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THE AGRI-AGRA LAW (PD717): A Review of Its Performance

This paper provides the reader an objective insight on how the Agri-Agra Law has delivered and a factual review of the performance of PD 717 over the period 1975 to 2002. Because lending to agriculture, especially agrarian reform beneficiaries, remains unattractive compared to other sectors due to high credit risks involved, banks still have difficulty complying with PD 717 in spite of the alternative forms of compliance. PD 717 therefore, needs to be amended to correct its flaws. A recent initiative aimed at amending PD 717 is House Bill No. 1930 (substituting House Bill Nos. 104, 658 and 2166). A main feature of the mentioned legislative bills is the provision this time of incentives for banks to lend to the agriculture and agrarian sectors. Among the incentives being considered are (a) the reduction of the gross receipts tax (GRT) rates on interests, commissions and discounts from loans, credit lines and similar credit accommodations extended by financial institutions to small farmers; and (b) the imputation of higher compliance rates to the mandatory loan quota if loans, credit lines and similar credit accommodations are made directly to agrarian reform beneficiaries and/or eligible agricultural activities, to LGUs specifically for rural development. Once these incentives are approved, the banking sector might become more willing to form partnerships with informal lenders or adopt other innovative strategies to expand their Agri-Agra credit outreach.


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Jul 05, 2013