the Local Government Code are not diminished by this Rule (Article 15).

Microfinance program, PCFC role, and credit windows

The SRA flagship program on credit is integrated, adopted, and enhanced using thrusts that include:
- a policy environment supportive of savings generation for basic sector initiatives dedicated to serving the poor through microfinance (Article 16(a)),
- rationalization of existing government programs for credit and guarantee (Article 16(b)),
- utilization of existing government financial entities to provide microfinance products/services for the poor (Article 16(c)),
- promotion of mechanisms including indigenous microfinance practices (Article 16(d)).
The People’s Credit and Finance Corporation (PCFC) is the vehicle for delivery of microfinance services for the exclusive use of the poor and serves as the lead government entity to mobilize financial resources from local and international funding sources for microfinance services for the poor (Article 17).
The PCFC’s creation is tied to Administrative Order No. 148 and Memorandum Order No. 261 (Article 17).
The President must take measures to enable amendment of the PCFC Articles of Incorporation to:
- increase authorized capital stock from One Hundred Million Pesos (P 100,000,000.00) to Two Billion Pesos (P 2,000,000,000.00) divided into twenty million common shares with par value One Hundred Pesos (P 100.00) per share (Article 18(a)),
- increase subscribed capital stock from One Hundred Million Pesos (P 100,000,000.00) to Six Hundred Million Pesos (P 600,000,000.00) with the National Government subscribing the difference of Five Hundred Million Pesos (P500,000,000.00) (Article 18(b)),
- increase initial paid-up capital from One Hundred Million Pesos (P 100,000,000.00) to Two Hundred Fifty Million Pesos (P 250,000,000.00), then to a total of Six Hundred Million Pesos (P 600,000,000.00) such that after four (4) years subscribed capital is fully paid up (Article 18(c)).
PCFC paid-up capital funding schedule requires, for the first year: P150,000,000.00, second year: P150,000,000.00, third year: P100,000,000.00, and fourth year: P100,000,000.00, with appropriations sourced from the National Government share in PAGCOR earnings as provided for under Article 21 (Article 18(c)).
Existing government financial institutions must provide savings and credit needs of the poor and must coordinate with NAPC and PCFC to set up special credit windows and other arrangements, including servicing Small Savers Instruments (SSIs), to promote the microfinance program (Article 19(a)).
Named GFIs include Land Bank of the Philippines, Philippine Postal Bank, Al Amanah Bank, and Development Bank of the Philippines (Article 19(a)).
Private financing institutions may provide savings and credit requirements of the poor by setting up similar credit windows and arrangements to promote the savings component (Article 19(b)).
Special credit windows for the poor must, as far as practicable, include allocation for basic sectors, particularly those in rural areas, agrarian reform communities, and women in the countryside (Article 19(c)).
If PCFC majority issued voting stock passes to private investors exclusively qualified as non-governmental organizations, people’s organizations, and cooperatives, stockholders must register revised Articles of Incorporation and By-laws with the Securities and Exchange Commission; PCFC becomes privately owned subject to laws and regulations for private corporations (Article 20(a)).
The Chairman of PCFC may still be a member of the NAPC after privatization, provided PCFC continues its main purpose of providing savings and credit needs of the poor (Article 20(a)).

NAPC and PDTF appropriations

An initial operating fund of One Hundred Million Pesos (P 100,000,000.00) is appropriated as additional to unutilized funds of rationalized commissions/councils, sourced from the President’s Contingent Fund, managed by the NAPC, with subsequent years covered by annual appropriations (Article 21(a)(1)).
An aggregate Four Billion and Five Hundred Million Pesos (P 4,500,000,000.00) for ten (10) years is appropriated for the PDTF from the National Government share in PAGCOR earnings, distributed as:
- first year: P 350,000,000.00,
- second year: P 350,000,000.00,
- third year: P 400,000,000.00,
- fourth year: P 400,000,000.00,
- fifth year and every year thereafter until the tenth year: P 500,000,000.00 annually (Article 21(a)(2)).
An aggregate Five Hundred Million Pesos (P500,000,000.00) for four (4) years is appropriated for increase in PCFC capitalization from the National Government share in PAGCOR earnings, triggered at the time PCFC capitalization increase under Section 15 of this Act has been effected, and distributed as:
- first year: P150,000,000.00,
- second year: P150,000,000.00,
- third year: P100,000,000.00,
- fourth year: P100,000,000.00 (Article 21(a)(3)).

Transitory, transfer, implementing rules, repeal, separability

Until NAPC members are duly appointed or designated, the Social Reform Council (SRC) and its representatives temporarily exercise NAPC powers and assume NAPC duties (Article 22(a)).
If some NAPC members are not appointed/designated, functioning NAPC members constitute more than one-half (1/2) of total NAPC membership (Article 22(a)).
Assets and liabilities of PCFP, SRC, and PCCD are transferred to the NAPC (Article 23(a)).
The Office of the President, in consultation with the NAPC, issues, modifies, and/or revokes the implementing rules and regulations (Article 24(a)).
All laws, executive orders, rules, regulations, or parts inconsistent with the Act are repealed, amended, or modified unless expressly provided in subsequent general or special laws; all previous Administrative Orders referring to the NAPC are modified accordingly (Article 25(a)).
If any provision of the Rules is held unconstitutional or invalid, unaffected