Bricks F. Magdales Prof.

Bates Bathan
AECO 151 A2-2R November 22, 2018

AGRARIAN REFORM IN THE PHILIPPINES

Comprehensive Agrarian Reform Program (Republic Act of 6657) is a policy

implemented by the State to protect the welfare of the landless farmers against repressive
landholders, to promote social justices and equitable distribution of land, to achieve sound rural
development and industrialization around the country and to enhance the productivity of these
lands through improving the quality of lives in order to achieve greater productivity of agricultural
lands in the Philippine agriculture (Lawphil.net, 1988). It symbolized that the implementation of
the program is the beginning of the living democracy among our farmers through the creation of
support services such as credits and farming implements to achieve agricultural development as
well as the impact of social justice to produce more quality and adequate food to address the
needs of the arising population rate in the Philippines (FIAN, 2014).

Table 1. Initial Scope of CARP LAD Component by Land Type and Phase, 1991
 Table 1 shows that the scope in the Department of Agrarian Reform has a total estimate
of 3.82 million hectares in order to equally distribute these lands among 1.56 million farmers and
agricultural works which was previously issued by the Presidential Agrarian Reform Council using
the 1980 Census of Agriculture (Ballesteros, Ancheta, & Ramos, 2017). Phase 1 consists of the
total area used in rice and corn lands covered under PD 27, the government financial institutions
that foreclosed the idle and abandoned lands and the land gathered by the Presidential
Commission on Good Government (Ballesteros, Ancheta, & Ramos, 2017). Phase 2 states the
dispose landed estates and settlement areas from the past land reform programs which contains
of above 50 hectares while the Phase 2 covers the 41% of the total area of agricultural farms
including the private lands with an estimate of 1.58 million hectares. (Ballesteros, Ancheta, &
Ramos, 2017).

Table 2. Distribution of CARP Area by Mode and by Period (in hectares)

Table 2 shows the total area distributed among the past administrations through Private
Agricultural Land and Non-Private Agricultural Land as well as the total percentage of the PAL
and Non-PAL Accomplishment from the year 1953 to 2016. In private agricultural lands, the total
hectares of land distributed to the farmers is 54% or 2,625,547 hectares while the non-private
agricultural lands distributed almost 45% or 2,116,033 hectares (Ballesteros, Ancheta, & Ramos,
2017). Under the implementation of CARP, VOS or VLT agreement is used to transfer the 57%
of the total private lands voluntarily/directly by the landowners to the farmers, compulsory
acquisition and confiscatory scheme are used to transfer the 36% of the private lands to its tenants
while the rest, which is 7% were directly foreclosed by government institutions (Ballesteros,
Ancheta, & Ramos, 2017).
T

Table 3. CARP accomplishments, to December 2002

Table 3 shows the total percentage of the accomplishments presented by the Presidential
Agrarian Reform Council, which states that the end of the year 2002, more than 5.82 million
hectares of the land has been distributed to the ARB, accounted to 72% of the total land area of
8.1 million hectares. As a result, the Department of Environment and Natural Resources
distributed the public lands and integrated social forestry areas of about 68.2% of the total scope
while the Department of Agrarian Reform distributed the agricultural lands of about 75.6% of its
scope with a total of 3.25 million hectares (Guardian, 2003).

Table 4. Land Distribution accomplishment under CARP, as of 2007

Table 4 shows that the total scope of the land area is 8,064,864. The completion rate is
much higher than in data provided from the year 2002. It only shows that the land distribution of
DAR-LAD and DENR increased and garnered 91% and 87%, respectively (Pabuayon, 2013).
There are support services provided to ARC’s or farmer beneficiaries which involves the
transfer of land ownership which benefits the 2.8 million agriculture households. First, the Agrarian
Reform Communities (ARCs) and Agrarian Reform Beneficiary Organizations which has adopted
by the Department of Agrarian Reform to incorporate the support services through the
development of its beneficiary from the different clusters of different agrarian reform barangays
as they key for the integration among agrarian reform areas and to ARB’s. The support services
they offered includes farm to market roads, irrigation and farm facilities (Ballesteros, Ancheta, &
Ramos, 2017).
.

Table 5. Physical infrastructure support and services in ARCs, 2002-2004

Table 6. Economic support services in ARCs, 2002-2004

Table 5 shows that bridges garnered the highest ratio in terms of physical infrastructure
support by the Agrarian Reform Community which has a total percentage of 64% followed by the
irrigation systems and farm-to-market roads which has a total percentage of 58.13% and 45.33%,
respectively. Table 6 shows the economic support services provided by the ARC. Unfortunately,
in marketing services, 54% do not have definite marketing outlets while 8% are members of an
organization who have forged marketing contracts or agreements. In accessibility of credits, the
highest access are the one who has been required to have livelihood loans with a total percentage
of 59% while the rest with requiring multipurpose and production loans, 5% and 38% respectively
(Guardian, 2003).
 One of the support services is called Agribusiness Ventures (AVA), which another strategy
is proposed by the Department of Agrarian Reform that aims to support the development of the
sector of agriculture through the access to agribusiness venture agreements. Its objectives is to
promote tenurial security and higher income to those members of ARBs and to achieve efficient
agricultural production through optimization of the operational size of commercial farms. Different
types of AVAS includes Joint Venture Arrangement (JVA); Lease Arrangement; Contract
Growing/Growership Arrangement; Management Contract; Production, Processing, and
Marketing Agreements; and Build-Operate-Transfer-Scheme (Ballesteros, Ancheta, & Ramos,
2017).

Last support services provided by the DAR is called Sugarcane Block Farming which
formally started in the areas of sugarcanes since 2012-2013 which was conceptualized to be part
of the National Convergence Initiative of DA and DAR as well as in the Sugar Regulatory Authority
that aims to increase the productivity of its members from 60-75 tons cane per hectare through
enhancement of skills in the agribusiness management’s enterprises, to reduce their cost of
production and to create at least one agribusiness activity per block farm (Ballesteros, Ancheta,
& Ramos, 2017).

Comprehensive Agrarian Reform Law experienced problems during its implementation

encountered by the implementors and its beneficiaries. Edaño (2018) discussed the reasons for
the low performance of the said Agrarian Reforms such as the schemes that do not adhere to the
principle of the land-to-the-tiller includes the Voluntary Land Transfer, Stock Distribution Option,
Agribusiness Option, Agribusiness Venture Agreements and Leaseback Arrangements,
underfunding, ambiguous guidelines for land use conversions, exemptions and exclusions from
CARP, provision of appropriate and timely support services and inefficiency of the bureaucracies.
There is an underfunding of the required budget from the Department of Agrarian Reform
in the full implementation of the Law for about 20 years since the allocated budget was reduced
from PhP 175 B into PhP 225 B (Edaño, 2018). From these figures, we can conclude that there
is difficulties from the implementation of the annual budget. The ambiguous guidelines for land
use conversions refers to the lands for redistribution which were exempted because of the land
use conversion orders and applications for real estate development, tourism, mining and special
economic zones (Edaño, 2018). The inefficiency of bureaucracy refers to the technical difficulties
due to the lack of a central base area, inaccurate land surveys, unclear land titles and lengthy
dispute settlements and low morale of DAR employees due to lack of transition or exit plan
(Edaño, 2018).
FIAN Philippines (2014) acknowledged the reality of the implementation from the past
years of CARP such as loopholes in the land redistribution among large landowners, budget
constraints, lack of accurate land registration and extensive corruption within the Department of
Agrarian Reform (DAR). Stock Distribution Option and Voluntary Land Transfer are anti-peasant
and pro-landlord due to poor prioritization of distribution of land and land use conversions among
public land due to the greediness of the private landholdings and the ambiguous guidelines for
the identification of its beneficiaries from the commercial and corporate farms (FIAN, 2014).
The Congress passed the CARPer Act or CARP extensions with reforms on August 7,
2009 by giving an additional five years in order to complete the disseminations of land to the
farmers. However, the provision only affects our farm workers because the law indicate that they
allowed these landowners to determine who will be their beneficiaries (FIAN, 2014). From the
Aquino Administration, our former president promised that he will finish the land redistribution
under CARPER, unfortunately several cases happened to our famers, who have experienced
harassments, intimidation and evictions from the aggressive and strong landlord resistance, who
opposed the land redistribution such as in Hacienda Matias in Bondoc Peninsula (FIAN, 2014).

Share of Achievement in
CARP Land Annual land distribution
Accomplishment/ Distribution Land (output vs.
Share of Land Land distribution Output Years of Distribution targets; (%)
Distribution (ha) (%) Presidency (ha)

Corazon Aquino 848,518 49.97 6 141,419.7 21

Fidel Ramos 1,900,035 44.72 6 316,672.5 46

Joseph Estrada 222,907 5.25 2.5 89,162.8 5.4

Gloria Macapagal-Arroyo 954,408 22.46 8* 119,301 23

5
Benigno Aquino III 322,697 7.60 3 104,415.5

Total 4,248,565 100.00 25.5 166,610.39

Table 7. CARP performance per post EDSA administration

Table 7 shows the achievement in land distribution from output and targets in percent of
the annual land distribution in hectares from the past administrations. It shows that the regime of
the late President Fidel V. Ramos garnered 46% as the highest land distribution among other
administrations.
 AGRICULTURAL/RURAL CREDIT PROGRAMS IN THE PHILIPPINES
Accessibility in credit programs provided by the government and financial institutions is
significant for the farmers. Farmers are affected by the lack of financial support when it comes
to financing their operations in the whole production and marketing (Pabuayon, 2013). They
need accessibility of funds from the agricultural/rural credit programs for three reasons such as
working capital, consumption smoothing and investment capital which were primarily affected by
determinants of farming systems such as pests and diseases, uncertain natural disasters and
calamities (Pabuayon, 2013).
Agricultural Finance is a type of finance related to agricultural activities including the
production and marketing system of the farm while Rural Finance is a type of financial services
intended for a heterogeneous rural farm and non-farm population at all farm level which includes
various type of products and services offered by different institutional arrangements such as
loans and insurance (CGAP, 2018). There are overlapping objectives of different financial
service providers in the Philippines due to the notion of not all rural finance is agricultural and
not all agricultural finance is intended for rural (CGAP, 2018).
Microcredit is a type of banking service who has a provision of small loan provided by a
specific facility of below poverty line which includes less income earners to encourage them to
become self-employed as well as it helps young small entrepreneurs to engage themselves
from taking risks in business through credit activities while micro finance refers to a type of
financial services provided by small enterprises or entrepreneurs to the unemployed low-income
earners who has no accessibility from banks and financial services through credit and non-credit
activities (S, 2015).
Microfinance has different divisions including micro-insurance and micro-savings.
Investopedia (2018) stated that micro-insurance aims to provide poor families or low-income
households/individual who has a little financial capacity to provide uncertain family-related
problems such as illness, injury or death through products being offered by financial loans
services while micro-savings is a branch of microfinance wherein lower income families or
individual stored their funds or money to a small deposit account with some requirements
including minimum balance without getting charged for the service rendered.
In developing countries, there are problems/constraints in agricultural/rural finance in the
Philippines includes lack of access to institutional credit, high cost of credit from informal
sources, high transaction cost of lending to farmers and interlinked transactions involving credit
such as land tenure and marketing (Pabuayon, 2013).
There is a lack of access to institutional credit due to the following reasons: several
farmers have no enough resources to comply necessary requirements from borrowing credit in
the financial institutions such as paperworks/documents and real properties, distance of
credit/financial institutions from their hometowns are far away to its location, and inaccessibility
of credit to the farmers coming from the programs provided by the government. Over a period of
time, credit accessibility has been already improved but the support coming from our
government is insufficient to provide the needs of our farmers. Furthermore, several researches
and studies have already been conducted by the government, however these efforts are still
useless since our small farmers and fisherfolks have limited absorptive capacity, which remains
as problem in the Philippine Agriculture (Pabuayon, 2013).
There is also a high cost of credit from informal sources due to high interest rate
provided as we compared from the formal credit sources, however interest rate varies from
different lending institutions around the country such that the interest rate that was being
charged from informal credit sources range from 39% per annum while formal credit sources
charged them with 18% per annum. There are several factor which primarily affects the high
cost of credit involving the “probability of the default through borrowing, absence of collateral,
opportunity cost of funds to the lender, transaction cost of lending, and monopoly rent”
(Pabuayon, 2013).
High transaction cost of lending to farmers includes the processing of loans, delivering
and collection of payments through administration cost. As the duration of loans incurred
decreases, possible risks are involve such as the services of the accounting agency tend to
increase for the small borrowers and uncertain risk of default may cover the damage or losses
in credit through provision of cost of risk, which has a huge demand among farmers who needs
immediate funds to provide their small loan and maturity together with the high vulnerability of
their farms from the variations of bio-physical factors such as natural disasters and climate
change. Furthermore, a lender must need to create a risk premium for the borrower in an
increasing manner so that the usual interest rate can be paid through effective rate (Pabuayon,
2013)
Interlinked transactions involving credit such as land tenure and marketing involves
farmers who sold their outputs to their landlords in exchange of having a loan through cash or in
kind such that some of these informal credit sources might lead to abuse our farmer by asking
for discounts from the output and high interest due to lack of bargaining power (Pabuayon,
2013).
Llanto (1993) provides an assessment of different agricultural/rural credits policies and
programs provided by the government. One of the preliminary assessment focuses some of the
principal on-going credit programs and general status of the agricultural credit and banking in
the Philippine and another is the study about the credit guarantees under these three diferrent
programs such as Integrated Rural Financing Program (IRF), Agricultural Loan Fund (ALF) and
other three special programs provided by the Department of Agriculture and ACPC, the
Livelihood Assistance for Agricultural Development (LEAD) and the Development Assistance
Program for Cooperatives and Peoples Organization (DAPCOCO) (Llanto, 1993).

Table 8. Loans Outstanding Financial Institutions by Industry, 1986-1989

 Table 8 shows the data of different sector of the economy and the total amount of
volume with respect to the agricultural and non-agricultural loans provided by financial institution
from the year 1986-1989. It also shows the importance of distribution of private banks in the
total agricultural loans such that the share is relatively high. Most of the private banks lend their
money to corporations comprising business activities related to agriculture and medium-size
enterprises while most of the government and rural banks offered loans to some small rural
borrowers and some small-scale agricultural activities. From the study, we can conclude that die
banking system accounting 10-13 percent from the total volume of call such as production loans
were allotted to agriculture through rural banks into small-scale agriculture (Llanto, 1993).

Table 9. Agricultural Loans by Commodity, 1986-1990

Table 9 shows the distribution of the total agricultural loans based on the commodity.
The food commodities such as rice, fruits and vegetables, livestock and fisheries has the largest
share among the rest with a total of 51% while the export crops garnered the second rank which
has a total of 34% of all commodities. Llanto (1993) tells that there is a phenomenon called
“Assymetry in Agricultural credit allocation” which can be determine through calculating the size
of the farm and the allocative distribution of outputs in the market including export and
commercial markets.
The first program is CALF-Guarantee Program or the PCIC-CALF Program which was
approved in the year 1987, month of September through a Memorandum of Agreement that
making the PCIC-CALF Guarantee Program create an effect. One of its objectives is to protect
the financial lenders to extend its credit to small-farmers from a risk called loan-default which
guarantee a maximum of 85% of small and medium-scale agricultural loans (Llanto, 1993).
 The implementation of the program undergone some gradual changes to extend its
service to its PCIC-CALF guarantee such as shifting to credit guarantee from being multi-risk,
expansion of coverage which includes production-related services, increase in guarantee free
from 1.5% to 2% per annum of the outstanding loan submitted for gurantee, increase in loan
ceiling from Php 50,000 for individual borrowers into Php 150,000, ceiling of Php 3,000,000 for
institutional borrowers when loan is not intended for relending and decentralizarion of claims
settlement activities to the regional offices (Llanto, 1993).
From this program, there happened to be Quedan-CALF Program which guarantees
local traders, small farmers, cooperatives and millers to provide grains from invested bonded
warehouses in oppose to a negotiable warehouse receipt such as quedan, which can be used
as collateral to bank loans. From the year 1987-1991, loans have been guaranteed to a total of
Php 2.1 billion which benefits 510 groups consists of 148,714 individuals and receives only 3%
of the total loans paid as of December 21, 1991 or Php 51.4 million. Another program was
GFSME-CALF Program which established in 1983 aiming for stimulation of the flow of credit
into small and medium enterprises by giving them guarantee from their bank loans, as well as
with rural-based entrepreneurs. From a study conducted, the guarantee is up to 85% of the
outstanding loan which amounted to Php 307,000,000 with a total of 348 groups and 61,975
individual as their beneficiary (Llanto, 1993).
The second program is the Integrate Rural Financing Program (IRF) which use the
approach of credit-line to support financially their small-holder. Agricultural Credit Policy Council
creates a joint management with the Land Bank of the Philippine to support the pilot financing
product since year 1983. These two financial institutions has two primary features such as “a
comprehensive credit-line type of financing open to rural banks and cooperatives through the
Land Bank’s rediscounting window and an institutional-development component focused on
organizing and strengthening small farmers’ groups” which were strengthened by NGO’s
(Llanto, 1993).
Several trainings and programs have been conducted to farmers such as basic
enterprise management, bookkeeping skills and value formation through creating an intergrated
farming systems and financial capabilities to avoid borrowing funds, encouraging healthy
lifestyle within a community through encourage themselves to create a large impact through
holistic development in the viable and small home or rural industries and leading the process
less tedious for the farmers and the banks (Llanto, 1993).
Modifications have been created through transferring the supervision to Central Bank
from the year 1989. Strategically, they do not use special time deposits (STDs) instead they use
the rediscounting window to give loans to the farmers which will help them to have their own
promissory notes between rural banks and cooperation so that the Land Bank can give them
rediscounts. Another gradual change is the institution-building component of the special time
deposits which will help them to organize themselves to have a better delivery of credit coming
from the Land Bank. The modified IRF aims to create a stable relationship with the NGO’s to
prepare and train these farmer on how to manage and create a delivery system in processing
their credits (Llanto, 1993).
The ACPC conducted an evaluation on 1992 which results into an increasing number of
agricultural borrowers who participates in the IRF coming from the rural financial institution as
well as the lending system in IRF is more cost-effective other than the other programs. From the
data gathered, the approved amount to be lent costs Php 1,800,000,000 with Php 1,500,000
credit lines and a total of 119,546 beneficiaries because of RFI (Llanto, 1993).
 Other programs and policies offered by the government are Agricultural Loan Fund
(ALF) Countryside Loan Fund, Livelihood Enhancement for Agricultural Development (LEAD),
Development Assistance Program for Cooperatives and People’s Organizations (DAPCOPO)
and Grameen Bank Replication Project (Llanto, 1993).

References
Ballesteros, M. M., Ancheta, J., & Ramos, T. (2017, December 11). CARP Implementing Agencies and
Resource Utilization. Retrieved from
https://pidswebs.pids.gov.ph/CDN/PUBLICATIONS/pidsdps1734.pdf

CGAP. (2018). Rural and Agricultural Finance: Glossary. Retrieved from

http://www.findevgateway.org/rural-and-agricultural-finance-glossary

Edaño, L. (2018). Philippine Agrarian Reform. Retrieved from https://www.edmodo.com/file/view-

office-online?id=19c25c333231aabf2020bf254ad256d9

FIAN. (2014). The Comprehensive Agrarian Reform Program (CARP). Retrieved from
http://www.fianphilippines.org/advocacy-policy-work/the-comprehensive-agrarian-reform-
program-carp/

Guardian, E. (2003, May 16). Impact of access to land on food security and poverty: the case of Philippine
agrarian reform. Retrieved from http://www.fao.org/docrep/006/j0415t/j0415t08.htm

Investopedia. (2018). What is Microinsurance. Retrieved from

https://www.investopedia.com/terms/m/microinsurance.asp#ixzz5XMbO41BN

Investopedia. (2018). What is Microsavings. Retrieved from

https://www.investopedia.com/terms/m/microsavings.asp

Lawphil.net. (1988, June 10). Comprehensive Agrarian Reform Law of 1988. Retrieved from
https://www.lawphil.net/statutes/repacts/ra1988/ra_6657_1988.html

Llanto, G. M. (1993, June). Agricultural Credit and Banking in the Philippines: Efficiency and Access
Issues. Retrieved from
https://opendocs.ids.ac.uk/opendocs/bitstream/handle/123456789/3735/pidswp9302.pdf

Pabuayon, I. (2013). Agricultural Policy: Perspectives from the Philippines and Other Developing
Countries. Diliman, Quezon City: The University of the Philippines Press.

S, S. (2015, November 25). Difference Between Microcredit and Microfinance. Retrieved from
https://keydifferences.com/difference-between-microcredit-and-microfinance.html