Success Story: From Farming to Commercial

Banking

History
LANDBANK was established on August 8, 1963 as part of the Agricultural Land Reform Code as
part of a program of land reform in the Philippines. It was to help with the purchase of agricultural
estates for division and resale to small landholders and the purchase of land by the agricultural
lessee. In 1965, LANDBANK's by-laws were approved and its first board of trustees was formed,
with the Secretary of Finance as Chairman.
On October 21, 1972, Presidential Decree No. 27, signed by President Ferdinand Marcos,
emancipated all tenant farmers working on private agricultural lands devoted to rice and corn,
whether working on a landed estate or not. The system was implemented through a system
of sharecropping or lease-tenancy. LANDBANK was tasked to collect 15-year
land amortizations from beneficiaries at the cost of the value of the land plus six percent interest per
annum.
By 1973, LANDBANK was in financial distress. It lacked the resources and the capital needed to
implement the land reform programs and lacked the structure to implement the programs efficiently.
On July 21, Marcos signed Presidential Decree No. 251 which revitalized the bank. The decree
granted LANDBANK a universal banking license (the first bank in the Philippines to be issued such a
license) with a social mission to spur countryside development. The decree expanded LANDBANK's
powers to include lending for agricultural, industrial, homebuilding and home-financing projects and
other productive enterprises, as well as lending to farmers' cooperatives and associations to facilitate
production, marketing of crops and acquisition of essential commodities. LANDBANK was also
required by the decree to provide timely and adequate support in all phases involved in the
execution of agrarian reform and also increased its authorized capital to 3 billion pesos. It also
became exempted from all national, provincial, city and municipal taxes and assessments.
LANDBANK was reorganized in 1977 when it was divided into three sectors to better assess the
needs of its customers. It was divided into Agrarian, Banking and Operations sectors to strengthen
operations and ensure long-term viability.
In 1982, the Agricultural Credit Administration (ACA), established under the same law as Landbank,
was abolished and all its assets and functions transferred to Landbank. ACA's function was to
extend credit to small farmers. Also in this year, Union Bank of the Philippines (UnionBank) was
formed, with LANDBANK having a 40-percent stake in the government-owned commercial bank.
LANDBANK became the financial intermediary for the Comprehensive Agrarian Reform
Program (CARP) in 1988. It was also in that year that UnionBank started a gradual privatization.
The Aboitiz Group of Companies acquired Landbank's 40% share of UnionBank then which it
continues to own. LANDBANK also became the third member of Expressnet, an interbank network in
December 1991 but now a BancNet member.
On February 23, 1995, LANDBANK's charter was once again amended. Its authorized capital was
increased to nine billion pesos and it became an official government depository. The number of
members of the board of trustees was also increased to nine. On August 25, 1998, Landbank's
authorized capital was once again increased to 25 billion pesos, and it then increased to 200 billion
pesos, after the DBP-LANDBANK merger in 2016.

After years of engaging in farming, members of a farmers cooperative in Naval, Biliran now ventured into
the world of banking. The Lico Agrarian Reform Cooperative (LARCoop) added quasi-banking into their list
of income generating projects. With some members who are college graduates, the Coop bravely gave this
practically new field a try.

In preparation, its management team together with other cooperatives attended the Microfinance,
Governance and Administration (MIGOA) seminar-workshop held in Naval in 2012. Chairperson Rebecca
Payos together with seven other coop members underwent a seminar on Microfinance Basic Capacity
Building (MBCB) in Cebu City and a 5-day on-the-job training in Siaton, Negros Oriental.

Last year, the Department of Agrarian Reform (DAR) recommended LARCoop to avail of the National
Confederation of Cooperatives (NATCCO) credit facilities and other assistances. Hence, LARCoop
became the 56th cooperative and the first from Region 8 to avail of NATCCOs microfinance assistance
which includes a P1-million loan payable in five years at 13 percent interest per annum.

With the loan, LARCoop opened a quasi-bank at the downtown area in Naval, Biliran. DAR officials last
December 18, 2012, representatives from the NATCCO and local government units witnessed the event
and the growth of the said cooperative.

The quasi bank according to Bibian Sereo, microfinance operations manager, offers savings deposit, time
deposit, kiddie deposit as well as loan assistance (providential, productive and microfinance). Its primary
goal is to address the financial needs of its members at very low interest rates.

On its launching day, 35 member-depositors opened an account. As of this writing, Sereo reported that
the quasi bank has already 524 depositors. LARCoop was organized by DAR in 2003 and registered as
Lico Agrarian Reform Beneficiaries Multi Purpose Cooperative (LARBMPC) and registered at the
Cooperative Development Authority (CDA) on February 21 of the same year with only 23 members
composed of agrarian reform beneficiaries (ARBs) and other farmers from the Naval-2 Agrarian Reform
Community (ARC).
The cooperative is engaged in micro-lending activities and food processing business with the joint effort of
the DAR and the Department of Trade and Industry (DTI) who assisted them through the years. The meager
income of the cooperative was not enough to provide the growing needs of its members, particularly the
rice farmers who needed bigger amount during planting season that would serve them as capital for their
farm operations hence, they ventured in to banking.

Though apprehensive, the cooperative took the risk of availing of production loan assistance from DARs
Credit Assistance Program for Program Beneficiaries Development (CAP-PBD) thru the Land Bank of the
Philippines. The cooperative was able to maintain a good standing with the bank. From the coops income,
they were able to acquire a 120 square meter lot in the village where they built their office.

In 2012, they changed their name to Lico Agrarian Reform Cooperative or LARCoop.

From 23 members, the cooperative has already 120 members as of December 18, 2012. Eighty of them
are ARBs. Since the opening of the quasi bank, 636 members more were added, bringing the total members
of the organization to 705.

From P 4,600 initial paid-up capital, LARCoop now posts a total asset of more than P5.6-million. These
include the 120 square meter lot and an office in Barangay Lico, and the recently inaugurated quasi bank.

As the coop expanded their operations, LARCoop opened their membership to residents of other barangays
and adjacent towns. During the inauguration of the cooperatives quasi bank, DAR Regional Director
Eliasem Castillo advised the officers and members to never give up when faced with challenges. He added
that DAR will always be there to guide and assist them. Castillo also reminded them the many assistances
extended by DAR to its beneficiaries which include credit facilities.

Recently, according to Provincial Agrarian Reform Officer (PARO) Ismael Aya-ay, the Coop was chosen by
his office to be the lead agrarian reform beneficiary organization (ARBO) who will take charge of the farm
machineries distributed under the Agrarian Reform Communities Connectivity and Economic Support
Services (ARCCESS). These machines will be used in realizing their agribusiness activities, such as their
Rice Productivity Enhancement Project that can lead to additional income in the form of rentals.

LARCoop is now among the more stable organizations in the province.