TWENTIETH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
)
SENATE 
S. No. 931
25 AUG-5 P3:53
R!:CEiVr D 0V-
Introduced by Senator Jinggoy Ejercito Estrada
AN ACT
ENHANCING CREDIT SUPPORT TO MICRO, SMALL AND MEDIUM 
ENTERPRISES, AMENDING FOR THE PURPOSE SECTION 15 OF REPUBLIC 
ACT NO. 6977, AS AMENDED, OTHERWISE KNOWN AS THE "MAGNA CARTA 
FOR MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs)
EXPLANATORY NOTE
The International Labour Organization has referred to Micro, Small, and 
Medium Enterprises as "the backbone of economies worldwide and of the world of 
work".1
The Philippine Statistics Authority (PSA) recorded a total of 1,246,373 business 
enterprises operating in the country in its 2023 List of Establishments. MSMEs 
comprise 99.63% of this number, totalling to 1,241,733 enterprises compared to 
0.37% share of large enterprises which numbers to 4,640. These MSMEs were able 
to generate a total of 6,351,466 jobs or 66.97% of the country's total employment.2
Republic Act No. 6977 or the Magna Carta for Small Enterprises was enacted 
on 24 January 1991. Section 13 of RA 6977 provides for the Mandatory Allocation of 
Credit Resources to Small Enterprises. All lending institutions are mandated to set
1 Houngbo, Gilbert F. "MSMEs: The backbone of economies and the world of work". ILO Micro-Small 
and Medium Sized-Enterprises Day Statement. 27 June 2023.
2 MSME Statistics I Department of Trade and Industry Philippines


aside a portion of their total loan portfolio for small enterprises wherein at the end of 
the first year of the effectivity of the Act portion set aside shall be 5%, at the end of 
the 2nd year to the end of the 5th year shall be 10%, and at the end of sixth year at 
5%, and may come down to zero by the end of the 7th year. Republic Act No. 9501 
was enacted on 23 May 2008 amending Section 13 of RA 6977. Under the amendatory 
law, lending institutions are mandated to set aside 8% for micro and small enterprises 
and at least 2% for medium enterprises of their total loan portfolio for a period of ten 
(10) years.
In spite of this however, access to finance has remained a chronic barrier to 
MSME growth, and even survival.3 As of December 2023, compliance with the 
prescribed allocation of loan portfolio to micro and small enterprises amounted to PhP 
200.787 billion or 1.93% and for medium enterprises was P301.422 billion or 2.90%.4
Sadly, this situation worsened the following year. As of end-March of 2024, 
"BSP data showed lending to micro and small enterprises stood at PHP 191.276 billion, 
equivalent to just 1.78% of their total loan portfolio and well below the 8% quota. On 
the other hand, loans for medium-sized enterprises amounted to PHP 283.646 billion, 
accounting for 2.63% of their total credit book."5
A University of the Philippines Center for Integrative and Development Studies 
Discussion Paper has enumerated a number of ways banks have used to avoid 
allocating the prescribed percentage of their loan portfolio to MSMEs, which include: 
"giving the bulk of funds charged against SME financing to large firms that hide their 
true worth in order to qualify as medium enterprises, depositing the required amount 
to the BSP rather than seek out SME borrowers, and preferring to pay fines rather 
than 'set aside non-income generating funds for lending to medium enterprises'", or
3 Asian Development Bank. "Asia Small and Medium-Sized Enterprise Monitor 2020". November 2020.
4 Bangko Sentral ng Pilipinas. "Compliance with Magna Carta for Micro, Small and Medium 
Enterprises". As of March 2024.
5 PH banks fall short of lending quota for small, medium businesses I Metrobank Wealth Insights


by simply resorting to an alternative such as "buying preferred stocks issued by the 
SBC (Small Business Corporation) with the money generated used for MSMEs".6
In order to enhance credit support to MSMEs, this bill seeks to further amend 
Section 15 or RA 6977, as amended by mandating all lending institutions to set aside 
at least 10% of their total loan portfolio for MSMEs. Furthermore, compliance to this 
provision will be limited to the actual extension of loans to eligible MSMEs only.
In view of the foregoing, immediate passage of this bill is earnestly sought.
NGGOY EJERCITO ESTRADA
6 Raquiza, Ma. Victoria R. "Micro, small, and medium enterprise (MSME) sector financing: Issues and 
Challenges." University of the Philippines Center for Integrative and Development Studies Political 
Economy Program Discussion Paper 2021-01.


TWENTIETH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session
)
SENATE 
S. No. 931
lOfr:.' of t;
25 AUG-5 P3 53
RliCE.V.j G
Introduced by Senator Jinggoy Ejercito Estrada
AN ACT
ENHANCING CREDIT SUPPORT TO MICRO, SMALL AND MEDIUM 
ENTERPRISES, AMENDING FOR THE PURPOSE SECTION 15 OF REPUBLIC 
ACT NO. 6977, AS AMENDED, OTHERWISE KNOWN AS THE "MAGNA CARTA 
FOR MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs)
Be it enacted by the Senate and the House of Representatives of the Philippines 
in Congress assembled:
1 
Section 1. Section 15 of Republic Act No. 6977, as amended, is hereby further
2 
amended to read as follows:
3 
"SEC. 15. Mandatory Allocation of Credit Resources to
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Micro, Small and Medium Enterprises. - [For the period of-ten
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(10) years from-the-datc of the cffcctivity of this amendatory
6 
Aetj] [a]AII lending institutions as defined under Bangko
1 
Sentrai ng Pilipinas (BSP) rules, whether public or private,
8 
shall set aside at least [eight] TEN percent [(8%)] (10%)
9 
for micro, [and] small AND MEDIUM enterprises [and at
10 
least two percent (2%) for medium enterprises] of their total
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loan portfolio based on their balance sheet as of the end of
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the previous quarter, and make it available for MSME credit
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as herein contemplated.
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"Compliance of this provision shall be[:] THE ACTUAL
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EXTENSION OF LOANS TO ELIGIBLE MSMEs.
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["a) actual extension of loans to eligible MSMEs; or


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"b) actual subscription of preferred shares of stock of
the SB Corporation; or
—wholesale—lending—te—Participating—Financial 
--------Institutions (PFIS) for on-lending to MSMEs;-Of
"d) purchase/discount of MSMEs receivables;-of
"e) loans granted to export, import, and domestic
traders subject to compliance with Section 3 of this Act;
Of
"f) subscribo/purchase of liability-instruments as-may
bc-offerod by the SB Corporation.]
"The [Bangko—Sentrai—ft§—Pilipinas} BSP, IN 
CONSULTATION WITH THE MSMED COUNCIL, 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 compliance with the foregoing provisions: Provided, 
further, That the [Bangko Sentrai ng Pilipinas} BSP, 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.
"The MSMED Council shall set up the appropriate systems to 
monitor all loan applications of MSMEs in order to account for 
the absorptive capacity of the MSME sector.
"The [Bangko -Sentrai ng Pilipinas} BSP 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


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to bid and take part in sales of mortgaged real property in
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case of judicial or extra-judicial foreclosure, as well as avail of
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receivership, enforcement and other proceedings, solely upon
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default of a borrower, and for a period not exceeding five (5)
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years from actual possession: Provided, That in no event shall
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title to the property be transferred to such lending institution.
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If the lending institution is the winning bidder, it may, during
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said five (5) year period, transfer its rights to a qualified
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Philippine national, without prejudice to a borrower's rights
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under applicable laws."
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Sec. 2. Implementing Rules and Regulations. - Within ninety (90) days from
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the effectivity of this Act, the MSMED Council and the BSP shall promulgate the
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necessary rules and regulations for its effective implementation.
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Sec. 3. Separability Clause. - Should any provision herein be declared
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unconstitutional, the other provisions not affected shall remain in full force and effect.
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Sec. 4. Repealing Clause. - All laws, decrees, orders, rules and regulations or
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other issuances or parts inconsistent with the provisions of this Act are hereby
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repealed, amended, or modified accordingly.
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Sec. 5. Effectivity. - This Act shall take effect fifteen (15) days after its
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publication in the Official Gazette or in a newspaper of general circulation.
Approved,