Issuance, effectivity, and publication rule
- The Act is Republic Act No. 10000, approved on February 23, 2010.
- Section 14 provides that the Act takes effect fifteen (15) days after its publication in the Official Gazette or in a newspaper of general circulation.
- Section 13 provides a transitory rule: prior to the effectivity of the implementing rules and regulations, Presidential Decree No. 717 remains in force.
- Section 2 sets the policy direction for the credit, insurance, and financing system established in the Act.
Core definitions established by law
- Section 3 defines “Accredited Rural Financial Institution” as a financial institution accredited by the Bangko Sentral ng Pilipinas (BSP) whose portfolios are substantially agri-agra related, as defined in implementing rules and regulations.
- Section 3 defines “Agrarian Reform Beneficiary” to include farmers granted lands under Presidential Decree No. 27, the Comprehensive Agrarian Reform Law, and Republic Act No. 9700 (“Comprehensive Agrarian Reform Extension with Reforms”), and regular farmworkers who are landless, irrespective of tenurial arrangement, who benefited from redistribution of lands (including arrangements designed to lift economic status through access to fruits of the lands worked).
- Section 3 defines “Agricultural Guarantee Fund Pool (AGFP)” as five percent (5%) of the 2007 surplus of government-owned and/or -controlled corporations and government financial institutions, including PAGCOR, PCSO, SSS, and GSIS, as mandated by Administrative Order No. 225-A, series of 2008, plus penalties collected from banking institutions for noncompliance and undercompliance under this Act.
- Section 3 defines “Agro-Industry Modernization Credit and Financing Program (AMCFP)” as the umbrella credit/financing program created under Republic Act No. 8435 (“Agriculture and Fisheries Modernization Act of 1997”), which funds loans to government financial institutions (GFIs) called “credit wholesalers” for relending to qualified “credit retailers” including rural banks, thrift banks, cooperative banks, NGOs, National Food Authority (NFA), and other associations/people’s organizations lending to small farmers and fisherfolk.
Coverage: beneficiaries, institutions, and eligible activities
- Section 4 establishes an agriculture, fisheries and agrarian reform credit, insurance and financing system to improve productivity, particularly for:
- farmers, fisherfolk, and agrarian reform beneficiaries,
- settlers,
- agricultural lessees,
- amortizing owners,
- farmworkers, fishworkers,
- owner-cultivators, compact farmers, and
- farmer’s and fisherfolk’s cooperatives, organizations, and associations,
through government and private banking institutions.
- Section 4 defines agriculture and agrarian reform credit as loans to finance activities and purposes including:
- agricultural production and promotion of agribusiness and exports,
- acquisition of work animals and farm and fishery equipment and machinery,
- seeds, fertilizers, poultry, livestock, feeds, and similar items,
- acquisition of lands authorized under the Agrarian Reform Code of the Philippines and its amendments,
- construction, acquisition, and repair of facilities for production, processing, storage, and marketing,
- facilities supporting agriculture and fisheries, and
- efficient and effective merchandising of agricultural and fishery commodities stored and/or processed by those facilities in domestic and foreign commerce.
- Section 5 requires credit to be extended to the named beneficiaries (and to their cooperatives and associations in good standing) regardless of capitalization, based on:
- feasibility of the project,
- paying capacity,
- estimated production, and/or
- securities they can provide, including assets acquired from loan proceeds.
- Section 6 covers all banking institutions, whether government or private, by requiring mandatory credit allocation.
- Section 3 defines additional covered beneficiary categories and related entities, including: Agricultural Lessee, Agricultural Guarantee Fund Pool (AGFP), Agricultural Lessee, Farmer, Farmworker, Farmer’s Cooperatives, Farmer’s and Fisherfolk’s Organizations or Associations, Fisherfolk, Fishworker, Owner-Cultivators, Quedan and Rural Credit Guarantee Corporation (QUEDANCOR), Settlers, and Tenant Farmer.
Mandatory credit quota and review
- Section 6 requires all banking institutions to set aside at least twenty-five percent (25%) of their total loanable funds for agriculture and fisheries credit in general.
- Section 6 requires that within the 25%, at least ten percent (10%) of total loanable funds must be made available for agrarian reform beneficiaries under Section 5.
- Section 6 defines “total loanable funds” for quota computation as funds generated from the date of effectivity of this Act.
- Section 6 requires a joint review by DA, DAR, and BSP after three (3) years of implementation to determine whether the law has been effective in accomplishing its goals.
- Section 6 requires the joint review findings to be submitted to Congress.
Compliance through allowed banking modes
- Section 7 directs the BSP, DA, and DAR (in consultation with concerned agencies and sectors) to promulgate implementing rules within ninety (90) days after approval of the Act.
- Section 7 provides that the implementing rules take effect fifteen (15) days after publication in a newspaper of general circulation in the Philippines.
- Section 7 authorizes banking institutions, subject to the rules and regulations, to comply by using permitted modes, including:
- Investing in bonds issued by DBP and LBP and/or opening special deposit accounts (SDAs) with accredited rural financial institutions, with proceeds used exclusively for on-lending to the agriculture and agrarian reform sector.
- Separately accounting for proceeds by DBP, LBP, and the depository thrift banks, cooperative banks, and rural banks, and providing that such proceeds are not considered for computing the loanable funds under Section 6 of those banks.
- Providing that funds channeled as compliance under this subsection do not count as compliance under the other compliance subsections even if later used by conduit banks for similar activities.
- Rediscounting with universal and commercial banks (including eligible local branches of foreign banks) using agriculture, fisheries and agrarian reform credits, including loans covered by guarantees of QUEDANCOR, and the PCIC, with rediscounted paper no longer eligible as originating bank compliance.
- Lending for construction and upgrading of infrastructure, including farm-to-market roads, plus provision of post-harvest facilities and other public infrastructure that benefits the agriculture, fisheries and agrarian reform sector.
- Investing directly in preferred shares of stock in rural financial institutions (including rural banks, cooperative banks, farmer’s cooperatives and farmer’s cooperative insurance or mutual benefit associations) or lending wholesale to accredited rural financial institutions, with wholesale credits used exclusively for on-lending to the agriculture, fisheries and agrarian reform sector and wholesale loans counting as compliance of the wholesale lender alone.
- Investing in shares of stock of QUEDANCOR and the PCIC.
- Loans or investments in activities identified under the AMCFP as enumerated under Chapter 3, Credit, Section 23 of Republic Act No. 8435.
- Section 8 requires a joint review by DA, DAR, and BSP after three (3) years to determine whether alternative compliance modes directly target the agriculture, fisheries and agrarian reform sector, with findings to be submitted to Congress.
Reporting, administrative penalties, and fund allocation
- Section 9 requires the BSP to furnish yearly reports on compliance with the mandatory credit allocation to DA, DAR, and Congress.
- Section 10 requires the BSP to impose administrative sanctions and other penalties on lending institutions for noncompliance with this Act.
- Section 10 provides that penalties for noncompliance and undercompliance are computed at one-half of one percent (0.5%) of noncompliance and undercompliance.
- Section 10 directs that penalties collected be applied to development of the agri-agra sector, with allocation rules:
- 90% of penalties collected goes to the AGFP and PCIC, according to the needs of the agri-agra sector as provided in the implementing rules and regulations, and
- 10% goes to the BSP to cover administrative expenses.
Repeals, separability, and transitory continuity
- Section 11 repeals:
- Presidential Decree No. 717,
- the second paragraph under Section 8 of Republic Act No. 7900 (High-Value Crops Development Act of 1995), and
- Section 9 of Republic Act No. 7721 (Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines).
- Section 11 further repeals or modifies accordingly all inconsistent laws, presidential decrees, executive orders, rules and regulations, or parts thereof.
- Section 12 contains a separability rule: if any part, section, or provision is held invalid or unconstitutional, the remaining provisions continue in force.
- Section 13 ensures continuity before implementing rules take effect by keeping Presidential Decree No. 717 in force prior to implementing rule effectivity.