Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

5540

HOUSE BILL NO.

Introduced by Honorable Michael L. Romero and Enrico A. Pineda

EXPLANATORY NOTE

The Small Business Guarantee and Finance Corporation (SBGFC) was created
‘on 24 January 1991 under Republic Act 6977, (as amended by Republic Act
8289). The Corporation was given a mantle of authority to offer a wide range of
financial services, specifically for small and medium enterprises engaged in
manufacturing, processing, agribusiness (except crop level production) and
services (except trading). These financial services include among others
guarantee, direct and indirect lending, financial leasing, secondary mortgage.
venture capital operations and the issuance of debt instruments for compliance
with the mandatory allocation provision.

On November 16, 2001 . the Small Business Guarantee and Finance Corporation
(SBGFC) and the Guarantee Fund for Small and Medium Enterprises (GFSME)
were merged through Executive Order 28, and became known as the Small
Business Corporation ($B Corporation).

Aside from the creation of SBGFC, the law likewise has the following significant
provisions:

1) the creation of the Small and Medium Enterprise Development (SMED);
2) the mandatory allocation of credit resources to small enterprises; and

3) the rationalization of government assistance programs and agencies
concemed with the development of SMEs. SBGFC commenced its
operations on July 16, 1992. It is attached to the Department of Trade and


Industry and is under the policy, program and administrative supervision of
the Small and Medium Enterprise Development (SMED) Council.

At the time of the merger, GFSME was a guarantee fund operated
independently by a Management Committee and professional staff under the
Livelihood Corporation, a corporation attached to the Office of the President of
the Philippines. GFSME's services were restricted to offering of guarantee
services to participating financial institutions lending to SMEs from the time it
started commercial operations in 1984.

This House Bill seeks to create a more effective financial institution better geared
fo meet the needs of the Small Medium Enterprises (SME) market. With the
merger, the National Government became the single biggest stockholder of
Small Business Corporation.

Earnest approval of this bill is hereby requested.

MICHAL ROMERO Ph.D fon PINEDA
/

L


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO, 5540

Introduced by Honorable Michael L. Romero and Enrico A. Pineda

AN ACT

TO PROVIDE ADDITIONAL CAPITALIZATION AND FUNDING TO THE
SMALL BUSINESS CORPORATION (SB Corporation), TO
EFFECTIVELY SPUR ITS GROWTH AND DEVELOPMENT

THROUGHOUT THE COUNTRY, TO RATIONALIZE ITS GUIDELINES,

AND FOR OTHER PURPOSES

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

SECTION 1. Declaration of Policy - The state shall hereby be responsible for
the promotion, growth and development of small and medium enterprises in the
country by way of facilitating and closely coordinating national efforts to
promote the viability and growth of small and medium enterprises, including
assisting relevant agencies in the tapping of local and foreign funds for small
and medium enterprise development. as well as promoting the use of existing
guarantee programs.


SECTION 2. Implementing Rules and Regulations — To foster the pace for
small and medium enterprise development, the State shall be guided by the
following principles:

(a) Minimal set of rules and simplification of procedures and
requirements. All government agencies having to do with small
enterprises shall pursue the principles of minimum regulation to
ensure stability of rules and to encourage entrepreneurial spirit
among the citizenry.

The agencies shall see to it that procedural rules and requirements,
within their respective offices and in coordination with other
agencies, are minimized in the act of registration, availment of
financing and accessing other government services and assistance.

(b) Role of the private sector. In order to hasten growth and
expansion of small and medium enterprises, the private sector
throughout the country shall be encouraged to assist in the
effective implementation of this Act by constantly policing their
ranks; and by participating in government programs for small and
medium enterprises strictly in accordance with law. and consistent
with the attainment of the purposes hereof.

The government shall encourage the organization and
establishment of small and medium enterprise industry associations
at the local and regional levels preferably unified under a national
federation/association.

(¢) Coordination of government efforts. Government efforts shall be
coordinated to achieve coherence in objectives. All appropriate
offices, particularly those under the Department of Trade and
Industry (DTI), Department of Finance (DOF), Budget and
Management (DBM), Agriculture (DA), Agrarian Reform (DAR),
Environment and Natural Resources (DENR), Labor and Employment
(DOLE), Transportation (DOT), Communication (ICT), Public Works
and Highways (DPWH), Science and Technology (DOST), and Local
Government as well as the National Economic and Development
Authority (NEDA) and the Central Bank of the Philippines (BSP),
through their national, regional and provincial offices, shall to the
best of their effort and in coordination with local government units,
provide the necessary support and assistance to small and medium
enterprises.


(d) Decentralization. The State shall accelerate the decentralization
process by establishing regional and provincial offices in order to
enhance and attain greater efficiency in the provision of services to
the countryside and the implementation of this Act. in coordination
with local government units.

To this end. the Government Agencies shall effect a substantial
delegation of authority their regional and provincial offices to make
decisions, particularly in the registration of beneficiaries of this law,
qualification for availment of benefits, accreditation of private
voluntary organizations, industry associations and cooperatives, and
fo resolve complaints for violation of applicable laws.

SECTION 3. Capitalization and Funding. — The Small Business Corporation
{SB Corp) shall have an additional authorized capital stock of Two billion pesos
(P2,000,000,000.00). The 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
Philippines National Bank (PNB), 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 to be placed in
preferred stocks of the SBGFC,

Additional funding shall come from trust placements of excess and
unused funds of existing government agencies, bilateral and multilateral official
development assistance funds, subscription from government-owned or
controlled corporations (GOCC), and investments of private financial institutions
and corporations.


SECTION 4. Allocation of Credit Resources to Small Enterprises. — All
lending institutions as defined under the BSP code, whether public or private,
shall, set aside a portion of their total loan portfolio based on their balance
sheet as of the end of the previous quarter, and make it available for small
enterprise credit as herein contemplated.

The portion mandated to be so set aside shall at least, eight per cent (8%)
by the end of the year of the effectivity of this Act, thirteen percent (13%) by the
end of the second year through the end of the fourth year, and eight percent
(8%) by the end of fifth year.

The BSP in consultation with the SBCorp, shall formulate rules for the effective
implementation of this provision:

Provided, That the purchase of government notes, securities, and other
negotiable instruments, with the exception of such instruments as may be
offered by the SBCorp, shall not be deemed compliance with the foregoing
provision,

SECTION 5. Periodic Reports - The SBCorp shall submit periodic reports on
its findings and make recommendations on actions to be taken by Congress
and Senate and the appropriate department, and in order to carry out the
objectives and mandates of this Act,

SECTION 6. Automatic Review - Every year after the effectivity of this Act,
an independent review panel composed of experts to be appointed by the
President shall review the policies and programs in the SBCorp and shall make
recommendations, based on its findings, to the President and to both Houses of
Congress.


SECTION 7. Repealing Clause. All laws. executive orders, issuances, rules
and regulations inconsistent with this Act are hereby amended, repealed or
modified accordingly.

SECTION 8. Separability Clause. If, for any reason or reasons, any portion
or provision of this Act shall be held unconstitutional or invalid, the remaining
provisions not affected thereby shall continue to be in full force and effect.

SECTION 9. Effectivity Clause. This Act shall fake effect fifteen (15) days
after its publication in any newspaper of general circulation.

Approved,