Republic of the Philippines
House of Representatives
Quezon ity, Alotes Manila

EIGHTEENTH CONGRESS
Second Regular Session

House Bill No. @45!

INTRODUCED BY
REP. ALFRED VARGAS

AN ACT
INSTITUTIONALIZING THE POVERTY REDUCTION THROUGH SOCIAL
ENTREPRENEURSHIP (PRESENT) PROGRAM, AND PROMOTING SOCIAL
ENTERPRISES WITH THE POOR AS PRIMARY STAKEHOLDERS,

EXPLANATORY NOTE

Poverty remains to be one of the main challenges that the country
faces today. With the daunting crisis from the COVID-19 pandemic, the
World Bank is expecting an increase in the poverty rate in the country for
2020.1

Social enterprises, as organizations that seek to reduce poverty and
improve the well-being of the poor and the marginalized, are recognized as
one of the key players in poverty reduction. Thus, this bill seeks to involve
various sectors of society in the fight against poverty with the Poverty
Reduction through Social Entrepreneurship (PRESENT) Program, in line
with a counterpart measure in the Senate, Sen. Sonny Angara’s Senate Bill
No.820.

This bill seeks to promote people’s participation and empowerment;
establish sustainable and innovative programs that reduce income
inequality and increase self-resilience among the poor; and develop effective
mechanisms for the provision of quality and accessible social services to the
poor, among others.

In view of the foregoing, the immediate passage bil-is
earnestly sought.
FRED VARGAS

* »Povery rate seen to rise this year”. 2020. PhilStar Global.

hilstar.com/headlines/2020/06/10/201 ise-year



Republic of the Philippines
House of Representatives
Quezon ity, Metro Manila

EIGHTEENTH CONGRESS
Second Regular Session

House Bill No. _7457

INTRODUCED BY
REP. ALFRED VARGAS

AN ACT
INSTITUTIONALIZING THE POVERTY REDUCTION THROUGH SOCIAL
ENTREPRENEURSHIP (PRESENT) PROGRAM, AND PROMOTING SOCIAL
ENTERPRISES WITH THE POOR AS PRIMARY STAKEHOLDERS

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:
CHAPTER I
GENERAL PROVISIONS

SECTION 1. Short Title. - This Act shall be known as the "Poverty
Reduction Through Social Entrepreneurship (PRESENT) Act.”

SECTION 2. Declaration of Policy. - The State shall promote a just and
dynamic social order that will ensure the prosperity and independence of
the nation and 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. The State shall provide social
justice in all phases of national development and that the State values the
dignity of every human person and guarantees full respect for human rights.

The goals of the national economy are a more equitable distribution of

opportunities, income, and wealth; a sustained increase in the amount of


goods and services produced by the nation for the benefit of the people; and
an expanding productivity as the key to raising the quality of life for all,
especially the underprivileged. The State shall promote industrialization and
full employment based on sound agricultural development and agrarian
reform, through industries that make full and efficient use of human and
natural resources, and which are competitive in both domestic and foreign
markets.

‘The State also recognizes the important role of enterprises in the
economy as the major agent of development, creating off-farm employment
opportunities and providing transitional means for improving the livelihood
of the people.

Towards this end, the State shall pursue an inclusive growth strategy
that promotes an environment conducive to the development and growth of
a vibrant social enterprise sector engaged in poverty reduction, economic
and social development. It shall empower the poor as primary stakeholders
in social enterprises, establish mechanisms essential to realizing their
potential and achieving their full growth, and extend the assistance
necessary for their advancement. The State shall likewise provide technical
and financial assistance, incentives and other services to enable Social
Enterprises to develop into viable and vital anti-poverty agents, and a strong
social entrepreneurship movement that will be instrumental in reducing

poverty in the country.

SECTION 3. Definition of Terms. - The following terms when used in this
Act shall mean:

a) Social Enterprise or SE refers to a social mission-driven organization
in the form of an association, single proprietorship, partnership,
corporation, cooperative, peoples organization, non-stock non-profit
and peoples organizations or any other legal form that conducts
economic activities providing goods and/or services directly related to
their primary mission of improving the well-being of the poor, basic
and marginalized sectors and their living environment. A social

enterprise explicitly declares and pursues poverty reduction as its


b)

d)

principal objective by purposefully rendering both transactional and
transformational services. An SE engages and invests in the poor to
become effective workers, suppliers, clients and/or owners and
ensures that a substantive part of the wealth created by the enterprise
is distributed to or benefits them. In addition to reinvesting its
surplus or profits back to the enterprise to sustain the fulfillment of
its social mission, a SE also uses it surplus or profits and mobilizes
other resources to assist the poor to become partners in SE or value
chain management and governance and to become partners in
community, sectoral and societal transformation.

A single proprietorship, partnership or corporation must fulfill
the cligibilities set forth in Section 14 to avail of the benefits and
incentives under this Act.

Government-Procuring Entity refers to any branch, department, office,
agency, or instrumentality of the government, including state
universities and colleges, government-owned and/or -controlled
corporations, government financial institutions, and local government
units procuring Goods, Consulting Services and Infrastructure
Projects;

Basic Sectors, as defined by Republic Act 8425 or the "Social Reform
and Poverty Alleviation Act”, refer to the disadvantaged sectors of
Philippine society, namely: farmer-peasant, artisanal fisherfolk,
workers in the formal sector and migrant workers, workers in the
informal sector, indigenous peoples and cultural communities,
women, persons with disabilities, senior citizens, victims of calamities
and disasters, youth and students, children, and urban poor;
Economic Subsectors refer to networks of related actors, and
enterprises performing various functions in value chains. These actors
and enterprises transform raw materials into finished products, or
develop services, and distribute or provide them through market
channels to final consumers; they may be identified by key raw
material source, by finished product or final service provided. An

economic subsector may be comprised of several competing value


e)

hy

chains. By understanding the dynamics of economic subsectors and
using them as units of planning social entrepreneurship
interventions, government agencies, support institutions and SEs
shall more effectively reach and benefit a greater number of poor in
poverty reduction programs;

Marginalized Sectors refer to groups of people who are stigmatized or
excluded by virtue of their physical, psychological, economic, social or
cultural circumstance;

Poor, as defined by Republic Act 8425, 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, education, housing and other essential amenities of life;
Poverty Reduction refers to overcoming the income, resource and
capability deprivation among the poor, basic and marginalized sectors;
Social Enterprise Service Institution refers to an organization that
provides assistance to SEs for them to become viable and sustainable
and which assistance pertains to supplying needs such as trainings,
education and other capacity-building measures, research and
development, and other similar activities;

Transactional Services refer to enterprise or market-driven activities,
such as providing loans, demonstrating new technologies or
conducting trainings that are necessary for the poor in the SE system
to effectively and efficiently perform their roles as workers, suppliers,
clients and owners. Transactional services may be fee-based, such as
the granting of loans, or non-fee based, such as the extension of
production-related trainings;

Transformative Services refer to activities that empower the poor, such
as leadership formation, organizational development, financial and
legal literacy, asset build-up and providing education and experiential
learning opportunities, to become conscious change agents for

themselves, for their communities, sectors and society as a whole;


k) Value Chains refer to value-adding economic activities that an
enterprise is interlinked with in the process of producing goods
and/or services to serve its chosen market. A value chain typically
consists of: 1) raw materials processing, 2) inbound distribution or
logistics, 3) manufacturing operations, 4) outbound distribution or
logistics, 5) marketing and selling, and 6) after-sales service. These
activities are supported by 6) purchasing or procurement, 7) research
and development, 8) human resource development, and 9)
organizational development. A SE that understands and manages its
value chain improves its capability to create economic, environmental
and social values towards improving the position and benefits of the
poor in the value chain and towards ensuring the viability and
sustainability of the enterprise; and

1) Living Wage refers to the amount of family income needed to provide
for the family’s food and non-food expenditures with sufficient
allowance for savings/ investments for social security so as to enable
the family to live and maintain a decent standard of human existence
beyond mere subsistence level, taking into account all of the family’s

physiological, social and other needs.

CHAPTER II
POVERTY REDUCTION THROUGH SOCIAL ENTERPRISES

SECTION 4. Formulation of a Poverty Reduction Through Social
Entrepreneurship (PRESENT) Program. - The PRESENT Program shall be
established as a flagship program of government. The objective of the
PRESENT Program is to progressively improve the position and benefits
derived by a big number of the poor, marginalized and basic sectors derived
from economic subsector development and growth. It shall do this by
identifying strategic economic subsectors with the potentials for growth and
where the poor are concentrated or could be major players. In the process, it
shall identify and develop key SEs and resource institutions as partners in

providing transactional and transformational services towards poverty


reduction. SEs shall be developed as vehicles to ensure that the poor benefit

the most from sustainable subsector development.

The formulation of the PRESENT program shall be guided by the

following principles:

a)

b)

io)

dq)

e)

8)

h)

Promoting sustainable programs that support the development of
inclusive value chains in key economic subsectors, towards reducing
inequality in incomes and increase self-reliance among the poor;
Enabling SEs to overcome constraints and to take advantage of
opportunities for enhancing the position and benefits of the poor and
their living environments including those that harness innovative
approaches in addressing social problems;

Development of sustainable mechanisms for the provision of quality
and accessible social services to the poor;

People's empowerment by ensuring the participation of the poor, basic
and marginalized sectors;

Gender-sensitivity by ensuring women's equal rights and access to
SE's resources;

Ecological soundness in the pursuit of sustainable and equitable
development;

Incorporation of the PRESENT Program in the government's poverty
reduction drive as a major sustainable and comprehensive strategy;
and

Rationalization of poverty reduction programs by streamlining and
coordinating the various anti-poverty programs of the government to
reduce inefficiency and duplication and to improve the effectiveness of
each program.

The planning framework of the PRESENT Program and its planning

process shall ensure that the poor are engaged as primary stakeholders. It

shall add value and complement ecosystem-based, area-based, community-

based and other tools and processes in local economic development by

promoting and utilizing the economic subsector as a strategic unit of

analysis and planning SE development interventions.


PRESENT medium-term and annual development plans shall be

formulated in synchrony with the medium-term development plan of the
national government.
SECTION 5. National Enterprise Development Council. - The existing
Micro, Small and Medium Enterprise Development (MSMED) Council, which
is an attached agency of the Department of Trade and Industry, shall be
strengthened and expanded to effectively spur the growth and development
of MSMES and SEs throughout the country, and to carry out the policy
declared under this Act. It shall now be known as the National Enterprise
Development Council, herein referred to as the Council.

In addition to the existing functions of the Council as provided under
Republic Act 9501 or the “Magna Carta for Micro, Small and Medium
Enterprises”, the Council shall serve as the primary agency tasked to carry
out the promotion, growth and development of social enterprises in the
country. To ensure that the Council is able to fulfill its additional mandate,
there shall be an SE Committee under the Council that shall perform the
following specific duties:

a) Promote social enterprise as a key strategy for reducing poverty and
enabling inclusive growth;

b) Provide oversight for the implementation of the PRESENT Program
and activities of the Center for Social Enterprise Development (CSED):

©) Establish policies, plans, programs and projects to develop and
promote SE as a tool for poverty reduction as part of a comprehensive

Social Enterprise Development Plan fully integrated and consistent

with national development objectives and plans;

4) Monitor and evaluate the performance of programs and projects of

CSED for appropriate incentives;

¢) Submit annual and other periodic reports to the President and the

Congress of the Philippines;

{) Promulgate such rules and regulations and exercise such other
powers and functions as may be necessary to carry out the purposes
of this Act; and


g Perform such other functions as may be necessary for its effective
operations and the continued enhancement, growth and development
of the SE sector.

The SE Committee shall be composed of the DTI, relevant council
members and the following representatives from the SE Sector and SE
Service Institutions to realize these powers and functions:

a) Nine (9) representatives from SEs, three (3) representatives each from
the main island groupings of Luzon, Visayas, and Mindanao;

b) Three (3) representatives from SE service institutions; and

c) Three (3) representatives from SE advocacy groups.

SECTION 6. Center for Social Enterprise Development. - There shall be
established a Center for Social Enterprise Development (CSED) under the
supervision of the Council and to be headed by an Executive Director, which
shall have the primary responsibility of implementing comprehensive
policies for Social Enterprise Development. Specifically, the CSED shall be
responsible for:

a) The development and implementation of the PRESENT Program as

approved by the Council, with the following components:

1. Formulation and implementation of social entrepreneurship-
oriented strategic economic sub-sector development plans that
shall serve as the basis for major policies, projects and
activities;

2. Capacity Building and Sustainability - The CSED: will work with
qualified Social Enterprise Service Institutions and other
intermediaries to design and deliver training and education in
social entrepreneurship development, institutional start-up or
strengthening, human resource competency and skills training,
business planning and advisory services, upgrading of
accounting and auditing systems, technical assistance for the
installation or improvement of management information
systems, technology intervention, technology

incubation/commercialization, market studies, and product


development competitiveness, business matching activities,

trade fairs and missions, policy advocacy, disaster-resiliency

and other related activities.
| Research and Development - The CSED in coordination with the

NEDA, DOST, DTI, and other appropriate agencies, research

institutions, and intermediaries, shall develop and enhance a

research and development system that:

i. provides studies on opportunities for poverty reduction and
SE development in key economic subsectors and other
inputs for the Council to undertake strategic planning for
programs and projects;

ii, equip SEs and support institutions with services and
technologies that are appropriate for enhancing the
participation and benefits of the poor in various economic

subsectors; and

equip SEs and support institutions with innovative, and

sustainable approaches to improve access of the poor to

quality basic social services.

_ Information and Marketing Assistance - The CSED shall
promote the development and expansion of local and foreign
markets for the products and services of SEs. Towards this, the
CSED shall:

i. establish a marketing assistance program that will assist
SEs match supply with demand in both domestic and foreign
markets, as well as promote SE products and services
through tri-media, trade fairs and trade missions; and

ii. develop install and sustain a market information system for

SEs with the assistance of the DTI and DOT. All government

departments, agencies, bureaus, research institutions, as

well as the Local Government Units (LGUs) shall consolidate
and continuously update all relevant information and data
that would be of use to SEs on a periodic basis and make

such data available in a dedicated website on the internet.


b) Establishment and implementation of criteria and process for the
qualification of SEs that shall be eligible for support and other
incentives as provided by this Act and as approved by the Council;

©) Identification of sources of financing for the SE sector not limited to
grants, loans and equity financing for enterprise incubation, start-up
and expansion;

4) Management of multi-stakeholder convergence programs and
activities among government agencies and private organizations in
support of the PRESENT Program;

e) Coordination with the concerned government agencies and local
government units in the development and implementation of the
PRESENT Program and projects.

{) Coordination with social enterprise stakeholders, including people's
organizations, non-government organizations, and multi-sectoral and
multi-disciplinary pool of experts from the academe, practicing
professionals, business, industry, youth, women and other concerned
sectors to provide advice and technical assistance on matters

pertaining to SEs.

SECTION 7. Role of LGUs in SE Development. - LGUs shall be encouraged
to incorporate viable SE development plans in their local plans and

collaborate with SEs.

SECTION 8. Social Enterprise Development Fund. - There shall be
included in the budget of the DTI under the annual General Appropriations
‘Act an initial amount of Nine Hundred Million Pesos (P900,000,000.00) for
the establishment of a Social Enterprise Development Fund (SEDF) which
shall be utilized as grants to SEs for the plans set forth under the PRESENT
program.
The SEDF shall be allocated for:
a) Six Hundred Million Pesos (P600,000,000.00) for value-chain
financing; and
b) Three Hundred Million Pesos (P300,000,000.00) for enterprise


development services.

‘After the first year of implementation, such sums as may be necessary
to fund the SEDF shall be included in the budget of the DTI under the
annual General Appropriations Act.

Plans for the utilization of the SEDF shall be developed by the CSED
for approval by the Council.

CHAPTER III
INCENTIVES AND BENEFITS FOR SOCIAL ENTERPRISES

SECTION 9. Special Credit Windows. - The Land Bank of the Philippines,
Development Bank of the Philippines and other government financial
institutions shall establish special credit windows for the unique needs of
SEs that are backed by a guarantee fund, as provided by Section 10 of this
Act, for the following purposes:

a) Credit line for business development loan or working capital loan to
cover the operational and management expenses of an existing
business or income generating project, including receivable financing
or purchase of additional inventory, soft or intangible investments
such as trade fair participation or acquisition of software or franchise
development packages;

b) Fixed assets financing to cover acquisition of fixed assets like
machineries and equipment, motor vehicle, or acquisition of lot for
project site or construction of a plant and building and the
improvement thereof;

©) Value chain financing to cover any of the value chain activities such
as production, processing and marketing;

d) Domestic letter of credit or trust receipt to provide a stand-by credit
facility for the SE borrower for the purchase of product inputs,
equipment, machinery, implements, and spare parts, whereby
payment of which is guaranteed and to be made to the seller by the
lending institution, provided all documents conform with the terms

and conditions of the credit; and


e) Revolving Credit Line for re-lending to finance the livelihood project

requirements of end-borrowers.

SECTION 10. Social Enterprise Guarantee and Surety Fund. - There
shall be established a Social Enterprise Guarantee and Surety Fund
(SEGSF) which shall be funded from equity contributions of government
financial institutions. The SEGSF shall be administered by the Small
Business Corporation to enable SEs to access non collateralized and other
appropriate financing while mitigating the risks involved in SE sector
lending, The SEGSF shall be used to provide guarantee cover to
participating financial institutions and other parties in extending financing
to SEs: Provided, That the fund may also be used to cover the performance

bond of SEs for their transactions.

SECTION 11. Compliance to Mandatory Allocation of Credit Resources.
— Loans granted by financial institutions to Social Enterprises shall be
computed by the Bangko Sentral ng Pilipinas as twice the loan amount for
purposes of determining financial institutions’ compliance to the mandatory
allocation of credit resources to micro, small and medium enterprises under
Republic Act 9501 or the "Magna Carta for Micro, Small and Medium

Enterprises.”

SECTION 12. Public Procurement for Social Enterprises. - The
Government Procurement Policy Board (GPPB) shall facilitate the full
participation of social enterprises in public procurement processes. In
support of this provision, the DBM shall direct agencies of government to
allocate at least ten percent (10%) of their annual budgets specifically for

projects to be procured from social enterprises.

SECTION 13. Insurance for Social Enterprises. - The Insurance
Commission shall issue the necessary rules and regulations and implement
measures to ensure that the insurance industry shall provide insurance

products, both life and non-life, for social enterprises and their stakeholders


among the poor. Furthermore, social enterprises shall be eligible to be

licensed agents or delivery channels for their clients and constituents.

SECTION 14. Cash Incentives for Persons with Disabilities. - To level
the playing field and in recognition of the circumstances of start-up SEs
primarily employing PWDs, the SEDF created in Section 8 of this Act shall
provide a cash incentive for every PWD, in accordance with Republic Act
7277 or the “Magna Carta for Disabled Persons”, and other marginalized
sectors as may be provided by this law, representing at least twenty five
percent (25%) of the daily minimum wage, until such time that the said SE

is able to achieve financial sustainability.

SECTION 15. Eligibility for Benefits and Incentives. - In the case of
social enterprises organized as stock corporations, partnerships or sole
proprietorships, the following requirements shall apply to become eligible for
benefits and incentives provided by this Act:

a) A social enterprise must not be organized as a branch, subsidiary or
division of a private business enterprise, regardless of the size of such
private business enterprise, nor may its policies be determined by a
private business enterprise: Provided, That this shall not preclude a
SE from accepting subcontracts from large private business
enterprises or firms or from joining in cooperative or joint-venture
activities with other SEs or foundations practicing Corporate Social
Responsibility (CSR).

b) At least sixty percent (60%) of a social enterprise's total expenditures
and profits plows back to the enterprise for the benefit of the poor,
and engage in practices that optimize the benefits for the poor through
the provision of living wages, above-market pricing for economically
disadvantaged producers and suppliers, and other such best practices
that distribute the profit generated by the enterprise.

CHAPTER IV
APPROPRIATION AND OTHER PROVISIONS


SECTION 16. Social Entrepreneurship Education in Schools. ~ Toward
strategically developing the nation’s human resource capability in social
entrepreneurship, the DepEd, TESDA and the CHED shall cause the
integration of SE content and inclusion of SE courses in the curricula at all
levels, especially in the secondary and tertiary levels. A continuing social
entrepreneurship education program for out-of-school youth and adults
shall likewise be developed and undertaken.

SECTION 17. Social Enterprise Week. - In order to institute continuing
awareness on the importance of SEs as a viable government strategy in
pursuing poverty alleviation, the week of the month when this Act shall have
been signed into law shall be declared as the "Social Enterprise Week" and
shall be celebrated annually. The Council shall, through the CSED, be

responsible in organizing activities for the event.

SECTION. 18. Appropriations. - The Council shall allocate the initial
amount of Fifty Million Pesos (P50,000,000.00) from the existing MSMED
Council Fund to support the operations and programs of the CSED.
‘Thereafter, such sums as may be necessary for the continued
implementation of this Act shall be included in the budget of the DTI under
the annual General Appropriations Act.

The budgetary requirements of the cooperating agencies shall be,
incorporated in their respective budgets. The CSED may raise funds from

other sources for specific projects as may be authorized by law.

SECTION 19. Transitory Provision. - Within a period of five years, the
NEDC shall facilitate the development and dissemination of tools, and invest
in the development of the capability of SEs to plan, monitor and evaluate
their social and financial performance and outcomes. Further, the NEDC
shall evolve socially-acceptable benchmarks for evaluating the performance
of SEs and incorporate such to more effectively develop and regulate the

sector.


SECTION 20. Implementing Rules and Regulations. - Within ninety (90)
days from the effectivity of this Act, the Secretary of Trade and Industry
shall, in consultation and coordination with the concerned government
agencies, promulgate the necessary rules and regulations for the effective

implementation of this Act.

SECTION 21. Separability Clause. - If any portion or provision of this Act
is subsequently declared invalid or unconstitutional, other provisions hereof
which are not affected thereby shall remain in full force and effect.

SECTION 22. Repealing Clause. - All other laws, acts, presidential
decrees, executive orders, presidential proclamations, issuances, rules and
regulations, or parts thereof which are contrary to or inconsistent with any
of the provisions of this Act are hereby repealed, amended, or modified

accordingly.
SECTION 23. Effectivity. - This Act shall take effect fifteen (15) days after
its publication in the Official Gazette or in a newspaper of general

circulation.

Approved,