The new “Agricultural Free Patent Act” (RA 11231 signed recently by President Duterte, is seen to “deliver a huge and immediate impact on the economy, on investments in the countryside and on inclusive growth” from the agriculture sector.
RA 11231 lifts restrictions on owners of agricultural free patents and lands from mortgaging or selling them within five years from date of possession, which have made agricultural lands and patents unbankable assets since banks are not inclined to hold a property for five years before its disposition.
Albay Rep. Joey Sarte Salceda, principal author of the measure in the Lower House, said the new law makes agricultural land titles immediately available for trade to help spur development in the agricultural sector, easing up prohibitions in granting public farmlands and qualified beneficiaries access to capital. It likewise empowers qualified farmland beneficiaries to legally manage and improve their lands as viable livelihood sources.
“For a country that has its roots in agriculture it is sad to note that agriculture only contributed 8.5% to the gross domestic product (GDP) in 2017, but with the new law, there will be a radical change because farmers are empowered and given the option on what to do with the land,” said Salceda.
RA 11231 removes the restrictions on agricultural free patents imposed under the Commonwealth Public Land Act No. 141 which prohibits land owners to sell and mortgage the land within the first five years of the patent grant. It also gives original owner the option to buy back the property within five years from the date of sale.
Salceda, a noted economist, said these restrictions have given poor farmers limited options to obtain funds to modernize and hike farm productivity and invest in their improvement. These were further aggravated by the government’s failure to help maximize farm production through modernization and inadequate use of inputs to hike productivity and make farming more viable and source of economic growth for farmers, the community and the country as a whole.
“Obtaining funds for capitalization by farmers to become farmer-entrepreneurs is very difficult, and access to credit has always been problematic for the poor. With RA 11231, Filipino farmers can have easy access to fresh funds, break away from stagnancy and move fast across the other side of the poverty line,” he stressed.
Banks and financial institutions require loan borrowers to present collaterals but farmers almost always have no assets to use as collateral other than the lands they till. This situation, Salceda noted, is reflected in the poor compliance by banks with the Agri-Agra Reform Credit Act of 2009, with banks only allocating 1.05% of their loan portfolio for agrarian reform credit vs. the 10% required compliance and 12.83% allocation for agricultural credit.
The 1936 Public Land Act adversely affected about 2.5-3 million agricultural patents covered by this restriction, or nearly 25% of the 12 million registered patents, that cannot be mortgaged or sold, except in the informal markets where their value remains depressed.
Salceda explained the restrictions have denied farmers their “freedom to decide on the future of their farmlands as they hampered access to capital.” This is further compounded by the right granted to heirs of the original landowner to repurchase the property within five years.
RA 11231, he said, unleashes the power of freer land markets and credit will now be made more freely available to farmer beneficiaries. Bankers, particularly rural and thrift bankers, who could not extend credit before due to the prohibition of loans without secure collaterals, will welcome an increase in the number of unrestricted properties as collateral for loans, he said.
“Now that these Commonwealth-era restrictions are removed, a tremendous amount of capital can be unleashed providing farmers with much-needed funds to improve their farms. The state will also benefit from the increase in lending activities and documentary and other taxes related to credit growth, and from the increase in land transactions and related taxes,” Salceda pointed out.