Social Reform and Poverty Alleviation Act

Policy framework for poverty alleviation

The State must adopt an area-based, sectoral and focused intervention to poverty alleviation 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.
The State must actively pursue asset reform or redistribution of productive economic resources to the basic sectors and must adopt a system of public spending targeted towards the poor.
The State must institutionalize and enhance the Social Reform Agenda (SRA) through consultations and summits on poverty alleviation.
The SRA must operate using principles and strategies including: social reform as a continuing process; enhancement in equal partnership with basic sectors through meaningful consultations; clearly defined policy/program/resource commitments to ensure accountability and transparency; pursuit of a policy environment conducive to sustainable social reform; a gender-responsive approach; promotion of ecological balance; and taking into account the principle and interrelationship of population and development to promote self-help and self-reliance.
The SRA implementation must be focused on specific target areas and basic sectors.

Definitions used throughout the Act

“Artisanal fisherfolk” refers to municipal, small scale or subsistence fishermen using fishing gear that does not require boats or requires boats below three (3) tons.
“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.
“Cooperative” is a duly registered association of at least fifteen (15) persons, majority of which are poor, with a common bond of interest, organized by members contributing the required share capital and accepting a fair share of risks and benefits.
“Capability building” means enhancing viability and sustainability of microfinance institutions through activities like training in microfinance technologies, upgrading accounting/auditing, technical assistance for management information systems, and monitoring of loans and related activities—excluding equity investments, seed funding/partnership seed funds, equity participation, start-up funds, infusion of government funds (or the people’s development trust fund) to microfinance institutions, and excluding any grant of a loan or equity funds to the microfinance institution.
“Collateral-free arrangement” is a loan without conventional real estate or chattel mortgage security in favor of the creditor, using alternative arrangements accepted to ensure repayment.
“Group character loan” is a loan contracted by a member and guaranteed by a group of persons; the creditor may collect from any guarantor member without prejudice to reimbursement rights among members who advanced payment for the actual debtor.
“Indigenous cultural communities/indigenous peoples” are defined by Republic Act No. 8371, the “Indigenous Peoples Rights Act of 1997.”
“Migrant workers” are defined by Republic Act No. 8042, the “Migrant Workers and Overseas Filipino Act of 1995.”
“Micro-enterprise” means an economic enterprise with capital of PHP 150,000 and below, subject to periodic determination by the Department of Trade and Industry to reflect economic changes.
“Microfinance” is a credit and savings mobilization program exclusively for the poor to improve household asset base and expand access to savings, using alternative credit schemes including small loans, simplified loan application, group character loans, collateral-free arrangements, alternative loan repayments, minimum savings requirements, and small denominated savers’ instruments.
“Minimum basic needs” cover survival (food and nutrition; health; water and sanitation; clothing), security (shelter; peace and order; public safety; income and livelihood), and enabling (basic education and literacy; participation in community development; family and psycho-social care).
“Human development index” measures performance based on social indicators tied to long and healthy life, knowledge and skills, and resources for a decent standard of living, using outcomes including life expectancy at birth, adult literacy and enrollment rates (weighted average), and real income per capita adjusted for poverty considerations.
“Nongovernment organizations” are duly registered nonstock, nonprofit organizations focusing on upliftment of basic/disadvantaged sectors through advocacy, training, community organizing, research, access to resources, and similar activities.
“People’s organization” is a self-help group of basic sectors and/or disadvantaged groups with members having common bond of interest who voluntarily join for a lawful common social or economic end.
“Poor” refers to individuals and families whose income falls below the poverty threshold defined by the National Economic and Development Authority and/or cannot afford in a sustained manner to provide minimum basic needs of food, health, education, housing and other essential amenities of life.
“Poverty alleviation” means reduction of both absolute poverty and relative poverty.
“Absolute poverty” is a household below the food threshold level.
“Relative poverty” is the gap between rich and poor.
“Social reform” is a continuing process addressing basic inequities through a systematic, unified, and coordinated delivery of socioeconomic programs or packages.
“Small Savers Instrument (SSI)” is an evidence of indebtedness of the Government of the Republic of the Philippines in small denominations sold at a discount from redemption value, payable to bearer and redeemable on demand per a printed schedule; it uses discount lower than the full stated rate if not held to maturity; resources generated are used primarily for micro-credit for the poor; and SSIs are not eligible as legal reserve of banks or legal reserves prescribed of insurance companies operating in the Philippines.
“Urban poor” are individuals or families in urban centers and urbanizing areas whose income (or combined household income) is below the poverty threshold defined by the National Economic and Development Authority and/or cannot afford in a sustained manner minimum basic needs of food, health, education, housing and other essential amenities of life.
“Workers in the formal sector” are workers in registered business enterprises who sell services for wages and other compensation.
“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 at subsistence level wages or other forms of compensation.
“Youth” means persons fifteen (15) to thirty (30) years old.

Social Reform Agenda integration and flagship programs

The National Anti-Poverty Action Agenda must include the core principles and programs of the Social Reform Agenda (SRA) and must apply a multi-dimensional approach to poverty through social, economic, ecological, and governance reforms.
The social dimension reforms must ensure equitable control and access to social services and facilities such as education, health, housing, and other basic services enabling citizens to meet basic human needs and live decent lives.
The economic dimension reforms must address inequities in ownership, distribution, management, and control of natural and man-made resources from which people earn a living or increase labor fruits.
The ecological dimension reforms must ensure effective and sustainable utilization of natural and ecological resource base to increase participation and social acceptability of basic sectors in conservation, management, and development.
The governance dimension reforms must enable basic sectors to participate in decision-making and management processes affecting their rights, interests, and welfare.
The SRA must focus on sector-specific flagship programs for: farmers and landless rural workers (agricultural development); fisherfolk (fisheries and aquatic resources conservation, management and development); indigenous peoples and indigenous communities (respect, protection and management of ancestral domains); workers in the informal sector (workers’ welfare and protection); urban poor (socialized housing); and members of other disadvantaged groups including women, children, youth, persons with disabilities, the elderly, and victims of natural and man-made calamities (Comprehensive Integrated Delivery of Social Services (CIDSS)).
The SRA must also institute cross-sectoral flagships: institution-building and effective participation in governance; livelihood programs; expansion of micro-credit/microfinance services and capability building; and infrastructure buildup and development.

Creation, abolition, composition, and governance of NAPC

The Act creates the National Anti-Poverty Commission (NAPC) under the Office of the President as the coordinating and advisory body for implementing the SRA.
The Act abolishes the Presidential Commission to Fight Poverty (PCFP), the Social Reform Council (SRC), and the Presidential Council for Countryside Development (PCCD), and provides that the NAPC exercises their powers and functions.
The NAPC is the successor-in-interest of the three abolished agencies.
The NAPC’s creation and operationalization must follow principles including incorporation of the SRA into national/regional/sub-regional/local development planning; efficiency by strengthening/streamlining existing mechanisms and reducing duplication; coordination and synchronization among national agencies; policy oversight for attainment of goals; strengthening local government units for SRA operationalization; institutionalization of basic sector and NGO participation; ensuring adequate/efficient/prompt delivery of basic services; and enjoining government financial institutions to open credit and savings windows for the poor and advocating similar private windows.
The President serves as Chairperson of the NAPC and appoints the Lead Convenor as head of the NAPC Secretariat with the rank of Cabinet Secretary.
The NAPC must have a vice chairperson for the government sector designated by the President and a vice chairperson for the basic sectors elected among basic sector representatives.
The NAPC includes members consisting of: heads of designated government bodies; presidents of named leagues of local government units (League of Provinces; League of Cities; League of Municipalities; Liga ng mga Barangay); and sectoral representatives from basic sectors enumerated in the Act.
Sectoral councils must nominate three (3) nominees from each sector within six (6) months after effectivity of the IRR, and every three (3) years thereafter and upon vacancy; the President must appoint the representatives within thirty (30) days after submission of the nominees list.
Sectoral representatives serve a term of three (3) years without reappointment, and appointments to vacancies for basic sector representatives are only for the unexpired term.
The IRR must include guidelines for sectoral council formation, nomination process, recall procedures, and accountability mechanisms for sectoral representatives.
The NAPC must establish its principal office in Metro Manila and may establish branches as deemed necessary.

NAPC Secretariat and program continuity

The NAPC must be supported by a Secretariat headed by the Lead Convenor to provide technical and administrative support.
The Secretariat must be formed by unifying the secretariats of the PCFP, SRC, and PCCD.
Within three (3) months from the Act’s effectivity, the Office of the President must finalize the NAPC organizational plan.
All accredited organizations under the three unified commissions and councils are automatically accredited under the NAPC until additional accreditation requirements are provided by the NAPC.

People’s Development Trust Fund (PDTF)

The Act establishes the People’s Development Trust Fund (PDTF), monitored by the NAPC.
The Trust Fund must be PHP 4,500,000,000, funded from earnings of the PAGCOR in addition to appropriations by Congress and voluntary contributions and grants/gifts from local and foreign sources as accepted or decided by the NAPC.
Any additional amounts 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.
Only the fruits of the PDTF may be used for purposes under the Act.
Undisbursed fruits for the preceding year must form part of the disbursible portion in the following year.
The President must assign administration of the Trust Fund to an existing government department or agency based on expertise, organizational capability, and orientation/focus.
The NAPC must be limited to monitoring utilization of the PDTF, while designated government departments/agencies directly administer utilization of PDTF earnings.
To monitor PDTF earnings, the NAPC must source funds for establishment and augmentation; recommend accreditation of organizations/institutions as resource partners for institutional development and capability building for accredited organizations and beneficiaries of microfinance and micro-enterprise programs; ensure validation and monitoring activities for funded projects/programs/beneficiaries; and promote research and development on livelihood and microfinance technology and communications programs assisting poor beneficiaries.
The Act enumerates PDTF earnings utilization purposes including microfinance institutions’ consultancy/training, scholarships/training grants for microfinance staff and selected beneficiaries, community organizing for microfinance/livelihood/training, feasibility studies and research, savings mobilization and incentive programs, information and communication systems (including baseline surveys and socioeconomic mapping surveys), legal/management support services, information dissemination of microfinance technology, and other activities approved by the administering agency.
The Act allows access to the PDTF by: registered microfinance organizations engaged in micro-enterprise services for the poor to enable viability and sustainability; LGUs providing microfinance and micro-enterprise programs to constituents with the restriction that PDTF cannot be used by LGUs for personal services and maintenance and other operating expenses; and LGUs 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.

LGU role in local anti-poverty action

LGUs, through local development councils at province, city, municipality, or barangay levels, must be responsible for formulation, implementation, monitoring, and evaluation of the National Anti-Poverty Action Agenda within their jurisdictions.
LGUs must identify the poor using indicators including minimum basic needs approach and human development index, plus location, occupation, nature of employment, and primary resource base, and must formulate provincial/city/municipality anti-poverty action agendas.
LGUs must identify and source funding for specific social reform and poverty alleviation projects.
LGUs must coordinate, monitor, and evaluate local efforts with the private sector for planning and implementation of local anti-poverty programs.
LGUs must coordinate and submit progress reports to the NAPC regarding local action programs.
The Act preserves LGUs’ powers under the Local Government Code.

Microfinance program integration and PCFC role

The Act integrates and enhances the Social Reform Agenda’s flagship program on credit through thrusts focused on policy environment for savings generation for poor-serving basic sector initiatives, rationalization of existing credit and guarantee programs, utilization of existing government financial entities for microfinance products/services, and promotion of necessary mechanisms including indigenous microfinance practices.
The People’s Credit and Finance Corporation (PCFC) is designated as the lead government entity and the vehicle for delivery of microfinance services for the exclusive use of the poor.
The PCFC must be government-controlled and registered with the Securities and Exchange Commission, and is created in accordance with Administrative Order No. 148 and Memorandum Order No. 261.
The PCFC must mobilize financial resources from local and international funding sources for microfinance services for the exclusive use of the poor.

PCFC capitalization increase

The President must take measures to enable amendments to the PCFC Articles of Incorporation to increase authorized capital stock from PHP 100,000,000 to PHP 2,000,000,000, divided into 20,000,000 common shares with par value of PHP 100 per share.
The President must enable increase of subscribed capital stock from PHP 100,000,000 to PHP 600,000,000, with the national government subscribing the difference of PHP 500,000,000.
The President must enable increase of initial paid-up capital from PHP 100,000,000 to PHP 250,000,000, and subsequently to PHP 600,000,000, such that the subscribed capital becomes fully paid-up at the end of a four (4) year period.
The paid-up capital increases must be funded per year with appropriations: PHP 150,000,000 in the first year, PHP 150,000,000 in the second year, PHP 100,000,000 in the third year, and PHP 100,000,000 in the fourth year.
Appropriations for additional paid-up capital must be sourced from the national government share in PAGCOR earnings in the manner provided under the Act’s appropriations provision.

Special credit windows and SSI servicing

Existing government financial institutions must provide savings and credit needs of the poor and must coordinate with NAPC and PCFC in setting up special credit windows and other arrangements, including servicing of Small Savers Instruments (SSIs), to promote the Act’s microfinance program.
The Act mandates coordination for special credit windows by specific GFIs including Land Bank of the Philippines, Philippine Postal Bank, Al Amanah Bank, and Development Bank of the Philippines.
Private financing institutions may provide savings and credit requirements of the poor through similar credit windows and arrangements to promote the microfinance program.
Special credit windows for the poor must include an allocation for basic sectors, particularly those living in rural areas, agrarian reform communities, and women in the countryside, as far as practicable.

PCFC privatization and regulatory treatment

If ownership of the majority of PCFC’s issued voting stocks passes to private investors consisting exclusively of nongovernment organizations, people’s organizations and cooperatives, stockholders must register with the Securities and Exchange Commission revised Articles of Incorporation and By-laws.
After registration, PCFC must be treated as a privately organized entity subject to laws and regulations generally applied to private corporations.
The PCFC chairman may remain a member of NAPC upon privatization provided PCFC continues its main purpose of providing for the savings and credit needs of the poor.

Appropriations for NAPC and PDTF

PHP 100,000,000 is appropriated as the initial operating fund for NAPC in addition to unutilized funds of the rationalized commission and councils, sourced from the President’s Contingent Fund.
Additional amounts necessary to implement the Act must be included in annual appropriations in subsequent years, under NAPC management.
PHP 4,500,000,000 for ten (10) years is appropriated for establishment of the PDTF from the national government share in PAGCOR earnings, with the following annual amounts: PHP 350,000,000 in the first year; PHP 350,000,000 in the second year; PHP 400,000,000 in the third year; PHP 400,000,000 in the fourth year; and PHP 500,000,000 annually in the fifth year and every year thereafter until the tenth year.
PHP 500,000,000 for four (4) years is appropriated to increase PCFC capitalization from the national government share in PAGCOR earnings, with the following annual amounts: PHP 150,000,000 in the first year; PHP 150,000,000 in the second year; PHP 100,000,000 in the third year; and PHP 100,000,000 in the fourth year.
The increase capitalization appropriation applies at the time the capitalization increase in the manner provided under the Act’s capitalization provision has been effected.

Transitory, repeal, and separability rules

The SRC and its representatives must, in temporary capacity, exercise NAPC powers and assume NAPC duties until NAPC members are duly appointed or designated.
PCFP, SRC, and PCCD assets, liabilities, and personnel are transferred to NAPC.
Personnel who cannot be absorbed by NAPC are entitled to separation pay of one and one-half (1 1/2) months for every year of service and other benefits under existing retirement laws, at the option of the personnel concerned.
All inconsistent laws, executive orders, rules and regulations, or parts thereof are repealed, amended, or modified accordingly.
The Act may not be repealed, amended, or modified unless expressly provided in subsequent general or special laws.
If any provision is held invalid or unconstitutional, the remaining provisions continue in full force and effect.