FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
Second Regular Session 
1 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
Section 9 Article I1 of the Constitution provides. that the State shall free the 
people from poverty through policies that provide adequate social services, promote 
full employment, a rising standard of living, and an improved quality of life for all. 
Republic Act No. 8425, otherwise known as the "Social Reform and Poverty Alleviation 
Act", points to the institution of the expansion of micro-credit and microfinance services 
as one of the fundamentals in eradicating poverty in the country. 
Since 2004, microfinance loans to four million entrepreneurial poor have reached 
P223.98 billion. Such coverage of microfinance services reveals the potential of micro- 
enterprise development institutions in providing opportunities for the poor to explore 
economic undertakings and climb up the social ladder. 
The bill seeks the creation of micro-enterprise development institutions to 
expand, enhance and promote the access of the poor to microfinance services such as 
credit, insurance, savings and health care, enabling them to operate their own 
productive economic opportunities. 
To encourage the expansion of services of the micro-enterprise development 
institutions, the proposed measure provides that they shall be exempted from national 
and local taxes. In lieu of this exemption, they shall be subject to a tax of 2% of their 
gross income as contribution to the People's Development Trust Fund created and 
established under the "Social Reform and Poverty Alleviation Act". 
Recognizing the enormous contribution of microfinance services in the fight 
against poverty, it is high time that the national government create an enabling 
environment for the promotion, broadening and enhancement of su?h services to the 
poor population. It is the intent of the measure institute micro-enterprise development 
to accelerate socio-economic progress. 
In view of the foregoing, the passage of this bill is earnestly sought. 
Senator 


FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
Second Regular Session 
1 
S E N A T E  
S.B. No. 
Introduced by Senator Loren Legarda 
AN ACT 
ENTERPRISE DEVELOPMENT INSTITUTIONS, AND FOR OTHER PURPOSES 
GOVERNING THE CREATION AND ACCREDITATION OF MICRO- 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
Section 1. Title. This Act shall be known and cited as the "Micro-Enterprise 
Development Institution Act of 2008." 
Section 2. Declaration ofpolicy. It is hereby declared the policy of the State 
to pursue a more focused program of poverty eradication wherein every poor 
Filipino family shall be empowered to meet its minimum basic needs including 
income security. 
In pursuance of this policy, the government shall work in partnership with 
qualified institutions in the private sector for the poor to have more access to micro- 
finance, micro-insurance, micro-health care, micro-housing, business development, 
such as leadership training and entrepreneurial skills training, and human 
development services to help the poor entrepreneurs achieve a level of sustainability 
and empowerment and adopt measures to promote a spirit of generosity and selfless 
giving among individuals and institutions that would help support all programs 
directly involved in poverty eradication. 
Section 3. Coverage. The Act shall apply to non-stock, non-profit Micro- 
Enterprise Development Institutions whose mission is totally focused on poverty 
eradication, and are duly accredited by the Securities & Exchahge Commission 
(SEC), as the accrediting entity, and registered with the Bureau of Internal Revenue 
(BIR). 
Section 4. Definition of Terns. For purpose of implementing this Act, the 
following definitions shall apply: 
a) "Micro-Enterprise Development Institutions (MED1)"- refers to a non-stock, 
non-profit corporation organized and operated to provide Micro-Enterprise 
Development Strategy, as defined in letter (b) hereof, thfough the broad 
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package of financial and human development services as well as other 
business development services to the poor to enable them to operate their 
own productive economic activities; provided, no part of the net of income of 
the MEDI inures to the benefit of any private individual, 
and the 
administrative expenses of which, on an annual basis, conform with the rules 
and regulations to be prescribed by the Secretary of Finance, upon 
recommendation of the Commissioner of Internal Revenue, but in no case to 
exceed thirty percent (30%) of the total expenses; 
b) ”Micro-Enterprise Development Strategy” - a social reform program 
exclusively for the poor to improve the asset base of households and expand 
the access to micro-finance services, such as micro-credit, micro-insurance, 
micro-savings and micro-health care for the poor through the broad package 
of business development services and other non-financial services as well as 
to the poor to enable them to operate their own productive economic 
activities; 
c) ”Poor” - refers to individuals and families whose income fall below the 
poverty threshold as defined by the National Economic and Development 
Authority and/or cannot afford in a sustained manner to provide their 
minimum basic needs of food, health care, education, housing and other 
essential amenities of life; 
d) ”Social Reform” - refers to the continuing process of addressing the basic 
inequities in Filipino society through a systematic, unified and coordinated 
delivery of socio-economic programs or packages; 
e) ”Utilization” by an accredited MEDI - shall refer to: 
i) 
Any amount in cash or in kind, including administrative expenses, 
paid or utilized by an accredited MEDI to accom$ish one or more 
purposes for which it was created or organized; or 
Any amount paid to acquire an asset used, or held for use, directly 
in carrying out one or more purposes for which the accredited 
MEDI was created or organized; or 
Any amount in cash or in kind invested in any poverty eradication 
activity related to the purpose for which it was created or 
organized; or 
Any amount set aside for a specific project which comes within one 
or more purpose or purposes for which the accredited MEDI was 
created, provided that the amount will be utilized for specific 
project within a period not to exceed five (5) years, and the project 
is the one which can be better accomplished by setting aside such 
amount than by immediate payments of funds; 
ii) 
iii) 
iv) 
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v) 
vi) 
Any amount in cash or kind invested in capital sustaining and 
generating activities, such as but not limited to, government 
securities, endowment funds, trust funds, money market 
placements, shares of stock and similar instruments: Provided, 
that any income derived from these investments shall be 
exclusively used in activities directly related to one or more 
purposed for which the accredited MEDI was created or organized. 
”Accrediting Entity” - shall refer to the Securities & Exchange 
Commission (SEC) and the Bureau of Internal Revenue (BIR), the 
regulatory powers of which shall be defined in the implementing 
rules and regulations of this Act. 
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Section 5. Form of Organization. A MEDI as defined in Section 4 (a) shall 
be established as a non-stock non-profit corporation. 
Section 6. Capita2 Requirements. A MEDI shall have a fund balance of not 
less than Fifty Million Pesos (P50,000,000.00). 
Section 7. Supervision and Accreditation. The Accrediting Entity established 
under this Act shall establish and operationalize a system of accreditation to 
determine the qualifications of the MEDI. It shall have the followihg functions and 
responsibilities: 
a) Examine, evaluate and accredit the MEDI as a pre-requisite for its registration 
with the BIR for purposes of tax exemption under this Act. 
b) Issue a Certificate of Accreditation to the MEDI upon determination that it 
meets the criteria for accreditation; Provided, that the Certificate of 
Accreditation shall be valid for such period as may be prescribed by 
implementing rules and regulations’ 
c) Review and deny the application of any MEDI, which ddes not meet the 
criteria for accreditation. The MEDI shall be notified of the denial of its 
application, the reasons therefore, and the evaluators’ recommendation in 
order that the MEDI may meet the criteria for accreditation. The procedure 
for reconsideration of and/or effecting any corrections amendments to the 
application shall be provided in the implementing rules and regulations of 
this Act. 
Section 8. Monitoring and Verification of Annual Infomation Return. 
The 
Accrediting Entity shall monitor the MEDIs and coordinate to ensure that the 
provisions of this Act are complied with. 
Section 9. Withdrawal of Certificate of Accreditation and Revocation 
of 
the Certificate of Registration. - The Accrediting Entity shall have the authority to 
withdraw the Certificate of Accreditation, which it used toregister the MEDI upon a 
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determination that the latter ,no longer meets the criteria for accreditation under 
Section 7 of this Act. 
Section 10. Exemption from the National and Local Taxes. No taxes, local 
and national, shall be imposed on MEDIs duly accredited by the Accrediting Entity 
and registered with the BIR. In lieu thereof, two percent (2%) of the gross income 
derived by the MEDIs shall be remitted to the National Government. This two 
percent(2%) tax shall be entirely contributed to the People’s Development Trust 
Fund established under Republic Act No. 8425 otherwise known as the ”Social 
Reform and Poverty Alleviation Act”. In addition, borrower of the MEDIs shall not 
be subject to the documentary stamp tax imposed under Section 179 of the Tax 
Code, as amended. 
The term ”gross income” means gross receipts less sales returns, allowances, 
discounts and other costs of services. Interest expenses of a MEDI shall be 
deductible from gross receipts as part of cost of services in arriving at gross income. 
The term gross income shall exclude donations. 
Section 11. Deductibility ofDonations. Donations to a MEDI shall be fully 
deductible form the gross income of the donor and shall be exempt from donor’s tax 
imposed under Sec. 98 of the Tax Code. 
Section 12. Implementing Rules and Regnlations. The SEC, in coordination 
with the BIR, shall formulate the implementing rules and regulations of this Act 
within sixty (60) days after its approval. Such rules and regulations shall take effect 
fifteen (15) days after their publication in a newspaper of general circulation in the 
Philippines. 
Section 13. Separability Clause. 
If any provision of ‘this Act or the 
application thereof to any person or circumstances is held invalid, 
the other 
provisions of this Act and the application of such provisions to other persons or 
circumstances shall not be affected thereby. 
Section 14. Repealing Clause. All internal revenue issuances, rules and 
regulations, or parts thereof, which are contrary to or inconsistent’with this Act are 
hereby repealed, amended or modified accordingly. 
Section 15. Effectivity. This Act shall take effect upon its a&roval. 
Approved, 
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