Republic of the Philippines
HOUSE OF REPRESENTATIVES.
Quezon City

‘SIXTEENTH CONGRESS
First Regular Session

1675

HOUSE BILL NO.

Introduced by

HON. GUSTAVO S. TAMBUNTING

EXPLANATORY NOTE

Section 9 of Article Il of the 1987 Constitution declares as state policy the freedom of
the people from poverty through adequate social services by promoting full employment, a
rising standard of living, and an improved quality of life for all. in addition, Republic Act No.
8425, otherwise known as the “Social Reform and Poverty Alleviation Act”, identifies the
institution of the expansion of micro-credit and microfinance services as one of measures in
eradicating poverty.

Microfinance has been proven to be one of the viable solutions in alleviating people
from poverty. With a small loan, individuals are given the opportunity to start a small
business such that they have the means to augment the needs of their respective families.
However, in order to capacitate them, accessibility to financial services should first be put in
place. Thus, the establishment of micro-enterprise institutions will provide the ample
support these individuals need in order to start-up business.

In effect, the people through microfinance gains income and employment. With the
creation of jobs and entrepreneurs who provide wages, it will result to empowering women
by giving them economic freedom and towards the improvement in health and education of
the people. More importantly, with the increase in income, business owners will be able to
improve their housing conditions notwithstanding the positive offshoot of creation of jobs.

By reason of the effectivity of microfinance institutions in poverty alleviation, this bill
is being filed with the goal of creating micro-enterprise development institutions. These
institutions will expand, enhance and promote the accessibility of micro-finance se
such as savings, insurance, credit and even health care by capacitating them with economic
and productive opportut



In view of the foregoing, the passage of this bill is earnest

GUSTAVeSS iG
"¢ District, Paranaque City,


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

‘SIXTEENTH CONGRESS
First Regular Session

House sino © 5S

Introduced by

HON. GUSTAVO S. TAMBUNTING

AN ACT GOVERNING THE CREATION AND ACCREDITATION OF MICRO- ENTERPRISE
DEVELOPMENT INSTITUTIONS, AND FOR OTHER PURPOSES.

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

Section 1. Title. This Act shall be known and cited as the “Micro-Enterprise
Development Institution Act of 2013.”

Section 2. Declaration of Policy. It is hereby declared the policy of the State to
pursue a more focused program of poverty eradication wherein every poor Filipino family

shall be empowered to meet its minimum basic needs including income security.

In pursuance of this policy, the government shall work in partnership with qualified
institutions in the private sector for the poor to have more access to micro-finance, micro-

insurance, micro-health care, micro-housing, business development, such as leadership

training and entrepreneurial skills training, and human development services to help the
poor entrepreneurs achieve a level of sustainability and empowerment and adopt measures
to promote a spirit of generosity and selfless giving among individuals and institutions that

would help support all programs directly involved in poverty eradication.

Section 3. Coverage. The Act shall apply to non-stock, non-profit Micro-Enterprise

Development Institutions whose mission is totally focused on poverty eradication, and are


duly accredited by the Securities & Exchange Commission (SEC), as the accrediting entity,

and registered with the Bureau of Internal Revenue (BIR).

Section 4. Definition of Terms. For purpose of implementing this Act, the following

definitions shall apply:

a) “Micro-Enterprise Development Institutions (MEDI)"~ refers to a non-stock, non-
profit corporation organized and operated to provide Micro-Enterprise Development
Strategy, as defined in letter (b) hereof, through the broad package of financial and

human development services as well as other business development services to the

poor to enable them to operate their own productive economic activities; provided,
no part of the net of income of the MEDI inures to the benefit of any private
individual, and the administrative expenses of which, on an annual basis, conform
with the rules and regulations to be prescribed by the Secretary of Finance, upon
recommendation of the Commissioner of Internal Revenue, but in no case to exceed
thirty percent (30%) of the total expenses;

b) “Micro-Enterprise Development Strategy” ~ a social reform program exclusively for
the poor to improve the asset base of households and expand the access to micro-
finance services, such as micro-credit, micro-insurance, micro-savings and micro-
health care for the poor through the broad package of business development
services and other non-financial services as well as to the poor to enable them to
operate their own productive economic activities;

©) “Poor” — 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 care, education, housing and other essential amenities of life;

d) “Social Reform” — refers to the continuing process of addressing the basic inequities

in Filipino society through a systematic, unified and coordinated delivery of socio-

‘economic programs or packages;
e) “Utilization” by an accredited MEDI — shall refer to:
i) Any amount in cash or in kind, including administrative expenses, paid or
utilized by an accredited MEDI to accomplish one or more purposes for

which it was created or organized; or


ii) Any amount paid to acquire an asset used, or held for use, directly in

carrying out one or more purposes for which the accre

d MEDI was

created or organized; or

‘Any amount in cash or in kind invested in any poverty eradication activity
related to the purpose for which it was created or organized; or

iv) Any amount set aside for a specific project which comes within one or
more purpose or purposes for which the accredited MEDI was created,
provided that the amount will be utilized for specific project within a
period not to exceed five (5) years, and the project is the one which can
be better accomplished by setting aside such amount than by immediate
payments of funds;

v) Any amount in cash or kind invested in capital sustaining and generating
activities, such as but not limited to, government securities, endowment
funds, trust funds, money market placements, shares of stock and similar
instruments: Provided, that any income derived from these investments
shall be exclusively used in activities directly related to one or more
purposed for which the accredited MEDI was created or organized.

vi) “Accrediting Entity” — shall refer to the Securities & Exchange Commission
(SEC) and the Bureau of Internal Revenue (BIR), the regulatory powers of
which shall be defined in the implementing rules and regulations of this
Act.

Section 5. Form of Organization. A MEDI as defined in Section 4 (a) shall be

established as a non-stock non-profit corporation.

Section 6. Capital Requirements. A MEDI shall have a fund balance of not less than
jon Pesos (P50,000,000.00).

Fifty
Section 7. Supervision and Accreditation. The Accrediting Entity established under

this Act shall establish and operationalize a system of accreditation to determine the

qualifications of the MEDI. It shall have the following functions and responsibilities:

ration with

a) Examine, evaluate and accredit the MEDI as a pre-requisite for its rey

the BIR for purposes of tax exemption under this Act.


b) Issue a Certificate of Accreditation to the MEDI upon determination that it meets the
criteria for accreditation; Provided, that the Certificate of Accreditation shall be valid
for such period as may be prescribed by implementing rules and regulations’

©) Review and deny the application of any MEDI, which does not meet the criteria for
accreditation. The MEDI shall be notified of the denial of its application, the reasons
therefore, and the evaluators’ recommendation in order that the MEDI may meet
the criteria for accreditation. The procedure for reconsideration of and/or effecting
‘any corrections amendments to the application shall be provided in the
implementing rules and regulations of this Act.

Section 8. Monitoring and Verification of Annual Information Return. The
Accrediting Entity shall monitor the MEDIs and coordinate to ensure that the provisions of

this Act are complied with.

Section 9. Withdrawal of Certificate of Accreditation and Revocation of the
Certificate of Registration. — The Accrediting Entity shall have the authority to withdraw
the Certificate of Accreditation, which it used to register the MEDI upon a determination

that the latter no longer meets the criteria for accreditation under Section 7 of this Act.

Section 10. Exemption from the National and Local Taxes. No taxes, local and
national, shall be imposed on MEDIs duly accredited by the Accrediting Entity and registered
with the BIR. In lieu thereof, two percent (2%) of the gross income derived by the MEDIs.

shall be remitted to the National Government. This two percent(2%) tax shall be entirely

contributed to the People’s Development Trust Fund established under Republic Act No.
8425 otherwise known as the “Social Reform and Poverty Alleviation Act”. In addition,
borrower of the MEDIs shall not be subject to the documentary stamp tax imposed under

Section 179 of the Tax Code, as amended.

The term “gross income” means gross receipts less sales returns, allowances,
discounts and other costs of services. Interest expenses of a MEDI shall be deductible from
gross receipts as part of cost of services in arriving at gross income. The term gross income

shall exclude donations.


Section 11. Deductibility of Donations. Donations to a MEDI shall be fully
deductible form the gross income of the donor and shall be exempt from donor's tax

imposed under Sec. 98 of the Tax Code.

Section 12. Implementing Rules and Regulations. The SEC, in coordination with the
BIR, shall formulate the implementing rules and regulations of this Act within sixty (60) days

after its approval. Such rules and regulations shall take effect fifteen (15) days after th

publication in a newspaper of general circulation in the Philippines.

Section 13. Separability Clause. \f any provision of this Act or the application
thereof to any person or circumstances is held invalid, the other provisions of this Act and
the application of such provisions to other persons or circumstances shall not be affected

thereby.

Section 14. Repealing Clause. All internal revenue issuances, rules and regulations,
or parts thereof, which are contrary to or inconsistent with this Act are hereby repealed,

amended or modified accordingly.
Section 15. Effectivity. This Act shall take effect upon its approval.

Approved,