Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 4512

Introduced by Representative Jericho Jonas B. Nograles

EXPLANATORY NOTE

Micro, small and medium enterprises (MSMEs) comprise 99.57% of all
businesses in the country, employ 63% of the total labor force and contribute 35% to
total value added.

President Rodrigo Roa Duterte acknowledges the importance of MSMEs to the
country’s economy. In the 13% ASEAN Business and Investment Summit, President
Duterte declared that the economic thrust of the Philippines will focus on innovating
MSMEs, among others. Moreover, in his 2019 State of the Nation Address, he stated
that the government will further implement programs and extend financial support to
MSMEs.

‘The Magna Carta for MSMEs (Republic Act No. 6977, as amended by Republic
Act No. 8289 in 1997 and Republic Act No. 9501 in 2008, and further amended by
Republic Act No. 10644 in 2014) defines the national policy to promote, support,
strengthen and encourage the growth and development of MSMEs. This law needs to
be reviewed and amended, when necessary, to make it more responsive to the current
requirements of the MSME sector.

In the 17% Congress, the amendatory bill to the Magna Carta for MSMEs was
approved on Third Reading by the House of Representatives as House Bill No. 8714.
Among the salient provisions of House Bill No. 8714 are the following:

+ Expansion of the membership of the Micro, Small and Medium Enterprise
Development (MSMED) Council, the Advisory Unit and the Small Business
Corp. (SB Corp.);

* Submission of an annual report by the SB Corp. to the MSMED Council, the
Congress of the Philippines and the Governance Commission for GOCCs
(GCG) on the performance and financial condition of the corporation;

* Deletion of the provision subjecting the SB Corp. to the supervision and
examination of the Bangko Sentral ng Pilipinas, and exempts the SB Corp.
from securing prior BSP authorization for engaging in quasi-banking
activities;

* Provision by the National Government for the full capitalization of the SB
Corporation within a period of five (5) years from the approval of the Act;

+ Extension to another ten (10) years of the implementation of the mandatory
allocation of credit resources by the banks for MSMEs; and


+ Increase in the penalties for non-compliance of the banks with the mandatory
lending.

The aforementioned provisions of House Bill No. 8714 are embodied in this bill,
together with the following additional amendments:

*Change in the name of the Small Business Guarantee and Finance
Corporation (which was created by Republic Act No. 6977) to Small Business
Corporation; and

* Deletion of the function of the SB Corporation of guaranteeing loans obtained
by qualified MSMEs,

The additional amendments are in view of the fact that, by virtue of Executive
Order No. 58 issued in July 2018, the guarantee functions, programs and funds of
the SB Corp. have been transferred to the PhilEXIM, which has been re-named as the
Philippine Guarantee Corporation.

The immediate passage of this bill is earnestly sought.

fue JONAS i NOGRALES


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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. sale

Introduced by Representative Jericho Jonas B. Nograles

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


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“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

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 GOODS
AND SERVICES TO ELIGIBLE MSMEs IN ACCORDANCE WITH THE
PROVISIONS OF REPUBLIC ACT NO. 9184, OTHERWISE KNOWN AS THE
“GOVERNMENT PROCUREMENT REFORM ACT’, AND ITS IMPLEMENTING
RULES AND REGULATIONS.

“The [Department—of—Budget—and—Management] GOVERNMENT
PROCUREMENT POLICY BOARD (GPPB) shall FORMULATE RULES FOR THE
EFFECTIVE IMPLEMENTATION OF THIS PROVISION AND monitor the
compliance of government agencies on the required procurement for MSMEs
and submit its report to the MSMED Council on a semestral basis and to the
Congress of the Philippines, through its appropriate committees on a yearly
basis.”

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

“SEC. 5. Guiding Principles. — To set the pace for MSME development,

the State shall be guided by the following principles:

“XX

“c) Coordination of government efforts. Government efforts shall be
coordinated to achieve coherence in objectives. All appropriate offices,
particularly those under the Departments of Trade and Industry, Finance,
Budget and Management, Agriculture, Agrarian Reform, Environment and
Natural Resources, Labor and Employment, Transportation [and
Communications], INFORMATION AND COMMUNICATIONS
TECHNOLOGY, Public Works and Highways, Science and Technology,
Interior and Local Government, and Tourism as well as the National
Economic and Development Authority, Philippine Information Agency and
the Bangko Sentral ng Pilipinas, through their national, regional and
provincial offices shall, to the best of their efforts and in coordination with
local government units, provide the necessary support and assistance to

MSMEs. THE DEPARTMENT OF TRADE AND INDUSTRY SHALL BE THE
LEAD AGENCY THEREFOR. :


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

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

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

“SEC. 7. Micro, Small and Medium Enterprise Development (MSMED) Council.

—The existing Small and Medium Enterprise Development Council, which was
created by Republic Act No. 6977, as amended by Republic Act No. 8289 AND
REPUBLIC ACT NO. 9501, AND FURTHER 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.

“xxx.”

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;

*(c) The Secretary of the Interior and Local Government;

“(D) THE SECRETARY OF FINANCE;

“{(d)] (E) Three (3) representatives from the MSME sector, [te-represent

microenterprise—sector} TO BE DESIGNATED BY A NATIONAL,
ORGANIZATION REPRESENTING AND DOMINATED BY MSMEs; AND

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nae < 1:
“{{- One {1} representative from-the youth sector designated by the National
“{(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;

“(c) The President of the Land Bank of the Philippines;

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

“(e) 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 MSMEs;

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

“{(@)] () 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;

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

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

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

“(N)| ONE (1) REPRESENTATIVE FROM THE YOUTH SECTOR
DESIGNATED BY THE NATIONAL YOUTH COMMISSION; AND

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

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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:
"nS
“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 agencies and institutions at
the national, regional and provincial levels towards the:
“XxX,
“12) Through appropriate government agencies:
*‘=25
“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 Council shall
monitor and assess the progress of the MSME Negosyo Centers, which shall
be included in its annual report submitted to the Congress.

“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

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publish and disseminate the compliance rules within ninety (90) days from
the date of issuance.

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

“d) 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.

“e) 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 of the same Act, as amended, is hereby further amended to

read as follows:

“SEC. 11. Creation of Small Business [Guarantee-and-Finanee] Corporation.
~There is hereby created a body corporate to be known as the Small Business
[Guarantee-and_Finanee] Corporation, hereinafter referred to as the [Small
Business-Corporation {SB-Corperation]] SB CORPORATION, which shall be
charged with the primary responsibility of implementing comprehensive
policies and programs to assist MSMEs in all areas, including but not limited
to finance and information services, training and marketing.

SEC. 9, 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-14j] 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);


1 “D) THE PRESIDENT OF THE SOCIAL SECURITY SYSTEM (SSS);
2 “[c] E) A private sector representative to be appointed by the President OF
3 THE PHILIPPINES upon the recommendation of the MSMED Council;
4 “{d] F) Seven (7) representatives of the SB Corporation common stock
5 shareholders who shall be elected based on proportional distribution,
6 in accordance with Section 24 of the Corporation Code; and
7 “{e] G) The president of the SB Corporation as ex-officio member and to
8 serve as vice chairman of the Board.

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

10 members.

a “All members of the Board so appointed, except for the ex-officio members,

2 shall serve for a term of three (3) years [without reappointment, AND MAY BE

3B REAPPOINTED TO ANOTHER TERM UNLESS EARLIER REVOKED. IF THE

“ ‘TERM OF THE INCUMBENT MEMBER HAS EXPIRED, THE MEMBER SHALL

15 CONTINUE TO FUNCTION IN A HOLDOVER CAPACITY UNTIL A

16 REPLACEMENT HAS BEEN APPOINTED AND QUALIFIED. [Fhe]ANY person

v7 [se] appointed to replace a member who has resigned, died, or been removed

18 for cause shall serve only for the unexpired portion of the term.

19 “The Board of Directors shall have, among others, the following specific

20 powers and authorities:

21 “xxx; and

22

23

24

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28 those-exte ntly-en employees aR

29 of other government financial institution] AND COMPENSATION OF

30 EMPLOYEES AND PERSONNEL OF THE SB CORPORATION, FOR

31 SUBMISSION TO THE GOVERNANCE COMMISSION FOR GOCCs.”

32 SEC. 10, Section 11-B of the same Act, as amended, is hereby further

33. amended, to read as follows: ’

34 “SEC. 11-B. Corporate Structure and Powers. — A. The SB Corporation

35 shall:

36 ex.


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“B. For this purpose, the SB Corporation |

d_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) [Fe] [e] 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-Gerperation

“[a)] C) Hold, purchase, lease or otherwise acquire and own real and
personal property, introduce necessary improvements thereon and to sell,
mortgage, encumber or otherwise dispose of the same as may be necessary
in the normal course of business;

“(e}] _D) Formulate means and methods of accepting alternative
collaterals and implementing alternative loan evaluation models;

“{9] E) Apply for, receive and accept grants and donations from sources
within and outside the country; [and]

“{@] F) Hold, own, purchase, acquire, sell, mortgage, dispose or
otherwise invest or re-invest in stocks, bonds, treasury bills, debentures,
securities and similar forms of indebtedness of the government, its agencies
and instrumentalities or any government financial institution [.]; AND
“G) SUBMIT AN ANNUAL REPORT TO THE MSMED COUNCIL, THE
CONGRESS OF THE PHILIPPINES AND THE GOVERNANCE COMMISSION
FOR GOCCs ON THE PERFORMANCE AND FINANCIAL CONDITION OF THE
CORPORATION.
THE SB CORPORATION SHALL BE EXEMPT FROM SECURING
PRIOR BSP AUTHORIZATION FOR ENGAGING IN QUASI-BANKING
ACTIVITIES AND SHALL NOT BE SUBJECT TO BSP SUPERVISION AND
REGULATION FOR SUCH ACTIVITIES. .


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SEC. 11. A new sub-section is hereby inserted after Section 11-B of the same

Act, as amended, and numbered as Section 11-C to read as follows:

“SEC. 11-C. STRATEGIC MANAGEMENT OF THE SB CORPORATION. -
THE BOARD OF THE SB CORPORATION, THROUGH ITS CHAIRMAN,
SHALL BE FULLY RESPONSIBLE AND ACCOUNTABLE FOR THE
PERFORMANCE OF THE CORPORATION'S MANDATE. TO ENSURE THIS,
THE BOARD SHALL BE CONSTITUTED AS A MANAGING BOARD, LED BY
ITS CHAIRMAN, TO CONCEPTUALIZE THE STRATEGIC PLANS AND
POLICIES OF THE CORPORATION.

“THE SB CORPORATION SHALL ADOPT A BALANCED SCORECARD
APPROACH, SUBJECT TO THE REVIEW AND APPROVAL OF THE
GOVERNANCE COMMISSION FOR GOCCs, IN ITS STRATEGIC
MANAGEMENT TO ENABLE IT TO MANAGE ITS FINANCIAL PERFORMANCE,
WHILE PURSUING THEIR PUBLIC POLICY OBJECTIVES OF SUPPORTING
MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT.”

SEC. 12. Section 12 of the same Act, as amended, is hereby further amended

to read as follows:

“SEC. 12. Capitalization and Funding of the SB Corporation. — The SB
Corporation shall have an authorized capital stock of Ten billion pesos
(P10,000,000,000.00). The initial capital of One billion pesos
(P1,000,000,000.00) shall be established from a pool of funds to be
contributed in the form of equity investments in common stock by the Land
Bank of the Philippines (LBP), the Development Bank of the Philippines
(DBP), in the amount of Two hundred million pesos (P200,000,000.00) each.
The Social Security System (SSS) and the Government Service Insurance
System (GSIS) shall also set aside Two hundred million pesos
(P200,000,000.00) each for the SB Corporation. Authorized capital stock of
the [s]Small [bjBusiness {c|Corporation shall be divided into 80,000,000
common shares and 20,000,000 preferred shares with a par value of One
hundred pesos (P100.00) per share: Provided, That the common shares
which have been issued, including those issued against the assets of the
KKK Guaranty Fund consolidated under the [small [b]Business
[clCorporation by virtue of Executive Order No. 233, Series of 2000 and
Executive Order No. 19, Series of 2001 and including those already
subscribed, shall form part of the capitalization of the corporation: Provided, ,
further, That holders of preferred shares issued under Republic Act No. 6977,

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as amended, shall have the option to convert the same into common shares.
Additional equity funding shall come from trust placements of excess and
unused funds of existing government agencies, bilateral and multilateral
official development assistance funds, subscriptions from government
owned or controlled corporations AND THE NATIONAL GOVERNMENT
THROUGH THE DEPARTMENT OF BUDGET AND MANAGEMENT (DBM),
and investments of private financial institutions and corporations: Provided,
‘finally, That any investment from the private sector shall only be in the form
of preferred shares.

THE NATIONAL GOVERNMENT SHALL PROVIDE FOR THE FULL
CAPITALIZATION OF THE SB CORPORATION WITHIN A PERIOD OF FIVE
(5) YEARS FROM THE APPROVAL OF THIS ACT.

“Hee

effectivity of thie-amendmentThereafter, it] THE SB CORPORATION may
only] declare as dividend not more than thirty percent (30%) of its net
income and the rest withheld as retained earnings.”

SEC. 13, Section 13 of the same Act, as amended, is hereby deleted.

SEC. 14, Section 14 of the same Act, as amended, is hereby renumbered as
Section 13, and further amended to read as follows:
“SEC, [14] 13. Venture Capital and Micro Finance Trust Fund. — The SB

Corporation may set aside an amount of money to encourage the setting up of
a venture capital and micro finance trust fund for the purpose of promoting
business opportunities available to MSME sector. The Venture Capital Fund
shall be used mainly for venture capital finance especially in technology-
oriented industries. The micro finance trust fund shall be used to provide
collateral-free fixed and working capital loans to micro and small enterprises
run by those emerging out of poverty. A SEED AMOUNT OF AT LEAST TEN
PERCENT (10%) OF THE ADDITIONAL EQUITY CONTRIBUTION OF THE
NATIONAL GOVERNMENT TO THE CAPITALIZATION OF THE SMALL
BUSINESS CORPORATION BUT NOT MORE THAN FIVE HUNDRED MILLION
PESOS (P500,000,000.00) SHALL BE SET ASIDE TO FUND THE VENTURE
CAPITAL AND MICRO FINANCE TRUST FUND.”

10


SEC. 15. Section 15 of the same Act, as amended, is hereby renumbered as

Section 14, and further amended to read as follows:

“SEC. [15] 14. Mandatory Allocation of Credit Resources to Micro, Small
‘and Medium Enterprises. — For a period of ANOTHER ten (10) years from the
date of effectivity of this amendatory Act, all lending institutions as defined
under Bangko Sentral ng Pilipinas rules, whether public or private, shall set
aside at least eight percent (8%) for micro and small enterprises and at least
two percent (2%) for medium enterprises of their total loan portfolio based on
their balance sheet as of the end of the previous quarter, and make it
available for MSME credit as herein contemplated.

“Compliance of this provision shall be:

*a) actual extension of loans to eligible MSMEs; or

“xxx; or

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

“G) LOANS TO MSME VALUE CHAIN ACTORS WHO ALLOW MSMEs TO
PARTICIPATE IN ORGANIZED OR FORMAL VALUE CHAINS. VALUE CHAIN
ACTORS INCLUDE, AMONG OTHERS, TRADERS, SUPPLIERS,
PROCESSORS, AGGREGATORS WHO CONDUCT LINKED SEQUENCE OF
VALUE ADDING ACTIVITIES INVOLVED IN BRINGING A PRODUCT TO
FINAL CONSUMERS.

“The Bangko Sentral ng Pilipinas , IN CONSULTATION WITH THE
MSMED COUNCIL AND THE SECRETARY OF TRADE AND INDUSTRY, shall
formulate rules for the effective implementation of this provision: Provided,
That the purchase of government notes, securities and other negotiable
instruments shall not be deemed compliance with the foregoing provisions:
Provided, further, That the Bangko Sentral ng Pilipinas, IN CONSULTATION
WITH ALL STAKEHOLDERS, shall establish [an] A MEANINGFUL incentive
[program] SYSTEM to encourage [lending—to—microsmall_and—medium
COMPLIANCE WITH THIS PROVISION, such as possiblé reduction in bank’s
reserve requirement|.]: PROVIDED, FINALLY, THAT THE BANGKO SENTRAL
NG PILIPINAS SHALL ALIGN ITS REGULATIONS ON THE PENALTIES FOR,

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BANKS AND OTHER ENTITIES, FOR NONCOMPLIANCE WITH THE
PROVISION FOR MANDATORY LENDING.”

“The MSMED Council shall set up the appropriate systems to monitor
all loan applications of MSMEs in order to account for the absorptive
capacity of the MSME sector. EACH LENDING INSTITUTION SHALL
DESIGNATE A CHIEF COMPLIANCE OFFICER WHO WILL PREPARE AND
SIGN THE REPORT ON COMPLIANCE AND NONCOMPLIANCE WITH THE
MANDATORY CREDIT ALLOCATION, FOR SUBMISSION TO THE BANGKO
SENTRAL NG PILIPINAS. The Bangko Sentral ng Pilipinas shall furnish the
MSMED Council on a quarterly basis comprehensive reports on the banks’
compliance[;]| AND noncompliance [and—penalties—of] WITH the above
provisions on the mandatory credit allocation for MSMEs|.|, AND SHALL
SUBMIT AN ANNUAL REPORT, SIGNED BY AN OFFICER WITH THE RANK
OF AT LEAST A MANAGING DIRECTOR, ON THE AMOUNTS OF THE
PENALTIES FOR NONCOMPLIANCE WITH THE MANDATORY LENDING
PROVISION OF THIS ACT.

“Lending institutions which are not qualified to acquire or hold lands
of the public domain in the Philippines shall be permitted to bid and take
part in sales of mortgaged real property in case of 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 actual possession: Provided, That in no event shall title to
the property be transferred to such lending institution. If the lending
institution is the winning bidder, it may, during said five (5) year period,
transfer its rights to a qualified Philippine national, without prejudice to a
borrower's rights under applicable laws.”

SEC. 16. Sections 16, 17 and 18 of the same Act, as amended, are hereby

renumbered as Sections 15, 16 and 17, respectively, to read as follows:

“SEC. [16] 15. Micro, Small, and Medium Enterprise Week. — x x x”
“SEC. [17] 16. Presidential Awards for Outstanding MSME, — x x x”
“SEC. [18] 17. Congressional Oversight Committee. — x x x”
SEC. 17. Section 19 of the same Act, as amended, is hereby renumbered as

Section 18, and further amended, to read as follows:

“SEC. [19] 18. Penal Clause. - The Bangko Sentral ng Pilipinas shall

- impose administrative sanctions and other penalties on the lending

institutions for non|-|compliance with THE provisions of this Act. [ineludinga

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MINIMUM PENALTY FOR NONCOMPLIANCE IS SET AT FIVE HUNDRED

THOUSAND PESOS (P500,000.00) AND THE MAXIMUM PENALTY FIVE

MILLION PESOS (P5,000,000.00), IN PROPORTION TO THE BANK’S OR

OTHER ENTITY’S LEVEL OF COMPLIANCE: PROVIDED, THAT A SMALLER

PENALTY IS SET AT ONE HUNDRED THOUSAND PESOS (P100,000.00) FOR

SMALLER BANKS’ NONCOMPLIANCE. AS USED IN THIS ACT, SMALL BANKS

SHALL BE DEFINED AS BANKS WITH CAPITALIZATION OF NOT MORE THAN

FIVE HUNDRED MILLION PESOS (P500,000,000.00): PROVIDED, FURTHER,

THAT THE DEFINITION OF SMALL BANKS SHALL BE REGULARLY

REVIEWED BY THE MSMED COUNCIL: PROVIDED, FINALLY, THAT THE

AFOREMENTIONED PENALTIES SHALL NOT BE IMPOSED ON NEWLY-

ESTABLISHED DOMESTIC AND FOREIGN BANKS WITHIN ONE (1) YEAR

FROM THE DATE THEY COMMENCED THEIR OPERATIONS.”

“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. 18. Implementing Rules and Regulations. — The Department of Trade
and Industry, through the Bureau of Micro, Small and Medium [Business]
ENTERPRISE 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 beapproved 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.

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SEC. 19. 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 the Act not otherwise affected shall remain in full force and effect.

SEC. 20. Repealing Clause. — All laws, executive orders, rules and
regulations, or parts thereof inconsistent herewith are hereby repealed or modified
accordingly.

SEC. 21. Bffectivity. — This Act shall take effect within fifteen (15) days from
its publication in the Official Gazette or in a newspaper of general circulation.

Approved,

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