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

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 51 58

Introduced by Representatives Peter “Sr. Pedro” M. Unabia,
Jocelyn 8. Limkaichong, Rodrigo A, Abellanosa, Gil “Kabarangay” P. Acosta,
Alexandria P. Gonzales, Marisol C, Panotes, Carlito S, Marquez,
Salvador B. Belaro, Jr, and Bernadette Herrera-Dy

EXPLANATORY NOTE

Access to financing is a persistent challenge which most micro, small
and medium enterprises (MSMEs) experience, Start-up and existing
enterprises can usually get capital by sceking loans from formal lending
institutions, such as banks, cooperatives or micro-finance institutions (MFIs).

There are several financing and credit programs for MSMEs. However,
MSMEs find it difficult to avail of the same because of high interest rate,
voluminous and stringent documentary requirements, including the need for
collaterals. More so for the micro enterprises which comprise 89.94% of the
total establishments in the country, Many of these micro enterprises are
severely resource-constrained and their survival in business relies heavily on
access to financing, But instead of accessing conventional financing, micro
enterprises resort to borrowing from the informal lenders or the so-called “5-6”.

The usurious moneylenders charge a nominal interest rate of twenty
percent (20%) over an agreed period of time. For every five pesos borrowed, six
pesos is paid back after just a few days, Effectively, the “5-6” system is said to
yield more than 1000% interest rate on an annual basis.

Starting January 2017, the administration earmarked P1 billion in the
2017 General Appropriations Act for a program that aims to replace the “5-6”
micro lending scheme. Through the Pondo sa Pagbabago at Pag-asenso (P3),
the government will make financing more accessible to micro enterprises,
particularly those in the poorest provinces. The P3 is designed to bring down
the interest rate at which microfinance is made available to micro enterprises.

There is a need to institutionalize, through law, the P3 as an alternative
to the “5-6” micro lending scheme in order to give micro enterprises the means
to effectively start or sustain their business and be able to generate income.

1



This will enable such busin
more self-sufficient

s to move up the economic ladder and become

The P3 micro financing y aims to help micro enterprise owners
optimize their potentials and achieve major growth through an alternative
source of funding with a low interest rate. The program shall provide
accessible, fast and hassle-free financing which is tailor-fit to the needs of
entrepreneurs

RODRIGO A. ABELLANOSA GIL “KABARANGAY” P. ACOSTA
fle Rove
ALEXANDRIA P. GONZALES MARISQL C. PANOTES
bine Aw a 1 ae
CARLITO S. MARQUEZ SALVADOR B. BELARO, JR.

BERNADETTE HPRRERA-DY


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

SEVENTEENTH CONGRESS
First Regular Session

no, 5158

HOUSE BILL No. _“

Introduced by Representatives Peter “Sr, Pedro” M. Unabia,
Jocelyn S. Limkaichong, Rodrigo A. Abellanosa, Gil “Kabarangay” P. Acosta,
Alexandria P. Gonzales, Marisol C, Panotes, Carlito S. Marquez,
Salvador B. Belaro, Jr. and Bernadette Herrera-Dy

AN ACT
PROVIDING A SOCIALIZED MICROFINANCING PROGRAM FOR MICRO
ENTERPRISES THEREBY PROMOTING ENTREPRENEURSHIP

Be it enacted by the Senate and House of Representatives of the
Philippines in Congress assembled:
SECTION 1. Title. - This Act shall be known as the “Pondo sa

Pagbabago at Pag-asenso or the P3 Act”

SEC, 2. Declaration of Policy. - It is the declared policy of the State to
foster national development, promote inclusive growth, and reduce poverty
by promoting the growth of micro, small and medium enterprises (MSMEs}
that facilitate local job creation, production and trade in the country.
Towards this end, the State shall develop plans and initiate means to
encourage entrepreneurial activities, and to ease the constraints and
challenges to MSMEs, particularly on access to financing.
SEC. 3. Objectives. ~The objectives of this Act are as follows:

a. To provide an affordable, accessible and hassle-free micro
financing program for the country’s micro enterprises, especially those in
the poorest provinces;

b. To replace the informal lenders or the so-called “5-6” money
lending system availed of by micro enterprises; and

c. To bring down the interest rate at which micro finance is made


available to micro enterprises.

SEC. 4. Creation of the Pondo sa Pagbabago at Pag-asenso (P3). - There
is hereby created the Pondo sa Pagbabago at Pag-asenso, hereinafter
referred to as the P3 Fund, which shall be lent out to qualified MSMEs inder
such terms and conditions that will meet the purposes of this Act.

The beneficiaries of the P3 Fund shall be micro enterprises and
entrepreneurs, including market vendors, agri-businessmen and members
of cooperatives, industry associations and cooperators.

‘The fund shall be primarily lent through conduit financial institutions
to be accredited for the purpose

SEC. 5. Lead Implementing Agency. - ‘The Small Business Corporation
(SB Corp,), the financing arm of the Department of Trade and Industry (DTI),
shall be the lead implementing agency for the P3 Fund. It shall handle the
fund delivery to micro enterprises through the following modes:

a. Direct lending to micro enterprises; or

b. Wholesale lending to conduits, such as, micro finance institutions
(MFIs), rural banks and credit cooperatives, which shall on-lend
the fund to micro enterprises.

To support administration and operating expenses of thé SB Corp.,

an amount of not more than Twenty Per Cent (20%) of total loans

disbursed shall be provided annually to the corporation.

SEC. 6. Features of the P3 Fund. - The P3 Fund shall have the following
features:

a. The components of the P3 Fund shall be:
* Loan Fund; and
* Guarantee Fund of not more than 25% of the total loan
exposure;
b, The loanable amount for individual loans shall be P5,000.00 for
start-ups to a maximum of P300,000.00.
c. The minimal interest rate to the conduits of the SB Corp. shall be

1% per annum.


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d. The interest rate to the end beneficiaries shall be lower than the
interest rate charged by MFls, to be set and regularly reviewed by
the Micro, Small and Medium Enterprise Development (MSMED)
Council.

e. There shall be no collateral requirement nor guarantee fee.

SEC, 7. Oversight Provision. - The Micro, Small and Medium Enterprise
Development (MSMED) Council shall perform oversight functions on the P3
Fund.

SEC. 8. Appropriations. - The amount necessary for the initial
implementation of this Act shall be taken from the budget of the Department
of Trade and Industry. Thereafter, the amount of P2 billion plus an amount
equivalent to provisioning expenses for the past year shall be allocated
annually in the General Appropriations Act: Provided, That at least fifty per
cent (50%) of the past year allocation shall have been lent out.

SEC, 9. Implementing Rules and Regulations, ~ Within sixty (60) days
from the approval of this Act, the DTI, in consultation with the concerned
agencies, shall formulate and promulgate the necessary rules and
regulations to implement the provisions of this Act. The implementing rules
and regulations issued pursuant to this section shall take effect thirty (30)
days after its publication in at least two (2) national newspapers of general
circulation.

SEC. 10. Separability Clause. - If any part or section of this Act is
declared unconstitutional, such declaration shall not affect in any manner
other parts or sections hereof.

SEC. 11, Repealing Clause. - All laws, decrees, proclamations,
issuances, or ordinances that are contrary to or inconsistent with the
provisions of this Act are hereby amended, repealed or modified accordingly.

SEC. 12. Effectivity. - This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,