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NINETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES
First Regular Session
SENATE
S. B. NO. 368
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*22 JUL 12 All 31
RtCEIVc-iSV,
Introduced by SENATOR JOEL VILLANUEVA
AN ACT
STRENGTHENING ACCESS TO CREDIT OF MICRO, SMALL, 
AND MEDIUM ENTERPRISES, AMENDING FOR THE 
PURPOSE, REPUBLIC ACT NO. 6977, AS AMENDED, 
OTHERWISE KNOWN AS THE “MAGNA CARTA FOR MICRO, 
SMALL AND MEDIUM ENTERPRISES” AND FOR OTHER 
PURPOSES
EXPLANATORY NOTE
The Philippine Micro, Small and Medium (MSME) sector is an integral 
factor in the country’s economy’s growth, comprising around 99.5% of the 
total establishments in the country, or 952,969 businesses enterprises, and 
provided a total of 5,380,815 jobs or 62.66% of the country’s total employment 
based on the 2020 Philippine Statistics Authority (PSA) List of 
Establishments.1
Despite the significant contribution of MSMEs in the Philippine 
economy, however, MSMEs continue to have difficulty in accessing credit 
from lending institutions. According to a 2017 study published by the 
International Finance Commission,2 the Philippine MSME sector lacks US 
$221.79 in supply of credit or financing. The study also noted that the size of 
the Philippine’s MSME finance gap accounts for 76% of its gross domestic 
product.
1 DTI, 2020 MSME Statistics, available at https://www.dti.aov.ph/resources/msme-statistics/ {last accessed June 25, 
2022).
2 MSME Finance Gap Assessment of the Shortfalls and Opportunities in Financing Micro, Small, and Medium 
Enterprises in Emerging markets”. 2017. International Finance Corporation. Retrieved from; 
https://www.smefinanceforum.orq/sites/default/files/Data%20Sites%20downloads/MSME%20Report.pdf (date last 
accessed; June 29, 2019)


In 2018, World Bank noted that 81.2% of Philippine MSMEs rely mostly 
on internal savings or earnings to finance their investments.3 This deficit is 
largely due to the inability of the country’s financial institutions to allocate a 
sustainable portion of their loan portfolio to MSMEs. According to the Bangko 
Sentral ng Pilipinas, as of March 2019, banks allocate a meager 2.72% of 
their loan portfolio to micro and small enterprises and 4.19% to medium 
enterprises.4
Meanwhile, on June 16, 2018, the mandatory credit allocation 
prescribed by Republic Act No. 6977, as amended, otherwise known as the 
“Magna Carta for Micro, Small and Medium Enterprises (MSMEs) already 
lapsed, despite the glaring need of MSMEs to access credit.
Lastly, due to the pandemic, the Department of Trade and Industry 
(DTI) reported that 52.66% of MSMEs fully stopped their operations as of April 
29, 2020.5 Likewise, a survey conducted by the Asian Development Bank 
Institute on Philippine enterprises showed dismal results, as 59.9% of micro 
enterprises surveyed reported no sales in March 2020, while 44.8% and 
35.8% for small, and medium enterprises, respectively, reported the same, 
noting that microenterprises were heavily hit with the strict lockdown.6 The 
survey had a total 2,329 respondents, 1,804 or 77.5% of which were from 
MSMEs.7
In order to ensure continued support and access to financing for 
MSMEs, this bill seeks to extend the period of the mandatory allocation of 
credits to MSMEs for another 10 years. This bill also seeks to set a minimum 
amount of penalty that may be imposed on non-compliant or under-compliant 
lending institutions.
The immediate passage of this bill is earnestly sought.
SENATOR JOEL VILLANUEVA^
3 2019, February 8. Building SME Lending competencies. Retrieved from; https://www.manilatimes.net/buildinq-sme- 
lendinq-competencies/508472/ (date last accessed; June 29, 2019)
4 70 Compliance with Magna Carta for Micro, Small and Medium Enterprises. Bangko ng Sentral Pilipinas. Retrieved 
from; http://www.bsp.qov.ph/bankina/pbs new/70.htm (date last accessed: June 29, 2019)
5 Philippine Daily Inquirer, DTI: Over half of MSMEs in PH fully stopped operations due to virus outbreak, available at 
https://business.inauirer.net/296227/dti-over-half-of-msmes-in-ph-fullv-stopped-operations-due-to-virus-outbreak {last
accessed June 25, 2022).
6 Shigehiro Shinozaki and Lakshman N. Rao, ADBI Working Paper Series, Covid-19 Impact on Micro, Small, and 
Medium-Sized Enterprises under the Lockdown: Evidence from a Rapid Survey in the Philippines, accessible at 
httpsV/www.adb.ora/sites/default/files/oublication/677321/adbi-wo 1216.pdf {last accessed July 4, 2022).
7 Id.


NINETEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES
First Regular Session
SENATE 
s. B. NO. 368
; '0ffirr of liU’ 'C ''J’
72 JUL 12 A11 31
Rl:CEiv> J 3V;
Introduced by SENATOR JOEL VILLANUEVA
AN ACT
STRENGTHENING ACCESS TO CREDIT OF MICRO, SMALL, AND 
MEDIUM ENTERPRISES, AMENDING FOR THE PURPOSE, 
REPUBLIC ACT NO. 6977, AS AMENDED, OTHERWISE KNOWN AS 
THE “MAGNA CARTA FOR MICRO, SMALL AND MEDIUM 
ENTERPRISES” AND FOR OTHER PURPOSES
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled:
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SECTION 1. Section 15 of Republic Act No. 6977, as amended, otherwise 
known as the “Magna Carta for Micro, Small and Medium Enterprises 
(MSMEs)” is hereby amended to read as follows:
SEC. 15. Mandatory Allocation of Credit Resources to Micro Small 
and Medium Enterprises. - For the period of ANOTHER ten (10) 
years from the date of the effectivity of this amendatory Act, all 
lending institutions as defined under Bangko Sentral ng Pilipinas 
rules, whether public or private, shall set aside at least eight percent 
(8%) for micro and small enterprises and at least two percent (2%) 
for medium enterprises of their total loan portfolio based on their 
balance sheet as of the end of the previous quarter, and make it 
available for MSME credit as herein contemplated.
Compliance of this provision shall be:
a) actual extension of loans to eligible MSMEs; or
b) actual subscription of preferred shares of shares of stock of the 
SB Corporation: or


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c) wholesale lending to Participating Financial Institutions (PFIS) for 
on-lending to MSMEs; or
d) purchase/discount of MSMEs receivables; or
e) loans granted to export, import, and domestic traders subject to 
compliance with Section 3 of this Act; or
f) subscribed/purchase of liability instruments as may be offered by 
the SB Corporation.
The Bangko Sentral ng Pilipinas, IN CONSULTATION WITH THE 
MSMED COUNCIL AND THE SECRETARY OF TRADE AND 
INDUSTRY, shall formulate rules for the effective implementation of 
this provision: Provided, That the purchase of government notes, 
securities and other negotiable instruments shall not be deemed as 
compliance with the foregoing provisions: Provided, further, That 
the Bangko Sentral ng Pilipinas, IN CONSULTATION WITH ALL 
STAKEHOLDERS, shall establish an incentive program to 
encourage lending to micro, small and medium industries beyond 
the mandatory credit allocation to said enterprises, such as possible 
reduction in bank's reserve requirement; PROVIDED, FINALLY, 
THAT THE PENALTY FOR NON-COMPLIANCE OR UNDER 
COMPLIANCE OF THE PRESCRIBED PERCENTAGE OF 
CREDIT ALLOCATION PROVIDED UNDER THIS SECTION 
SHALL NOT BE LOWER THAN FIVE HUNDRED THOUSAND 
PESOS (P500,000.00).
The MSMED Council shall set up the appropriate systems to 
monitor all loan applications of MSMSEs in order to account for the 
absorptive capacity of the MSME sector.
The Bangko Sentral ng Pilipinas shall furnish to the MSMED 
Council on a quarterly basis comprehensive reports on the banks' 
compliance, noncompliance, and penalties of the above provisions 
on the mandatory credit allocation for MSMEs.
Lending institutions which are not qualified to acquire or hold lands 
of the public domain in the Philippines shall be permitted to bid and 
take part in sales of mortgaged real property in case of judicial or 
extra-judicial foreclosure, as well as avail of receivership, 
enforcement and other proceedings, solely upon default of a 
borrower, and for a period not exceeding five (5) years from actual 
possession: Provided, That in no event shall title to the property be 
transferred to such lending institution. If the lending institution is the 
winning bidder, it may, during said five (5) year period, transfer its 
rights to a qualified Philippine national, without prejudice to a 
borrower's right under applicable laws.


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SEC. 2. Implementing Rules and Regulations. - Within sixty (60) days from 
the effectivity of this Act, the Bangko Sentral ng Pilipinas, in consultation with 
the Department of Trade and Industry, the MSMED Council and other relevant 
stakeholders, shall issue the implementing rules and regulations for the 
effective implementation of this Act.
SEC. 3. Separability Clause. - If for any reason, any part or provision of this 
Act is declared invalid or unconstitutional, the remaining parts or provisions not 
affected thereby shall remain in full force and effect
SEC. 4. Repealing Clause. - All laws, executive orders, presidential decrees, 
rules and regulations or parts thereof contrary to or inconsistent with any 
provisions of this Act are hereby repealed, amended or modified accordingly.
SEC. 5. Effectivity. - This Act shall take effect fifteen (15) days after its 
publication in the Official Gazette or in two (2) national newspapers of general 
circulation.
Approved,