MANILA, Philippines — Agricultural free patents are now accepted as underlying collateral the Banko Sentral ng Pilipinas said.
The agricultural free patents law, which was signed by President Duterte in March last year, allows farmers to use agricultural public land that they have continuously occupied and cultivated for central bank’s peso rediscounting windows to avail of funds, the BSP said.
The relative circular (No. 1072) issued by BSP Governor Benjamin Diokno freed up the restriction on agricultural free patents as collateral for rediscounting loans through amendments to the Manual of Regulations for Banks (MORB).
“Agricultural free patents are now accepted as underlying collateral for rediscounting loans after President Duterte signed Republic Act 11231 or the Agricultural Free Patent Act in March 14 last year,” Diokno said.
The BSP governor also claimed that “a certificate of title issued by virtue of free patent may be accepted as underlying collateral for loans offered for rediscounting with the BSP in view of the passage of RA 11231, otherwise known as the Agricultural Free Patent Act.”
In layman’s terms, agricultural patents are land grants to farmers given title under the Public Land Act, especially those processing or cultivating the land and paying the taxes for 30 years.
Republic Act 11231 or the Agricultural Free Patent Act removed the restrictions on agricultural free patents under Commonwealth Act 141 or the Public Land Act of 1936, including the five-year prohibition on encumbrance and alienation as well as the five-year right to repurchase.
Previously, landowners and farmers have no choice – because of the five restriction — but to sell their land in the informal market at down-to-earth prices.
The farmers are not only the ones disadvantaged as this resulted too in higher revenue losses from taxes and fees on the part of the government.
Aside for that, past prohibitions also denied access to formal credit market.
Rediscounting is a BSP credit facility given to qualified banks with active rediscounting lines to meet their temporary liquidity needs by refinancing the loans they extend to their clients using the eligible papers of its end-user borrowers.
A report by the Philippine Star also said loans from the peso rediscount window of the central bank jumped 71 percent to a record high of P122.17 billion last year from P71.52 billion in 2018.
The Agricultural Free Patent Reform Act or Republic Act (RA) No. 11231 signed by President Rodrigo Duterte removed the Commonwealth-era restrictions on agricultural free patents under the Public Land Act of 1936.
The said restrictions include the 1) prohibition to sell and mortgage the land within the first five (5) years from the date of sale or alienation; 2) five (5) year right to repurchase; and 3) and prohibition on corporation, association, or partnership to acquire or own an agricultural free patent.
Such restrictions undervalued agricultural lands and deprived people of using their lands in its full potential. Uncertainties brought about by the right to repurchase made the agricultural free patents unbankable as banks were reluctant to lend when the patent is used as collateral. This law will minimize informal market transactions in the rural land market.
It was gathered that more than 2.5 million agricultural free patent landowners will benefit from this reform.
Supporters of the bill cited its transformational effects on Philippine agriculture.
For one, Senator Richard Gordon, the principal champion of the Bill and Chairman of the Senate Justice Committee, earlier said that removing the restrictions will unleash a massive amount of capital and the value of the properties, whether for borrowing or sale, will immediately rise.
Also, according to Johnson Melo, Director of Rural Bankers Association of the Philippines, lifting the restrictions to agricultural free patents will “make the property an acceptable collateral to access credit or bond to access more capital to finance the economic activities of farmers and micro, small and medium enterprises or MSMEs who usually hold such titles”.
With freer transactions in the land market, lands under agricultural patents will be used in its full potential. RA 11231 will open up economic opportunities for the local farmers that lead towards the development of the agriculture sector.
Sponsors of the law in the Senate are Senators Richard Gordon and Bam Aquino. In the House, it was sponsored by Representatives Joey Salceda, Kit Belmonte, Romero Quimbo, Arthur Yap, Monsour del Rosario III, Reynaldo Umali, Ferdinand Hernandez, Orestes Salon, Delphine Lee, and Luis Villafuerte Jr.
Individuals and organizations who also pushed for the removal of the restrictions include the Rural Bankers Association of the Philippines, Philippine Solar Power Alliance, AGRI Party-list, and leading Philippine agricultural economists Dr. Raul Fabella, Dr. Rolando Dy, Dr. Ramon Clarete, and Dr. Bruce Tolentino. (ia/sovereignph.com)