THIRTHEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
1 
First Regular Session 
1 
.., . 
/
-
 
' 
INTRODUCED BY SENATORS MAR ROXAS, RICHARD J. GORDON, 
MANUEL M. U P I D  AND RAMON REVILLA, JR. 
EXPLANATORY NOTE 
This bill strengthens R.A. No. 6977, the Magna Carta for Small Enterprises. The focus of 
the amendments of this bill rest on three points: guidelines, institutional support and 
organizational support. Guidelines refer to the specific asset size definition, appropriating 
a definite and regular amount for the Small and Medium Enterprise Development (SMED) 
Council and increase in the mandatory allocation to lending activities. Institutional support 
comprises of additional government agencies to coordinate SME efforts and formalization of 
the SME Development Plan. Lastly, organizational support to intensify the powers and 
increase capitalization of the Small Business and Guarantee Finance Corporation to 
complement the growing demands for financing. 
Other features of the bill 
include 
formalizing the celebration of the Micro, Small and Medium Enterprise (MSME) Week and 
recognition of outstanding MSMEs. 
R.A. No. 6977 was passed into law in 1991 to promote, develop and assist small and medium 
scale enterprises through the creation of a Small and Medium Enterprise Development 
(SMED) Council, and to rationalize government assistance, programs and agencies concerned 
with the development of small and medium enterprises. The passage of this law signaled 
awareness and recognition of a much-needed policy base to support the growth of SMEs. By 
outlining guidelines for institutional support to improve productivity, upgrade of 
technologies, lower the cost of doing business and expand access to financing, government 
has laid the foundation for a national agenda to economic progress. 
After fifteen (15) years, strengths and weaknesses are now apparent. 
Despite the growth of 
the sector due to the passage of R.A. No. 6977 in 1991, the sector still faces limitations in 
delivering expected benefits to the economy. Areas needing attention are lack of access to 
financing, inefficient operating practices, insufficient technology and technical knowledge 
and lack of access to markets. By providing an enabling environment to SMEs, the potential 
of the sector could be maximized. 


The sustainability of SMEs is a priority of government because of its significant contributions 
to income and employment generation, hence a leading sector in stimulating economic 
development. SMEs account for 69.1% of employment, comprise 99.6% of all registered 
companies and contribute 32% value added to the economy, making these enterprises 
indispensable to overall growth. 
In view of the foregoing, the passage of this bill is earnestly requested. 
/7 
/Len:or-- 
R HARD J GORDON 
-.-. 
Senator 
Senator\ I 


THIRTHEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
INTRODUCED BY SENATORS MAR ROXAS, RICHARD J. GORDON, 
MANUEL M. LAPID AND RAMON REVILLA, JR. 
AN ACT 
TO PROMOTE ENTREPRENEURSHIP BY STRENGTHENING 
DEVELOPMENT AND ASSISTANCE PROGRAMS TO MICRO, SMALL AND MEDIUM 
SCALE ENTERPRISES, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 6977, AS 
AMENDED, OTHERWISE KNOWN AS THE "MAGNA CARTA FOR SMALL 
ENTERPRLSES' AND FOR OTHER PURPOSES. 
Be it enacted by the Senate and the House of Representatives of the Republic of the 
Philippines in Congress assem bled: 
SECTION 1. Section 1 of Republic Act No. 6977 is hereby amended to read as follows: 
"SECTION 1. Title. - This Act shall be known as the Magna Carta for MICRO, Small 
AND MEDIUM Enterprises. 
SECTION 2. All references to Small and Medium Enterprises (SMEs) in this Act shall be 
changed accordingly to Micro, Small and Medium Enterprises (MSMEs). 
SECTION 3. Section 3 of Republic Act No. 6977 is hereby amended to read as follows: 
"SECTION 3. MICRO, Small and Medium Enterprise as Beneficiaries. - 'MICRO, 
Small and Medium Enterprise' shall be defined as any business activity or enterprise 
engaged .in industry, agribusiness andor services, whether single proprietorship, 
cooperative, partnership or corporation whose total assets, inclusive of those arising 
from loans but exclusive of the land on which the particular business entity's office, 
plant and equipment are situated, must have value falling under the following 
categories: 
Micro 
[less than P1,500,001] P1,500,001 TO P3,000,000 
P15,000,000 
Small 
[P1,500,001 - P-l5,000,000] P3,000,001 TO 
Medium 
P-15,000,001 to P100,000,000 
"The above definitions shall be subject to review and adjustment [by the said 
Council] MOTlJproprio BY THE MSMED COUNCIL CREATED UNDER SECTION 6 
OF THIS LAW or upon recommendation of sectoral organization(s) taking into 


account inflation and other economic indicators. The Council may use as variables 
the number of employees, equity capital and asset size." 
THE COUNCIL SHALL ENSURE THAT NOTWITHSTANDING THE PLANS AND 
PROGRAMS SET FOR MSMES AS A WHOLE, THERE SHALL BE SET AND 
IMPLEMENTED OTHER PLANS AND PROGRAMS VARIED AND DISTINCT 
FROM EACH OTHER, ACCORDING TO THE SPECIFIC NEEDS OF EACH 
SECTOR. 
SECTION 4. Section 5 of Republic Act No. 6977 is hereby amended to read as follows: 
"SECTION 5. Guiding Principles. - To set the pace for MICRO, small and medium 
enterprise development, the State shall be guided by the following principles: 
xxx 
'(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 
Communication, 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 effort and in coordination with 
local government units, provide the necessary support and assistance to 
MICRO, small and medium enterprises. 
xxx 
SECTION 5. A new section, numbered Section 6 is hereby inserted after Section 5 of RA 
6977, to read as follows: 
SECTION 6. MICRO, SMALL AND MEDIUM ENTERPRISES DEVELOPMENT 
PLAN (MSMEDP). - THE PRESIDENT OF THE REPUBLIC OF THE PHILIPPINES 
SHALL APPROVE A ROLLING THREE-YEAR MICRO, SMALL AND MEDIUM 
ENTERPRISES DEVELOPMENT PLAN PREPARED BY THE MICRO, SMALL AND 
MEDIUM ENTERPRISE COUNCIL THROUGH THE DEPARTMENT OF TRADE 
AND INDUSTRY WHICH SHALL FORM PART OF THE MEDIUM TERM 
PHILIPPINE DEVELOPMENT PLAN (MTPDP). IT SHALL BE FORMULATED IN 
CONSULTATION WITH THE PRIVATE SECTOR, VALIDATED AND UPDATED 
SEMESTRALLY. 
SECTION 6. Section 6 of Republic Act No. 6977 is hereby amended to read as follows: 
"SECTION 7. [Creation of a Small and Medium Enterprise Development Council.] 
AND 
MEDIUM 
ENTERPRISE DEVELOPMENT 
COUNCIL, WHICH WAS 
CREATED BY REPUBLIC ACT NO. 6977, AS AMENDED BY REPUBLIC ACT NO. 
MICRO, SMALL AND MEDIUMENTERPRISE COUNCIL. -THE EXISTING SMALL 


8289, SHALL BE STRENGTHENED TO effectively spur the growth and development 
of small and medium enterprises throughout the country, and to carry out the policy 
declared in this Act, [a Small and Medium Enterprise Development (SMED) Council 
is hereby created] SHALL NOW BE KNOWN AS THE MICRO, SMALL AND 
MEDIUM ENTERPRISE DEVELOPMENT 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 
SECTION 7. Section 7 of Republic Act No. 6977 is hereby amended to read as follows: 
‘SECTION 8. COMPOSITION - The Council shall be headed by the Secretary of 
Trade and Industry as Chairman, and may elect from among themselves a Vice 
Chairman to preside over the Council meetings in the absence of the Chairman. The 
members shall be the following: 
“(a) Director General of the National Economic and Development Authority; 
“(b) Secretary of Agriculture; 
“(c) Secretary of Labor and Employment; 
“(d) Secretary of [Environment and Natural Resource] INTERIOR AND LOCAL 
GOVERNMENT; 
“(e) Secretary of [Science and Technology] ENVIRONMENT AND NATURAL 
RESOURCES; 
“(f) Secretary of [Tourism] SCIENCE AND TECHNOLOGY; 
“(g) [Chairman of the Monetary Board] SECRETARY OF TOURISM; 
“(h) Chairman of [Small Business Guarantee and Finance Corporation] THE 
MONETARY BOARD; 
“(i) Chairman of [the small and medium enterprises promotion body which the 
President shall undertake to establish under this Act] SMALL BUSINESS 
GUARANTEE AND FINANCE CORPORATION [and] 
“(j) Three (3) representatives from the private sector at large, all Filipino citizens, to 
represent Luzon, Visayas and Mindanao, and one representative from the small and 
medium enterprises sector to be appointed by the President; AND 
“(k) A representative from the private banking sector to serve alternately among the 
Chamber of Thrift Bank; the Rural Bankers’ Association of the Philippines (RBAP); 
and 
the 
Bankers’ 
Association 
of 
the 
Philippines 
(BAP). 
ALL MEMBERS OF THE COUNCIL SO APPOINTED, EXCEPT FOR THE EX- 
OFFICIO MEMBERS, SHALL SERVE FOR A TERM OF THREE (3) YEARS. THE 
PERSON SO APPOINTED TO REPLACE A MEMBER WHO HAS RESIGNED, DIED, 
PORTION OF THE TERM. 
OR REMOVED’ FOR CAUSE SHALL SERVE ONLY FOR THE UNEXPIRED 
“Cabinet-rank ex officio members of the Council shall designate an undersecretary or 
assistant secretary, and the Chairman of the Monetary Board or his representative, as 
their permanent representative in case they fail to attend meetings of the Council. 
“The private sector members of the Council shall [initially] receive per diem of [One] 
TWO Thousand pesos [(Pl,OOO)] P2,OOO per meeting, for a maximum of twenty-four 


(24) meetings per year, which [per diem may be adjusted] AMOUNT SHALL BE 
DETERMINED by the Council: Provided, that THE AMOUNT AND ANY [may such] 
adjustments shall take effect upon approval of the President. 
xxx 
SECTION 8. Section 8 of Republic Act No. 6977 is hereby amended to read as follows: 
“SECTION 9. POWERS AND FWCTION. The MICRO, Small and Medium 
Enterprise Development Council shall have the following powers, duties and functions: 
xxx 
k) to assist in the establishment of modern industrial estates outside urban centers; 
[andl 
1) generally, to exercise all powers and functions necessary for the objectives and 
purposes of this Act [.I; AND 
M) TO APPROVE THE MSMEDP, COORDINATE, MONITOR AND ASSESS THE 
IMPLEMENTATION 
THEREOF, 
AND 
WHEN 
NECESSARY, 
INSTITUTE 
APPROPRIATE ADJUSTMENTS THEREON IN THE LIGHT OF CHANGING 
CONDITIONS 
IN 
BOTH 
THE 
DOMESTIC 
AND 
INTERNATIONAL 
ENVIRONMENT. 
SECTION 9. A new section, numbered Section 10 is hereby inserted after Section 9 of RA 
6977, which is now Section 9, to read as follows: 
‘SECTION 10. APPROPRIATIONS. - FUNDING 
OF ACTIVITIES AND 
OPERATIONAL EXPENSES OF THE COUNCIL SHALL BE SUPPORTED BY 
CONTRIBUTIONS FROM THE GOVERNMENT AND THE PRIVATE SECTOR. 
THE AMOUNT OF CONTRIBUTION BY THE GOVERNMENT WILL BE 
RECOMMENDED BY THE DEPARTMENT OF TRADE AND INDUSTRY, UPON 
CONSULTATION WITH THE DEPARTMENT OF BUDGET AND MANAGEMENT, 
AND APPROVED BY THE PRESIDENT. THE ANNUAL CONTRIBUTIONS OF 
THE GOVERNMENT SHALL BE INCLUDED IN THE ANNUAL GENERAL 
APPROPRIATIONS ACTS AFTER CONSULTATIONS WITH THE DEPARTMENT 
OF BUDGET AND MANAGEMENT. 
SECTION 10. Section 10 of Republic Act No. 6977 is hereby amended to read as follows: 
“SECTION 12. Rationalization of Existing MICRO, Small and Medium EnteTrise 
Programs and Agencies. - The Council shall conduct continuing review of 
government programs for micro, small and medium enterprises and submit to 
Congress and the President a report thereon together with its policy 
recommendations. 
[“The President is hereby also empowered to establish a small a and medium 
enterprise promotion body which shall be the principal government agency that will 
formulate, implement, coordinate and monitor all non-financing government 


programs, including fee-based services, to support and promote micro, small and 
medium enterprises. It shall be attached to the Department of Trade and Industry 
and shall be under the policy, program and administrative supervision of the SMED 
Council. The said office shall receive no less than fifty percent (50%) of the assets, 
and budgetary allocations of the agencies for promotion, development and financing 
of small and medium enterprises that may be henceforth dissolved and/or abolished 
and absorbed, incorporated and integrated into the SMED Council."] 
SECTION 11. Section 11 of RA 6977 is hereby amended to read as follows: 
"SECTION 13. 
Creation of Small Business Guarantee and Finance Corporation. 
- There is hereby created a body corporate to be known as Small Business Guarantee 
and Finance Corporation hereinafter referred to as the SMALL BUSINESS 
CORPORATION, which shall [source and adopt development initiatives for globally 
competitive small and medium enterprises 'in terms of finance, technology, 
production, management and business linkages, and provide, promote, develop and 
widen in both scope and service reach various alternative modes of financing for 
small and medium enterprises, including but not limited to, direct and indirect 
project lending venture capital, financial leasing, secondary mortgage and/or 
rediscounting of loan papers to small businesses, secondaryhegional stock markets: 
Provided, That crop production financing shall not be serviced by the Corporation.] 
SERVE THE FOLLOWING FUNCTIONS AND DUTIES: 
A) 
SOURCE AND ADOPT DEVELOPMENT INITIATIVES FOR GLOBALLY 
COMPETITIVE MSMEs IN FINANCE AND BUSINESS TECHNOLOGIES; 
B) 
TO EXTEND ALL FORMS OF FINANCIAL ASSISTANCE WHICH MAY BE 
IN THE FORM OF DIRECT LENDING, AND TECHNICAL ASSISTANCE TO 
QUALIFIED AND REGISTERED MSMEs. SB CORPORATION MAY ALSO 
ENGAGE IN WHOLESALE LENDING PROVIDED THAT IT SHALL NOT IN 
ANY GIVEN TIME BE MORE THAN FIFTY PERCENT (50%) OF ITS TOTAL 
AVAILABLE LOAN PORTFOLIO. 
C) 
GUARANTEE LOANS OBTAINED BY QUALIFIED MSMEs UNDER SUCH 
TERMS AND CONDITIONS ADOPTED BY THE [SB] SMALL BUSINESS 
CORPORATION BOARD OF DIRECTORS. 
["The Corporation shall guarantee loans obtained by qualified small and medium 
enterprises, local and/or regional associations' small enterprises and industries, private 
voluntary organizations and/or cooperatives, under such terms and conditions 
adopted by its Board. It may guarantee loans up to one hundred percent (100%). It 
may also provide second level guarantee (ie., reinsurance) on the credit and/or 
investment guarantees made by credit guarantee associations and other institutions in 
support of small entrepreneurs.] 
["The Corporation shall become liable under its guarantees upon proof that the loan 
has become past due under such terms and guidelines adopted by its Board and 
printed on the contract of guarantee.] 


["The Small Business Guarantee and Finance Corporation shall:] 
["(a) be attached to the Department of Trade and Industry and shall be under the 
policy, program and administrative supervision of the SMED Council;] 
["(b) have its principal place of business in Metro Manila and endeavor to have one or 
more branch offices in every province of the country;] 
["(c) exercise all the general powers conferred by law upon corporation under the 
Corporation Code as are incidental or conducive to the attainment of the objectives of 
this Act;] 
[(d) have a board of directors upon to which the powers of the Corporation shall be 
vested, 
to 
be 
composed 
of 
nine 
(9) 
members 
including:] 
["(l) three (3) members of the private sector appointed by the President upon 
recommendation of the SMED Council and from among whom the Chairman 
of the Board shall be appointed by the President to serve on a full-time basis;] 
["(2) the Secretary of Trade and Industry or his Undersecretary; and] 
["(3) a representative from each of the five (5) government financial 
institutions mandated in this Act to provide the initial capital of the 
Corporation, who shall be designated, under guidelines agreed upon by the 
Board Chairmen of said institutions;] 
["(e) Notwithstanding the provisions of Republic Act No. 6758, and Compensation 
Circular No. 10, series of 1989 issued by the Department of Budget and Management, 
the Board of Directors of SBGFC shall have the authority to extend to the employees 
and personnel thereof the allowance and fringe similar to those extended to and 
currently enjoyed by the employees and personnel of other government financial 
institutions."] 
SECTION 12. There shall be incorporated after Section 11 of Republic Act No. 6977, and 
renumbered as Section 13 in this bill, as amended, new sections to read as follows: 
"SECTION 14. CORPORATE POWERS. The SMALL BUSINESS CORPORATION 
SHALL BE ADMINISTRATIVELY ATTACHED TO THE DEPARTMENT OF TRADE 
AND INDUSTRY AND SHALL BE UNDER THE POLICY AND PROGRAM 
SUPERVISION OF THE MSMED COUNCIL. 
IT SHALL HAVE ITS PRINCIPAL 
OFFICES IN METRO MANILA AND WHENEVER NECESSARY, ESTABLISH 
BRANCH OFFICES IN THE PROVINCES. 
THE SMALL BUSINESS CORPORATION SHALL EXERCISE ALL THE GENERAL 
POWERS EXPRESSLY CONFERRED BY LAW UPON CORPORATIONS UNDER 
THE CORPORATION CODE, INCLUDING THOSE POWERS THAT ARE 
INCIDENTAL OR NECESSARY TO THE ATTAINMENT OF THE OBJECTIVES OF 
THIS ACT. 
FOR THIS PURPOSE, THE SMALL BUSINESS CORPORATION MAY ALSO: 


A) 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; 
B) APPLY FOR, RECEIVE AND ACCEPT GRANTS AND DONATIONS 
FROM SOURCES WITHIN AND OUTSIDE THE COUNTRY; 
C) HOLD, OWN, PURCHASE, ACQUIRE, SELL, MORTGAGE, DISPOSE OR 
BILLS, 
DEBENTURES, SECURITIES AND SIMILAR FORMS OF 
INDEBTEDNESS OF THE GOVERNMENT, ITS AGENCIES AND 
INSTRUMENTALITIES 
OR 
ANY 
GOVERNMENT 
FINANCIAL 
INSTITUTIONS. 
OTHERWISE INVEST OR RE-INVEST IN STOCKS, BONDS, TREASURY 
SECTION 13. There shall be incorporated after the inserted Section 14 a new section to read 
as follows: 
"SECTION 15. COMPOSITION POWERSANDA WHORITX - THE [SB] SMALL 
BUSINESS CORPORATION CORPORATE POWERS SHALL BE VESTED ON A 
BOARD DIRECTORS COMPOSED OF ELEVEN (11) MEMBERS WHICH SHALL 
INCLUDE THE FOLLOWING: 
A) SECRETARY OF TRADE AND INDUSTRY 
B) SECRETARY OF FINANCE 
C) A PRIVATE SECTOR REPRESENTATIVE TO BE APPOINTED BY THE 
PRESIDENT OF THE PHILIPPINES UPON THE RECOMMENDATION 
OF THE MSMED COUNCIL; 
D) SEVEN 
(7) 
REPRESENTATIVES 
OF 
[SB] 
SMALL 
BUSINESS 
CORPORATION COMMON STOCKS; AND 
OFFICIO MEMBER AND TO SERVE AS VICE CHAIRMAN OF THE 
BOARD. 
E) PRESIDENT OF [SB] SMALL BUSINESS CORPORATION AS EX- 
THE PRESIDENT OF THE PHILIPPINES SHALL APPOINT THE CHAIRMAN OF 
THE BOARD FROM AMONG ITS MEMBERS. 
ALL MEMBERS OF THE BOARD SO APPOINTED, EXCEPT FOR THE EX-OFFICIO 
MEMBERS, SHALL SERVE FOR A TERM OF THREE (3) YEARS WITHOUT RE- 
APPOINTMENT. THE PERSON SO APPOINTED TO REPLACE A MEMBER WHO 
HAS RESIGNED, DIED, OR REMOVED FOR CAUSE SHALL SERVE ONLY FOR 
THE UNEXPIRED PORTION OF THE TERM. 
THE BOARD 
OF DIRECTORS SHALL HAVE, AMONG OTHERS THE 
FOLLOWING SPECIFIC POWERS AND AUTHORITIES: 
A) TO FORMULATE POLICIES NECESSARY TO CARRY OUT EFFECTIVELY THE 
PROVISIONS OF THIS CHARTER AND TO PRESCRIBE, AMEND AND 
OPERATIONS OF SB CORPORATION: 
REPEAL BY-LAWS, RULES AND REGULATIONS FOR THE EFFECTIVE 


B) ESTABLISH SUCH BRANCES, AGENCIES AND SUBSIDIARIES AS MAY BE 
DEEMED NECESSARY AND CONVENIENT; 
C) COMPROMISE OR RELEASE, IN WHOLE OR IN PART, ANY CLAIM OR 
LIABILITY WHATSOEVER FOR OR AGAINST THE [SB] SMALL BUSINESS 
CORPORATION, INCLUDING INTEREST, PENALTIES, FEES AND/OR OTHER 
SENTRAL NG PILIPINAS RULES; 
CHARGES IN ACCORDANCE TO ITS OWN BY-LAWS AND BANGKO 
D) FIX THE FEATURES OF NON-VOTING PREFERRED SHARES WHICH SHALL 
BE PRINTED ON THE STOCK CERTIFICATES EVIDENCING THE SAME: 
E) EXERCISE ALL OTHER SUCH POWERS AS MAY BE NECESSARY OR 
INCIDENTAL TO CARRY OUT [SB] SMALL BUSINESS CORPORATION 
PURPOSES. 
SECTION 
14. 
to read as follows: 
Section 12 of Republic Act No. 6977, as amended, is hereby amended 
“SECTION 16. Capitalization and Funding of the [SB] SMALL BUSINESS 
CORPORATION 
- 
The [Small Business Guarantee and Finance] [SB] Small 
Business Corporation shall have an authorized capital stock of [Five] TEN billion 
pesos (P [5] 10,000,000,000.00). 
The initial capital of One billion pesos 
(Pl,OOO,OOO,OOO.OO) 
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 Philippine National Bank (PNB), the Development Bank of the Philippines 
(DBP) [in the amount of Two hundred million pesos (P200,000,000.00) each]. LBP 
AND DBP SHALL EACH CONTRIBUTE FOUR HUNDRED MILLION PESOS 
(P4,000,000,000.00), WHILE PNB WILL CONTRIBUTE TWO HUNDRED MILLION 
PESOS (P200,000,000). THE TEN BILLION PESOS AUTHORIZED CAPITAL STOCK 
OF THE SMALL BUSINESS CORPORATION SHALL BE DIVIDED INTO 80,000,000 
COMMON SHARES AND 20,000,000 PREFFERED 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 BUSINESS CORPORATION 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 
PREFFERED SHARES ALREADY ISSUED UNDER REPUBLIC ACT NO. 6977, AS 
AMENDED, SHALL BE CONVERTED 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 investments of private financial institutions and corporations, PROVIDED, 
THAT ANY INVESTMENT FROM THE PRIVATE SECTOR SHALL ONLY BE IN 
THE FORM OF PREFFERED SHARES. 


TO ALLOW FOR CAPITAL BUILD-UP, [SB] SMALL BUSINESS CORPORATION 
SHALL BE GIVEN A FIVE (5) YEAR GRACE PERIOD ON DIVIDEND 
COMMITMENTS BEGINNING ON THE DATE OF EFFECTIVITY OF THIS 
AMENDMENT. THEREAFTER, IT MAY ONLY DECLARE AS DIVIDEND NOT 
MORE THAN 30% OF ITS NET INCOME AND THE REST WITHHELD AS 
RETAINED EARNINGS. 
SECTION 15. There shall be incorporated after the Section 12 of R.A. No. 6977, and 
renumbered as Section 16, a new section to read as follows: 
“SECTION 17. ORGANIZATIONAL STRUCTURE. - THE BOARD OF DIRECTORS 
SHALL HAVE THE AUTHORITY TO PROVIDE FOR AN ORGANIZATIONAL 
STRUCTURE AND STAFFING PATTERN FOR OFFICERS AND EMPLOYEES OF 
THE [SB] SMALL BUSINESS CORPORATION. 
ALL POSITIONS IN THE [SB] SMALL BUSINESS CORPORATION SHALL BE 
GOVERNED BY THE SALARY STANDARDIZATION LAW. 
SECTION 16. There shall be incorporated after the inserted Section 17 a new section to read 
as follows: 
“SECTION 18. MICRO, SMALL AND MEDIUM EmERPRISE WEEK IN ORDER 
TO INSTITUTE CONTINUING AWARENESS OF THE PRIMACY OF SMALL 
CELEBRATE AND ESPOUSE THE FIRM COMMITMENT OF THE STATE IN THE 
PROMOTION, GROWTH AND DEVELOPMENT OF SMALL BUSINESS, THE 
SECOND WEEK OF JULY OF EVERY YEAR SHALL BE DECLARED AS THE 
“MICRO, SMALL AND MEDIUM ENTERPRISE DEVELOPMENT WEEK THE 
MICRO, SMALL AND MEDIUM ENTERPRISE DEVELOPMENT COUNCIL, THE 
DEPARTMENT OF TRADE AND INDUSTRY, AND THE SMALL BUSINESS 
[GUARANTEE 
AND 
FINANCE] 
CORPORATION 
SHALL 
BE 
JOINTLY 
RESPONSIBLE IN ORGANIZING ACTIVITIES FOR THE EVENT. 
BUSINESS IN NATION-BUILDING AND IN PEOPLE EMPOWERMENT, AND TO 
SECTION 17. There shall be incorporated after the inserted Section 18 a new section to read 
as follows: 
“SECTION 
19. PRESIDENTIAL AWARDS FOR OUTSTANDING MSMES. - 
PRESIDENTIAL AWARDS FOR OUTSTANDING MSMEs, CONSISTING OF REWARDS IN 
DURING THE MSME DEVELOPMENT WEEK. 
CASH OR IN KIND SHALL BE GRANTED TO 100% FILIPINO-OWNED COMPANIES 
SECTION 18. Section 13 of Republic Act No. 6977 is hereby amended to read as follows: 
“SECTION 20. Mandatory Allocation of Credit Resource to Small and Medium 
Enterprises. -For a period of ten (10) years from the date of the effectivity of this Act, 
all lending institutions as defined under Bangko Senrral ng Pilipinas rules, whether 
public or private, shall set aside at least [six] EIGHT percent ([6] 8%) for MICRO 
AND small enterprises and at least two percent (2%) for 
[small and] medium 
enterprises, [respectively] of their total loan portfolio based on their balance sheet as 


of the end of the previous quarter, and make it available for [small and medium 
enterprises] MSMEs credit as herein contemplated. 
COMPLIANCE OF THIS PROVISION SHALL BE: 
A) ACTUAL EXTENSION OF LOANS TO QUALIFIED AND REGISTERED MICRO, 
B) ACTUAL SUBSCRIPTION OF PREFFERED SHARES OF STOCK OF [SB] SMALL 
SMALL AND MEDIUM ENTERPRISES; OR 
BUSINESS CORPORATION. 
The 
MAY 
PRESCRIBE ALTERNATIVE FORMS OF COMPLIANCE SUBJECT TO THE 
APPROVAL OF THE MSMED COUNCIL. FURTHER THE BANGKO SENTRAL NG 
PILIPINAS 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 SBGFC 
which do not pay market rates,] shall not be deemed compliance with the foregoing 
provisions: Provided, hrther, That the Bangko Sentral ng Piripinas shall establish an 
incentive program to encourage lending to [small and medium] MSMEs industries 
beyond the mandatory credit allocation to said enterprises, such as possible 
reduction in bank’s reserve requirement. 
Bangko Sentral ng Pilipinas [, in consultation with the Council,] 
The [SMED] MSMED Council shall set up the appropriate systems to monitor all loan 
applications of [small and medium enterprises] MSMEs in order to account for the 
absorptive capacity of the small and medium enterprise sector. 
The Bangko Sentral Ng Pilipinas shall [require lending institutions covered by this 
Act to] furnish to the [Small and Medium Development Council] MSMED Council on 
a quarterly basis [regular] COMPREHENSIVE reports [on their compliance with the 
above provisions on the mandatory credit allocation for small and medium enterprises 
and expeditiously act on the Council’s reports of non-compliance therewith.] ON 
ABOVE PROVISIONS ON THE MANDATORY CREDIT ALLOCATION FOR 
MSMEs. 
THE BANKS’ COMPLIANCE, NON-COMPLIANCE AND PENALTIES OF THE 
SECTION 19. A new section, numbered Section 13 in R.A. No. 6977 and renumbered as 
Section 20 is hereby inserted after Section 19: 
SECTION 21. 
IMPLEMEhTING RULES AND REGULATIONS. - THE 
DEPARTMENT OF TRADE AND INDUSTRY, THROUGH BSMED AND IN 
GOVERNMENT ORGANIZATIONS AND PRIVATE SECTOR INVOLVED IN THE 
PROMOTION OF MICRO, SMALL AND MEDIUM ENTERPRISES, 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. THE IRR ISSUED PURSUANT 
TO THIS SECTION SHALL TAKE EFFECT THIRTY (30) DAYS AFTER 
PUBLICATION IN A NATIONAL NEWSPAPER OF GENERAL CIRCULATION. 
CONSULTATION WITH OTHER CONCERNED GOVERNMENT AGENCIES, NON- 


SECTION 20. Separabiliv Clause. - Any portion or provision of this Act that may be 
declared unconstitutional or invalid shall not have the effect of nullifying other portions and 
provisions hereof as long as such remaining portion or provision can still subsist and be given 
effect in their entirety. 
SECTION 21. Repealing Clause. - All other laws, decrees, executive orders, proclamations 
and administrative regulations, or parts thereof inconsistent herewith are hereby repealed or 
modified accordingly. 
SECTION 22. E f f e c t i ~ v .  
- This Act shall take effect fifteen (15) days after its proclamation 
in at least two (2) national papers of general circulation. 
Approved,