October 18, 1995
DAR OPINION NO. 63-95
Mr. Emmanuel M. Bautista
President and General Manager
CARZAR MULTI-PURPOSE COOPERATIVE
325 Roosevelt Avenue
SFDM, Quezon City
Dear Mr. Bautista:
This has reference to your letter addressed to then Exec. Secretary Guingona, seeking assistance on behalf of the farmer-beneficiaries of Nueva Ecija regarding their request that the financing institutions should be more lenient in their lending policies to consider CLTs as sufficient collaterals for agri-business loan.
You state that the lending policies of financial institutions discriminate against farmers, as they only consider titled real properties free from encumbrances as sufficient collateral for agri-business loans. This does not benefit the farmers but only moneyed borrowers. You also believe that farmers should be afforded the opportunity to engage in substantial agri-business ventures, to augment their income for the improvement of their economic condition.
Please be informed that under Presidential Decree No. 315 dated October 22, 1973 (copy attached), all financing institutions are mandated to accept as collateral for loans any duly registered Certificate of Land Transfer (CLT) issued by the Government, through the DAR, to tenant-farmers in an amount of not less than sixty percent (60%) of the value of the landholdings, with the proviso that the loans obtained shall be used in the improvement or development of the farmholding of the tenant-farmers or the establishment of facilities that will enhance production or marketing of agricultural products or increase farm income. With regard to your request that farmers should be given the opportunity to engage in agri-business ventures to improve their economic condition, we are furnishing you herewith a copy of RA 7900 entitled "High Value Crops Development Act of 1995" which was enacted to enhance productivity and income of farmers and the rural population as well; improve investment and develop high value crops as export crops that will increase the foreign exchange earnings of the country through promotion of the production, processing, marketing and distribution of high value crops. Please note that all financial institutions, whether public or private, are required to support the program and that participating banks are exempted from the compliance requirement of PD No. 717, provided, that they shall lend a minimum of five percent (5%) of their loanable funds without alternative compliance directly to farmers' associations or cooperatives (Section 8, RA 7900). It is important, however, for farmer-beneficiaries to organize themselves into cooperatives in order to benefit from the government's assistance in terms of credit and institutional support.
Very truly yours,
(SGD.) HECTOR D. SOLIMAN
Assistant Secretary Legal Affairs Office
cc: OSEC
Doc. No. 95-04-0181