The creation of the P5-billion fund is embodied in a proposed measured called Enhanced Collateral Value of Farm Lands Act of 2002 which is already approved jointly by the House committee on agrarian reform chaired by Rep. Gregorio Ipong and the committee on banks and intermediaries headed by Rep. Jaime Lopez.
The fund will allow farmers to have greater access to rural credit , and it will even allow them to mortgage their rights to partially paid farm land acquired under the Comprehensive Agrarian Reform Program (CARP) which is currently prohibited under the current law.
The measure is a substitute for House bills 341,2665 and 3946 which seek to provide measures to enhance agricultural enterprises and the acceptability of agricultural lands as security for loans obtained from lenders, banks and other financial institutions.
Agriculture Secretary Leonardo Montemayor lauded the House of Representatives, saying the guarantee fund will complement the programs of government to intensify growth in the countryside.
He noted that the Department of Agriculture through, the Quedan and Rural Credit Guarantee Corp. (Quedancor) provided P1.123 billion in loans for the first nine months of the year to agricultural enterprises.
Productivity in the agriculture sector is being hampered to a large extent because of farmers’ lack of access to badly-needed funds that will go into agricultural inputs.
In a related development, Montemayor called on Congress to review the 10-year period of the non-transferability for awarded lands contained in the bill.
"The prohibition on the sale, transfer or conveyance of lands acquired by beneficiaries needs to undergo an evaluation to determine if this period is advantageous to the farmer considering his capacity to optimize the use of his land," said Montemayor.
The review, he added, can be done by an independent body of experts to be tapped by the Agricultural Credit and Policy Council.
"We should encourage CARP beneficiaries to hold on to their lands. But with their need for credit however, a shorter time period of his prohibition will boost the collaterability of the lands," noted Montemayor.
He added that the unacceptability of CARP-awarded lands as loan collateral is mainly due to their lack of any real market value.
"There is uncertainty over their transferability and valuation, so that in the event of loan default, banks can dispose agricultural lands only to the government, which is also the one that sets the value of these lands."