Rural beneficiaries covered

Section 5 requires financing under Section 4 to be extended to rural community beneficiaries, or to cooperatives, associations, MSMEs, or organizations in good standing of those beneficiaries.
Section 5 provides that eligibility for financing is based on project feasibility, paying capacity, estimated production, securities they can provide, and assets that may be acquired from loan and investment proceeds.
Section 4 identifies the rural community beneficiaries, including farmers, fisherfolk, ARBs, ARCs, settlers, agricultural lessees, amortizing owners, farmworkers, fishworkers, owner-cultivators, compact farmers, tenant farmers, members of their household, and their MSMEs.
Section 4 also includes farmer’s and fisherfolk’s cooperatives, organizations, and associations, through government and private banking institutions.

Definitions governing the Act

Section 3(a) defines Agrarian Reform Beneficiary (ARB) to include farmers granted land under Presidential Decree No. 27, Republic Act No. 9700, and the Comprehensive Agrarian Reform Law of 1988, and also includes landless regular farmworkers under specified arrangements and support services; it also includes registered ARBs’ cooperatives/associations/other farm groups endorsed by the nearest DAR office, and ARB households.
Section 3(b) defines Agrarian Reform Community (ARC) as a barangay or cluster of barangays primarily composed of and managed by ARBs, organized and willing to undertake integrated development of an area and/or their organizations/cooperatives.
Section 3(c) defines Agri-Business as agriculture and fishery-related activities that connect farmers, fisherfolk, processors, distributors, and consumers through input production, farm/fishery operations and management, equipment/supplies manufacturing, processing, trading, and retailing.
Section 3(d) defines Agri-Tourism (also referred to as “Farm Tourism” under Republic Act No. 10816) as attracting visitors and tourists to farm areas for production, educational and recreational purposes, including agricultural- or fishery-based operations bringing visitors to a duly-accredited farm tourism camp.
Section 3(k) defines Basic Deposit Account (BDA) as an interest- or non-interest-bearing account designed to promote financial inclusion.
Section 3(l) defines Cash agent as a third party entity contracted by a bank to accept and disburse cash on its behalf and facilitate self-service and banking services as allowed under BSP rules.
Section 3(m) defines Compact farmers as farmers with adjoining farms operating as a single unit under one management, farm plan, and budget.
Section 3(n) defines Farmer as a natural person whose primary livelihood is cultivation or production of agricultural crops, agro-forest products, or livestock, either by oneself or primarily with immediate farm household assistance, regardless of ownership, leasehold, or share tenancy arrangement.
Section 3(o) defines Farmworker as a natural person rendering service for value as an employee or laborer in an agricultural enterprise or farm, regardless of pay structure (including pakyaw), and includes an individual whose work ceased due to or in connection with a pending agrarian dispute who has not obtained substantially equivalent and regular farm employment.
Section 3(s) defines Financial services as services extended by banks and financial institutions such as credit/lending, deposits, rediscounting, investments, and insurance.
Section 3(t) defines Fisherfolk as people directly and physically engaged in catching and processing fishery/aquatic resources, and in fish farming or aquaculture.
Section 3(u) defines Fishworker as a person in commercial fishing and related industries whose income comes from wages, profit sharing, or stratified sharing, including specific fishing and processing roles, excluding administrators, security guards, and overseers.
Section 3(v) defines Green projects as climate adaptation and mitigation activities and also environmental/efficiency improvements, natural capital preservation, and resource mobilization.
Section 3(w) defines MSME using the definition under existing laws.
Section 3(x) defines Newly Established Bank as a domestic or foreign bank without banking presence in the Philippines prior to its certificate of authority to operate, excluding banks formed through acquisition of ownership in an existing bank or merger/consolidation.
Section 3(bb) defines Post-harvest Facilities to include threshers, moisture meters, dryers, weighing scales, milling equipment, fish ports, fish landings, ice plants and cold storage, processing plants, warehouses, buying stations, market infrastructure, transportation facilities, and other facilities supporting post-harvest activities.
Section 3(cc) defines Public Rural Infrastructure to include rural infrastructure such as roads, bridges, ports, airports, irrigation, canals, dams, public buildings and housing projects, public schools and hospitals, markets, slaughterhouses, warehouses, solid waste management, sewerage, flood control, drainage, dredging, and similar infrastructure projects.
Section 3(dd) defines RSBSA as an electronic compilation of basic information on farmers, farmworkers, and fisherfolk, including profiles and data such as farm parcels and fisheries, used for policy formulation for agricultural development.
Section 3(ee) defines Rural Community as an area defined as such by the Philippine Statistics Authority (PSA).
Section 3(ff) defines Rural Financial Institution (RFI) as any financial institution established and operating in a rural community.
Section 3(hh) defines Sustainable Finance as financial products/services integrating environmental, social, and governance criteria into business decisions supporting lasting benefits while reducing environmental pressures, including green finance facilitating funds toward green economic activities and climate change mitigation and adaptation projects.

Credit quota and mandatory financing

Section 6 requires all banking institutions, whether government or private, except newly-established banks for five (5) years from commencement of operations, to set aside a credit quota: a minimum mandatory agricultural and fisheries financing requirement of at least twenty-five percent (25%) of their total loanable funds.
Section 6 defines “total loanable funds” by BSP.
Section 6 provides that during the first year of effectivity, total loanable funds are computed starting from 20 April 2010 (the effectivity date of Republic Act No. 10000).
Section 6 provides that after the first year, a bank’s total loanable funds are determined based on funds generated starting from the second year of effectivity of this Act.
Section 6 imposes the credit quota obligation through Section 7 compliance modes and Section 8 monitoring/reporting.

How banks comply with the requirement

Section 7 allows banks to comply by lending to rural community beneficiaries to finance agricultural and fishery-related activities enumerated under Section 4.
Section 7 authorizes alternative compliance modes in addition to direct lending, including:
- Investing in debt securities, including those issued by DBP and LBP, with proceeds used to finance Section 4 activities, and requiring separate accounting for DBP/LPB debt securities so they are not considered for loanable funds computation under Section 6 for the originating bank.
- Opening deposit accounts and/or investing in fixed term deposit products with RFIs, with separate accounting by the depository bank so these are not considered for computing the banks’ loanable funds under Section 6.
- Rediscounting with banks eligible paper covering agriculture, fisheries and agrarian reform credits, provided the rediscounted paper is no longer eligible as compliance by the originating bank.
- Investing directly in shares of stock of RFIs (subject to prevailing laws) or lending wholesale to RFIs, with wholesale loans credited as compliance of the wholesale lender alone.
- Lending for construction and upgrading of infrastructure, including farm-to-market roads, and for post-harvest facilities and public rural infrastructure benefiting rural communities.
- Lending to agri-business enterprises maintaining agricultural commodity supply-chain arrangements directly with rural community beneficiaries.
- Undertaking Agricultural Value Chain Financing (AVCF) for actors/players in the AVC that benefit rural communities.
- Engaging in sustainable finance.
- Investing in shares of stock of PCIC or in companies primarily engaging in Section 4 activities (including venture capital corporations) benefiting rural community beneficiaries.
- Providing financing to electronic platforms facilitating AVCF and supply chain financing transactions among agricultural actors.
Section 7 requires that compliance-counted loans and investments for electronic platforms are not funded by proceeds from debt securities and/or deposit/lending of other banks that were already counted as compliance.
Section 7 requires that loans generally benefitting ARBs, ARCs, or other priority sectors as determined by the Agricultural Credit Policy Council (ACPC) are counted at ten times (10x) their outstanding amount, or as otherwise prescribed by the ACPC, for compliance determination.
Section 7 subjects the listed compliance modes to ACPC review after implementation to determine adequacy and recommend appropriate action to Congress.
Section 7 authorizes the BSP, DA, and DAR to provide inputs to the ACPC review as ACPC members.
Section 7 authorizes BSP to identify other actions eligible as compliance with the mandatory credit.

Monitoring, annual reporting, and oversight

Section 8 requires the BSP to furnish reports on banks’ compliance with the mandatory agriculture, fisheries and rural development financing requirement, including information on the amount of agri-agra penalties collected and remitted, to the ACPC and Congress yearly.
Section 8 requires BSP, as part of its regulatory functions, to monitor bank compliance with the Act.

Penalties, special fund, and allocation

Section 9 requires BSP to impose administrative sanctions and other penalties on lending institutions for violation of any provision of the Act.
Section 9 provides that penalties for noncompliance or undercompliance are computed at one-half of one percent (0.5%) of the noncompliance or undercompliance, or at rates prescribed by the BSP Monetary Board.
Section 9 requires BSP, upon collection, to remit the penalties to implementing agencies identified under Sections 9, 10 and 11.
Section 9 requires that five percent (5%) of collected penalties be retained by BSP for administrative expenses.
Section 9 requires twenty percent (20%) of collected penalties to be allocated as a fund for agricultural- and fishery-related organizational-capacity- and institution-building programs and activities implemented equally by LBP and DBP.
Section 9 requires those capacity-building programs to equip ARBs, duly registered farmers, members of their household, and their MSMEs, as well as agrarian reform communities, with knowledge and skills to improve welfare, competitiveness, income, and productivity.
Section 9 authorizes LBP and DBP to coordinate with and/or tap qualified training providers, as well as the ACPC and the Cooperative Development Authority (CDA), for program design and delivery.
Section 10 creates a Special Fund consisting of penalties due from banks on noncompliance or undercompliance with the mandatory agri-agra credit requirement under Republic Act No. 10000, collected after the Act’s effectivity, net of the 5% retention by BSP and the 20% allocation to capacity-building under Section 9, and including penalties collected under Section 9.
Section 10 requires annual penalties collected by BSP under the Act for noncompliance/undercompliance to be remitted directly to implementing agencies within one (1) year and six (6) months from imposition for distribution under Sections 9, 10 and 11.
Section 11 requires the Special Fund under Section 10 to be allocated to implementing agencies as follows:
- Thirty-five percent (35%) to DAR for titling and parcelization of landholdings covered with collective CLOA.
- Sixty-five percent (65%) made available as a credit facility with minimal interest rates and minimum collateral requirements, equally managed by LBP and DBP, which set geographic coverage in administering the facility.
Section 11 requires LBP and DBP to use the Special Fund for lending to farmers and fisheries registered in RSBSA, farmers and fisheries cooperatives and associations, and microfinance institutions.
Section 11 requires allocation in the DBP share to promote financial inclusion in Islamic communities, particularly ARBs in the Bangsamoro Region: two and one-half percent (2.5%) in the thirty-two and one-half percent (32.5%) DBP share to Al-Amanah Islamic Investment Bank of the Philippines (AAIIBP) as long as the National Government is a majority shareholder of AAIIBP.
Section 11 requires that all loan repayments and other collections be used to fund the credit facility of LBP, DBP, and AAIIBP, and allows reimbursement of direct costs incurred in management, but limits reimbursements to not more than two percent (2%) of average quarterly loan balance.

Sunset, congressional oversight, and implementation

Section 12 provides that provisions related to the mandatory credit quota under Section 6 cease to have effect on the tenth (10th) year from approval of the Act.
Section 12 provides that all unutilized funds allocated for any implementing agency and all loan collections are remitted to the General Fund.
Section 13 creates oversight by the Congressional Oversight Committee on Agricultural and Fisheries Modernization (COCAFM), which conducts independent review of the use of the Special Fund administered by implementing agencies.
Section 14 requires the BSP, in consultation with LBP, DBP, AAIIBP, CDA, DA, DAR, the banking industry, microfinance organizations, and other relevant agencies, to promulgate implementing rules and regulations within sixty (60) working days after approval of the Act.

Effectivity, repeal, separability

Section 1 sets the short title as “The Agriculture, Fisheries and Rural Development Financing Enhancement Act of 2022.”
Section 17 provides effectivity fifteen (15) days after publication in the Official Gazette or in a newspaper of general circulation.
Section 16 repeals Republic Act No. 10000 and repeals or amends laws, decrees, regulations, and administrative orders inconsistent with the Act.
Section 15 provides separability: invalidity or unconstitutionality of any part, section, or provision does not affect other provisions’ validity and force.