RECEIVED
oct 02 2019 “|

Republic of the Philippines
House of Representatives
Queson City, Metro Manila

Eighteenth Congress
First Regular Session

055
HOUSE BILL NO.

Introduced by Representative Florencio Gabriel “Bem” G. Noel

EXPLANATORY NOTE

Micro-enterprises are considered as drivers of the Philippine economy. Statistics have shown the glaring
impact of Micro, Small and Medium Enterprises (MSME) to our economy. According to the Philippine
Statistics Authority, 99.56% or 920,677 of the total establishments in the country are MSMEs. Furthermore,
MSMESs generated the biggest number of jobs in the country, and statistics show that MSMEs generated a
total of 4,922,251 jobs in 2017 as compared to large enterprises that produced 909,838 jobs.'

Even though millions of Filipinos are employed in MSMEs, MSMEs are still hampered by numerous
challenges and setbacks such as lack of access in markets, technology and most importantly, to finance.
These challenges have been a taxing obstacle in the strengthening and supporting of the MSMEs in our
country. The lack of support for MSMEs have also been a restriction in developing Filipinos to become
more business driven which puts the skill, talent and dreams of Filipinos to waste

Republic Act (R.A.) No. 6977, otherwise known as “Magna Carta for Small Enterprises,” as amended, was
enacted in order to strengthen, promote and foster the growth of small and medium enterprises in the
country. In this regard, there is a need to further strengthen this Act by having more government officials
and employees engaged in the promotion of Small and Medium enterprises in the country.

‘This bill secks to expand the composition of the Micro, Small and Medium Enterprises Development
(MSMED) Council and the Small Business Corporation, as well as broaden the functions of said institutions
by amending R.A. No. 6977, as amended, in order to better serve the MSMEs

In view of the foregoing, the approval of this bill is eamestly sought.

FLORENCIO GABRIEL “BEM” G. NOEL

* 2017 MSME Statistics - ttps/ww i gov ph tifindex php/2014-04-02-03-40-26/news-oom/179-workshop-on-markt-scces-for MSMo-set


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Republic of the Philippines
Douse of Representatives
Queson City, Metro Manila

Eighteenth Congress
First Regular Session

House BiLLNo, 5055

Introduced by Representative Florencio Gabriel “Bem” G. Noel

AN ACT
FURTHER PROMOTING ENTREPRENEURSHIP BY STRENGTHENING, EMPOWERING AND
ENHANCING THE FINANCING PROGRAMS FOR MICRO, SMALL AND MEDIUM ENTERPRISES,
AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 6977, AS AMENDED, OTHERWISE KNOWN AS
THE “MAGNA CARTA FOR MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs)”

Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

SECTION 1. Section 2 of Republic Act No. 6977, as amended, is hereby further amended to read as
follows:

“SEC. 2. Declaration of Policy. - Recognizing that MSMEs have the potential [for] TO GENERATE
‘more employment [generation] and SPUR economic growth and therefore can help provide a self-sufficient
industrial foundation for the country, it is hereby declared the policy of the State to promote, support,
strengthen and encourage the growth and development of MSMEs in all productive sectors of the economy
particularly rural/agri-based, MANUFACTURING, FINANCE AND SERVICES enterprises. To this
end, the State shall recognize the specific needs of the MSMEs and shall undertake to promote
entrepreneurship, support entrepreneurs, encourage the establishment of MSMEs and ensure their
continuing viability and growth and thereby attain countryside industrialization by:

fee

SEC. 2. Section 4 of the same Act, as amended, is hereby further amended to read as follows:

“SEC. 4. Eligibility for Government Assistance. ~ To qualify for assistance, counseling, incentives and
promotion under this Act, businesses falling under the above definition must be:

“xxx

“[Eligible MSMEs shall be entitled to a share of at least ten percent (10%) of total procurement value of
goods and services supplied to the Government, its bureaus, offices and agencies annually.] THE
NATIONAL GOVERNMENT, ITS BUREAUS, OFFICES AND AGENCIES SHALL ALLOCATE
AT LEAST TEN PERCENT (10%) OF ALL ITS PROCUREMENT OPPORTUNITIES FOR


1 GOODS AND SERVICES TO ELIGIBLE MSMEs IN ACCORDANCE WITH THE PROVISIONS

2 OF REPUBLIC ACT NO. 9184, OTHERWISE KNOWN AS THE ‘GOVERNMENT
3 PROCUREMENT REFORM ACT”, AND ITS IMPLEMENTING RULES AND REGULATIONS.
4 “The [Department of Budget and Management] GOVERNMENT PROCUREMENT
5 POLICY BOARD (GPPB) shall FORMULATE RULES FOR THE EFFECTIVE
6 IMPLEMENTATION OF THIS PROVISION AND monitor the compliance of govemment
7 agencies on the required procurement for MSMEs and submit its report to the MSMED Council on a
8 semestral basis and to the Congress of the Philippines, through its appropriate committees on a
9 yearly basis.”

10

u SEC. 3. Section 5 of the same Act, as amended, is hereby further amended to read as follows:

2 “SEC. 5. Guiding Principles. ~ To set the pace for MSME development, the State shall be
B ‘guided by the following principles:

14 “XXX

1s “c) Coordination of government efforts. Government efforts shall be coordinated to achieve
16 coherence in objectives. All appropriate offices, particularly those under the Departments of Trade
7 and Industry, Finance, Budget and Management, Agriculture, Agrarian Reform, Environment and
18 Natural Resources, Labor and Employment, Transportation [and Communications],
19 INFORMATION AND COMMUNICATIONS TECHNOLOGY, Public Works and Highways,
20 Science and Technology, Interior and Local Government and Tourism as well as the National

a Economic and Development Authority, Philippine Information Agency and the Bangko Sentral ng
n Pilipinas, through their national, regional and provincial offices shall, o the best of their efforts and
2B in coordination with local government units, provide the necessary support and assistance to
4 MSMEs, THE DEPARTMENT OF TRADE AND INDUSTRY SHALL BE THE LEAD

25 AGENCY THEREFOR.

26 “xxx”

27

28 SEC. 4. Section 6 of the same Act, as amended, is hereby further amended to read as follows:

2» “SEC. 6. Micro, Small and Medium Enterprises Development Plan (MSMEDP). ~ The President
30 shall approve a six-year micro, small and medium enterprises development plan prepared by the
31 Department of Trade and Industry (DTI) which shall form part of the [Medium Term] Philippine
32 Development Plan ([MTJPDP). It shall be formulated in consultation with the private sector,
33 validated and updated semestrally. Such plan shall include a component on a micro credit financing
4 scheme.”

35

36 SEC. 5. Section 7 of the same Act, as amended, is hereby further amended to read as follows:

37 “SEC. 7. Micro, Small and Medium Enterprise Development (MSMED) Council. — The existing,
38 Small and Medium Enterprise Development Council, which was created by Republic Act No. 6977,

39 as amended by Republic Act No. 8289 AND REPUBLIC ACT NO. 9501, AND FURTHER


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AMENDED BY REPUBLIC ACT NO. 10644, shall be strengthened to effectively spur the growth
and development of MSMEs throughout the country, and to carry out the policy declared in this Act
and shall now be known as the Micro, Small and Medium Enterprise Development (MSMED)
Council. The Council shall be attached to the Department of Trade and Industry and shall be
constituted within sixty (60) days after the approval of this Act.

SEC. 6. Section 7-A of the same Act, as amended, is hereby further amended to read as follows:

“SEC. 7-A. Composition of the Micro, Small and Medium Enterprises Development (MSMED)
Council. ~ The members of the Council shall be the following:

“(a) The Secretary of Trade and Industry as Chair;

“(b) The Secretary of Agriculture:

“I The Secretary of the Interior and Local Government;

“(D) THE SECRETARY OF FINANCE;

“[(@)] I Three (3) representatives from the MSME sector, [to represent Luzon, Visayas and
Mindanao, with at least one (1) representative from the microenterprise sector] TO BE
DESIGNATED BY A NATIONAL ORGANIZATION REPRESENTING AND DOMINATED
BY MSMEs; AND

“[I One (1) representative from the women sector designated by the Philippine Commission on
Women;}

“{( One (1) representative from the youth sector designated by the National Youth
Commission; and]

“[(g)] (F) The Chairman of THE Small Business Corporation.

“A. Advisory Unit, ~ There shall be an Advisory Unit to the Council, which shall consist of the
following:

“(a) The Secretary of Science and Technology:

“(b) The Governor of the Bangko Sentral ng Pilipinas;

“1 The President of the Land Bank of the Philippines:

“(d) The President of the Development Bank of the Philippines;

“I The Director General of the National Economic and Development Authority;

“(F) THE EXECUTIVE DIRECTOR OF THE COOPERATIVE DEVELOPMENT
AUTHORITY;

“(G) A REPRESENTATIVE OF A NATIONAL ORGANIZATION REPRESENTING
AND DOMINATED BY MSME:

“[(O1 (H) One (1) representative from the labor sector, to be nominated by accredited labor
groups;



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“[@1 (A representative from the private banking sector to serve [alternatively]
ALTERNATELY between the chamber of thrift banks, and the Rural Banker's Association of the
Philippines (RBAP);

“[(h)] (J) A representative of the microfinance nongovernment organizations (NGOs),
DESIGNATED BY THE MICROFINANCE NGO REGULATORY COUNCIL;

“[(D] (K) A representative of the University of the Philippines-Institute for Small Scale
Industries (UP-ISSI); [and]

“{G)1 (L) The President of the Credit Information Corporation|.];

“(M)ONE (1) REPRESENTATIVE FROM THE WOMEN SECTOR DESIGNATED BY
‘THE PHILIPPINE COMMISSION ON WOMEN; AND

“(N) ONE (1) REPRESENTATIVE FROM THE YOUTH SECTOR DESIGNATED BY
‘THE NATIONAL YOUTH COMMISSION.

“(0)A REPRESENTATIVE FROM NONSTOCK SAVINGS AND LOAN
ASSOCIATIONS DESIGNATED BY THE ALLIANCE OF NON-STOCK SAVINGS AND
LOAN INSTITUTIONS, INC. (ANSLI).

“XXX.

‘SEC. 7. Section 7-B of the same Act, as amended, is hereby further amended to read as follows:

“SEC. 7-B. Powers and Functions. - A. The MSMED Council shall have the following powers,
duties and functions:

Gos

“h) To promote the productivity and viability of MSMEs IN DTI’S TOP PRIORITY
INDUSTRIES FOR DEVELOPMENT by way of directing and/or assisting relevant government

agencics and institutions at the national, regional and provincial levels towards the:

“XXX;

“12) Through appropriate government agencies:

xxx;

“f) Set-up new MSME NEGOSYO centers and revitalize already established MSME
NEGOSYO centers to provide MSMEs in the regions easier access to services such as, but not
limited to, the following:

“Xxx”

“B. Additional Functions of the MSMED Council. - THE MSMED Council shall have the
following additional functions:

“(a) Coordinating and Oversight Body for the MSME Negosyo Center. - The MSMED Council,
through the DTI, shall act as the coordinating and supervising body for all the agencies involved in
the establishment and operation of the MSME Negosyo Centers. Further, the MSMED Couneil shall
monitor and assess the progress of the Negosyo Centers, which shall be included in its annual report
submitted to the Congress.


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“(b) Provision of a Compliance Guide. — For each rule or group of related rules issued by any
‘government agency for compliance by MSMEs, the Council shall publish compliance guidelines
which shall be written in plain language or in the local dialect, if necessary.

“The Council shall prepare separate compliance guides covering groups or classes of similarly
affected MSMEs and shall cooperate with industry associations to develop and distribute such
compliance guides. The publication of each compliance guide shall include the posting of the guide
in an easily identified location on the website of the agency, and distribution of the guide to known
industry contacts, such as small entities, associations or industry leaders affected by the rule. The
issuing government agency shall publish and disseminate the compliance rules within ninety (90)
days from the date of issuance.

“(€) Conduct of Research on Women Entrepreneurship. ~ The Council shall conduct research
to support women entreprencurship including, but not limited to entrepreneurial behavior, barriers,
participation and cessation rates, discriminatory practices and contribution to the national economy
and growth.

“(€) Policy Formulation on Women Entrepreneurship. - The Council shall provide policy
direction towards recognizing women’s propensity in doing business as well as establish linkages
that will enable more opportunities for women to engage in entrepreneurship.

“(@)Development of Entrepreneurial Education and Training. - The MSMED Council shall
develop, in coordination with the Department of Education, TESDA and CHED, a course
curriculum or training program in entrepreneurship that will promote entrepreneurial culture and
competence. Entrepreneurship shall be integrated in the curriculum of educational and training
institutions in all levels.”

SEC. 8. Section 11-A of the same Act, as amended, is hereby further amended to read as follows:

“SEC. 11-A. Composition of the Board of Directors and its Powers. ~ The SB Corporation
[corporate powers shall be vested on] SHALL HAVE a Board of Directors composed of [eleven
(11)] THIRTEEN (13) members which shall include the following:

“a) The Secretary of Trade and Industry;

“b) The Secretary of Finance;

“C) THE PRESIDENT OF THE GOVERNMENT SERVICE INSURANCE SYSTEM
(GSIS);

“D) THE PRESIDENT OF THE SOCIAL SECURITY SYSTEM (SSS);

“[el E) A private sector representative to be appointed by the President OF THE
PHILIPPINES upon the recommendation of the MSMED Council;

“[d] F) Seven (7) representatives of the SB Corporation common stock sharcholders who shall
be elected based on proportional distribution, in accordance with Section 24 of the Corporation
Code; and


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“fl G) ‘The president += of _~— the. =) SB_— Corporation as
ex-officio member and to serve as vice chairman of the Board.

“The President shall appoint the chairman of the Board from among its members.

“All members of the Board so appointed, except for the ex-officio members, shall serve for a
term of three (3) years [without reappointment. AND MAY BE REAPPOINTED TO ANOTHER
‘TERM UNLESS EARLIER REVOKED. IF THE TERM OF THE INCUMBENT MEMBER
HAS EXPIRED, THE MEMBER SHALL CONTINUE TO FUNCTION IN A HOLDOVER
CAPACITY UNTIL A REPLACEMENT HAS BEEN APPOINTED AND QUALIFIED.
[The] ANY person [so] appointed to replace a member who has resigned, died, or been removed for
cause shall serve only for the unexpired portion of the term.

“The Board of Directors shall have, among others, the following specific powers and
authorities:

“xxx; and

“f) [Notwithstanding the provisions of Republic Act No. 6758 and Compensation Circular No.
10, Series of 1989 issued by the Department of Budget and Management, the Board shall have the
authority to p]Provide for the organizational structure, [and] staffing pattern [of SB Corporation and
to extend to the employees and personnel thereof salaries, allowances and fringe benefits similar to
those extended to and currently enjoyed by employees and personnel of other government financial
institutions,] AND COMPENSATION OF EMPLOYEES AND PERSONNEL OF THE SB
CORPORATION, FOR SUBMISSION TO THE GOVERNANCE COMMISSION FOR
Goce

SEC. 9. Section 11-B of the same Act, as amended, is hereby further amended, to read as follows:
“SEC. 11-B. Corporate Structure and Powers. ~ “A. The SB Corporation shall:
ox
“B. For this purpose, the SB Corporation [subject to compliance with the rules and regulations

to be issued by the Bangko Sentral ng Pilipinas (BSP) and the Securities and Exchange

Commission,] shall have the following functions and duties
“a) Source and adopt development initiatives for globally competitive MSMES in finance and

business technologies:

“b) [To] fe]Extend all forms of financial assistance, EXCEPT GRANTS AND SUBSIDIES,
to eligible MSMEs|.|, AND NOT TO PRECLUDE RETAIL LENDING IN AREAS WHERE,
PRIVATE BANKS ARE NOT ABLE TO SERVE, SUBJECT TO CONSULTATION WITH
THE PRIVATE BANKS; [SB Corporation may also engage in wholesale lending. The SB
Corporation shall be given two (2) years from the effectivity of this Act to comply with this
requirement:]

“c) Guarantee loans obtained by qualified MSMEs under such terms and conditions adopted by
the SB Corporation Board of Directors, AS WELL AS ESTABLISH A GUARANTEE SYSTEM


1 FOR DISTRESSED ENTERPRISES AS INSURANCE AGAINST EXTRAORDINARY

2 DISASTERS;

3 xxx;

4 “f) Apply for, receive and accept grants and donations from sources within and outside the
5 country; [and]

6 “g) Hold, own, purchase, acquire, sell, mortgage, dispose or otherwise invest or re-invest in
7 stocks, bonds, treasury bills, debentures, securities and similar forms of indebtedness of the
8 government, its agencies and instrumentalities or any government financial institution], J; AND

9 “H)SUBMIT AN ANNUAL REPORT TO THE MSMED COUNCIL, THE CONGRESS

10 OF THE PHILIPPINES AND THE GOVERNANCE COMMISSION FOR GOCCS ON THE
ul PERFORMANCE AND FINANCIAL CONDITION OF THE CORPORATION.

2 “THE SB CORPORATION SHALL BE EXEMPT FROM SECURING PRIOR BSP
B AUTHORIZATION FOR ENGAGING IN QUASI-BANKING ACTIVITIES AND SHALL
ry NOT BE SUBJECT TO BSP SUPERVISION AND REGULATION FOR SUCH
1s ACTIVITIES.”

16

” SEC. 10. A new subsection is hereby inserted after Section 11-B of the same Act, as amended, and
18 numbered as Section 11-C to read as follows:

19 “SEC. 11-C. STRATEGIC MANAGEMENT OF THE SB CORPORATION. ~ THE BOARD
20 OF THE SB CORPORATION, THROUGH ITS CHAIRMAN, SHALL BE FULLY
21 RESPONSIBLE AND ACCOUNTABLE FOR THE PERFORMANCE OF THE
n CORPORATION'S MANDATE. TO ENSURE THIS, THE BOARD SHALL BE
2B CONSTITUTED AS A MANAGING BOARD, LED BY ITS CHAIRMAN, TO
4 CONCEPTUALIZE THE STRATEGIC PLANS AND POLICIES OF THE CORPORATION.
25 “THE SB CORPORATION SHALL ADOPT A BALANCED SCORECARD
26 APPROACH, SUBJECT TO THE REVIEW AND APPROVAL OF THE GOVERNANCE
a1 COMMISSION FOR GOCCs, IN ITS STRATEGIC MANAGEMENT TO ENABLE IT TO
28 MANAGE ITS FINANCIAL PERFORMANCE WHILE PURSUING THEIR PUBLIC
29 POLICY OBJECTIVES OF SUPPORTING MICRO, SMALL AND MEDIUM
30 ENTERPRISES DEVELOPMENT.”

31

32 SEC. 11. Section 12 of the same Act, as amended, is hereby further amended to read as follows

33 “SEC. 12. Capitalization and Funding of the SB Corporation. ~ The SB Corporation shall have
34 an authorized capital stock of Ten billion pesos (P10,000,000,000.00). The initial capital of One
35 billion pesos (P1,000,000,000.00) shall be established from a pool of funds to be contributed in the
36 form of equity investments in common stock by the Land Bank of the Philippines (LBP), the
7 Development Bank of the Philippines (DBP), in the amount of Two hundred million pesos
38 (P200,000,000.00) cach. The Social Security System (SSS) and the Government Service Insurance

39 System (GSIS) shall also set aside Two hundred million pesos (P200,000,000.00) each for the SB


1 Corporation. Authorized capital stock of the [s]Small [b]Business [c|Corporation shall be divided

2 into 80,000,000 common shares and 20,000,000 preferred shares with a par value of One hundred
3 pesos (P100.00) per share: Provided, That the common shares which have been issued, including,
4 those issued against the assets of the KKK Guaranty Fund consolidated under the {s}Small
5 [b[Business [c|Corporation by virtue of Executive Order No. 233, Series of 2000 and Executive
6 Order No. 19, Series of 2001 and including those already subscribed, shall form part of the
d capitalization of the corporation: Provided, further, That holders of preferred shares issued under
8 Republic Act No. 6977, as amended, shall have the option to convert the same into common shares.
9 Additional equity funding shall come from trust placements of excess and unused funds of existing
10 ‘government agencies, bilateral and multilateral official development assistance funds, subscriptions
ul from government owned or controlled corporations AND THE NATIONAL GOVERNMENT
2 THROUGH THE DEPARTMENT OF BUDGET AND MANAGEMENT (DBM), and
1B investments of private financial institutions and corporations: Provided, finally, That any investment
4 from the private sector shall only be in the form of preferred shares.
15 “THE NATIONAL GOVERNMENT SHALL PROVIDE FOR THE FULL
16 CAPITALIZATION OF THE SB CORPORATION WITHIN A PERIOD OF FIVE (5)
” YEARS FROM THE APPROVAL OF THIS ACT.
18 “{To allow for capital build-up, SB Corporation shall be given a five (5) year grace period on
19 dividend commitments beginning on the date of effectivity of this amendment. Thereafter, it] THE
20 SB CORPORATION may [only] declare as dividend not more than thirty percent (30%) of its net
21 income and the rest withheld as retained earings.”
22
2B SEC. 12. Section 13 of the same Act, as amended, is hereby deleted.
m4 “|SEC. 13. The SB Corporation shall be subject to the supervision and examination of the
25 Bangko Sentral ng Pilipinas taking into consideration its developmental objectives.”]
26
27 SEC. 13. Section 14 of the same Act, as amended, is hereby renumbered as Section 13, and further
28 amended to read as follows:
2» “SEC. [14]13. Venture Capital and Micro Finance Trust Fund. ~The SB Corporation may set
30 aside an amount of money to encourage the setting up of a venture capital and micro finance trust
31 fund for the purpose of promoting business opportunities available to MSME sector, The Venture
32 Capital Fund shall be used mainly for venture capital finance especially in technology-oriented
33 industries. The micro finance trust fund shall be used to provide collateral-free fixed and working,
4 capital loans to micro and small enterprises run by those emerging out of poverty. A SEED
35 AMOUNT OF AT LEAST TEN PERCENT (10%) OF THE ADDITIONAL EQUITY
36 CONTRIBUTION OF THE NATIONAL GOVERNMENT TO THE CAPITALIZATION OF
37 ‘THE SMALL BUSINESS CORPORATION BUT NOT MORE THAN FIVE HUNDRED
38 MILLION PESOS (P500,000,000.00) SHALL BE SET ASIDE TO FUND THE VENTURE

39 CAPITAL AND MICRO FINANCE TRUST FUND.”


1 SEC. 14. Section 15 of the same Act, as amended, is hereby renumbered as Section 14, and further

2 amended to read as follows:
3

4 “SEC. [15]14, Mandatory Allocation of Credit Resources to Micro, Small and Medium
3 Enterprises. ~For the period of ANOTHER ten (110) years from the date of the effectivity of this
6 amendatory Act, all lending institutions as defined under Bangko Sentral ng Pilipinas rules, whether
7 public or private, shall set aside at least eight percent (8%) for micro and small enterprises and at
8 least two percent (2%) for medium enterprises of their total loan portfolio based on their balance
9 sheet as of the end of the previous quarter, and make it available for MSME credit as herein
0 contemplated.

n “Compliance of this provision shall be:

2 “a) actual extension of loans to eligible MSMEs; or

B xxx: oF

“4 “f) subscribe/purchase of liability instruments as may be offered by the SB Corporation. THE
1s SAME SHALL NOT BE DEEMED AS QUASI-BANKING OPERATIONS, AND SHALL
16 NOT REQUIRE A QUASI-BANKING LICENSE FROM THE BSP; OR

7 “(G) LOANS TO MSME VALUE CHAIN ACTORS WHO ALLOW MSMEs TO
18 PARTICIPATE IN ORGANIZED OR FORMAL VALUE CHAINS. VALUE CHAIN
19 ACTORS INCLUDE, AMONG OTHERS, TRADERS, SUPPLIERS, PROCESSORS,
20 AGGREGATORS WHO CONDUCT LINKED SEQUENCE OF VALUE ADDING
21 ACTIVITIES INVOLVED IN BRINGING A PRODUCT TO FINAL CONSUMERS.
n “The Bangko Sentral ng Pilipinas, IN CONSULTATION WITH THE MSMED COUNCIL
23 AND THE SECRETARY OF TRADE AND INDUSTRY, shall formulate rules for the effective
m4 implementation of this provision: Provided, That the purchase of government notes, securities and
25 other negotiable instruments shall not be deemed compliance with the foregoing provisions:
26 Provided, further, That the Bangko Sentral ng Pilipinas, IN CONSULTATION WITH ALL
n STAKEHOLDERS, shall establish [an] A MEANINGFUL incentive [program] SYSTEM to
28 ‘encourage [lending to micro, small and medium industries beyond the mandatory credit allocation to
2 said enterprises,| COMPLIANCE WITH THIS PROVISION, such as possible reduction in
30 bank's reserve requirement{.: PROVIDED, FINALLY, THAT THE BANGKO SENTRAL NG
31 PILIPINAS SHALL ALIGN ITS REGULATIONS ON THE PENALTIES FOR BANKS AND
2 OTHER ENTITIES, FOR NONCOMPLIANCE WITH THE PROVISION FOR
3 MANDATORY LENDING.

M “The MSMED Council shall set up the appropriate systems to monitor all loan applications of
35 MSMES in order to account for the absorptive capacity of the MSME sector. EACH LENDING
36 INSTITUTION SHALL DESIGNATE A CHIEF COMPLIANCE OFFICER WHO WILL
37 PREPARE AND SIGN THE REPORT ON COMPLIANCE AND NONCOMPLIANCE

38 WITH THE MANDATORY CREDIT ALLOCATION, FOR SUBMISSION TO THE


1 BANGKO SENTRAL NG PILIPINAS. The Bangko Sentral ng Pilipinas shall furnish to the

2 MSMED Council on a quarterly basis comprehensive reports on the banks” compliance|,| AND
3 noncompliance [and penalties of] WITH the above provisions on the mandatory credit allocation for
4 MSMES|., AND SHALL SUBMIT AN ANNUAL REPORT, SIGNED BY AN OFFICER
5 WITH THE RANK OF AT LEAST A MANAGING DIRECTOR, ON THE AMOUNTS OF
6 THE PENALTIES FOR NONCOMPLIANCE WITH THE MANDATORY LENDING
7 PROVISION OF THIS ACT.
8 “Lending institutions which are not qualified to acquire or hold lands of the public domain in
9 the Philippines shall be permitted to bid and take part in sales of mortgaged real property in case of
10 judicial or extra-judicial foreclosure, as well as avail of receivership, enforcement and other
" proceedings, solely upon default of a borrower, and for a period not exceeding five (5) years from
2 actual possession: Provided, That in no event shall title to the property be transferred to such lending,
B institution. If the lending institution is the winning bidder, it may, during said five (5) year period,
“4 transfer its rights to a qualified Philippine national, without prejudice to a borrower's rights under
1s applicable laws.”
16
0 SEC. 15. Sections 16, 17 and 18 of the same Act, as amended, are hereby renumbered as Sections 15, 16
18 and 17, respectively, to read as follows
19 “SEC. [16]15. Micro, Small, and Medium Enterprise Week. ~ xxx.”
20 “SEC. [17]16. Presidential Awards for Outstanding MSME. ~x xx.”
21 “SEC. [18]17. Congressional Oversight Committee. —xx x.”
22
23 SEC. 16. Section 19 of the same Act, as amended, is hereby renumbered as Section 18, and further
24 amended, to read as follows
25 “SEC. [19]18. Penalty Clause. - The BANGKO SENTRAL NG PILIPINAS shall impose
26 administrative sanctions and other penalties on the lending institutions for non|-Jcompliance with
7 THE provisions of this Act [including a fine of not less than Five hundred thousand pesos
28 (P500,000.00)]. THE MINIMUM PENALTY FOR NONCOMPLIANCE IS SET AT FIVE
29 HUNDRED THOUSAND PESOS (PS00,000.00) AND THE MAXIMUM PENALTY FIVE
30 MILLION PESOS (P5,000,000.00), IN PROPORTION TO THE BANK’S OR OTHER
31 ENTITY'S LEVEL OF COMPLIANCE: PROVIDED, THAT A SMALLER PENALTY IS
2 SET AT ONE HUNDRED THOUSAND PESOS (100,000.00) FOR SMALLER BANKS’
3 NONCOMPLIANCE. AS USED IN THIS ACT, SMALL BANKS SHALL BE DEFINED AS
34 BANKS WITH CAPITALIZATION OF NOT MORE THAN FIVE HUNDRED MILLION
35 PESOS (P500,000,000.00): PROVIDED, FURTHER, THAT THE DEFINITION OF SMALL
36 BANKS SHALL BE REGULARLY REVIEWED BY THE MSMED COUNCIL: PROVIDED,
37 FINALLY, THAT THE AFOREMENTIONED PENALTIES SHALL NOT BE IMPOSED ON
38 NEWLY-ESTABLISHED DOMESTIC AND FOREIGN BANKS WITHIN ONE (1) YEAR

39 FROM THE DATE THEY COMMENCED THEIR OPERATIONS.


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“Penalties on noncompliance shall be directed to the development of the MSME sector. Ninety
percent (90%) of the penalties collected should go to the MSMED Council Fund, while the
remaining ten percent (10%) should be given to the BSP to cover for administrative expenses.

“THE MSMED COUNCIL SHALL SUBMIT TO THE CONGRESS OF THE
PHILIPPINES AN ANNUAL REPORT ON THE STATUS OF THE PENALTIES
REMITTED AND HOW THE SAME WERE USED OR ARE BEING USED IN RELATION
TO THE IMPLEMENTATION OF = SERVICES = TO MSMES.
IN THE AREAS OF CAPACITY BUILDING, TECHNOLOGY INFORMATION,
COLLECTION AND DISSEMINATION, AND OTHER INTERVENTIONS FOR MSME
DEVELOPMENT, GROWTH AND SUSTAINABILITY.”

SEC. 17. Implementing Rules and Regulations (IRR). — The Department of Trade and Industry, through
the Bureau of Micro, Small and Medium Business Development and in consultation with the Bangko Sentral ng
Pilipinas and other concerned government agencies, nongovernment organizations and private sector agencies
involved in the promotion of MSMEs, shall formulate the implementing rules and regulations (IRR) necessary to
implement the provisions of this Act within ninety (90) days from the approval of this Act: Provided, That the
IRR shall be reviewed yearly: Provided, further, That the IRR shall be approved by the MSMED Council. The
IRR issued pursuant to this section shall take effect thirty (30) days after its publication in a national newspaper
of general circulation,

SEC. 18. Separability Clause. — The provisions of this Act are hereby declared to be separable. If any
provision of this Act shall be held unconstitutional, the remainder of this Act not otherwise affected shall remain
in full force and effect.

SEC. 19. Repealing Clause. — All laws, executive orders, rules and regulations, or parts thereof
inconsistent herewith are hereby repealed or modified accordingly.

SEC. 20. Effectivity. - This Act shall take effect within fifteen (15) days from its publication in the
Official Gazette or in a newspaper of general circulation.
Approved,