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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 3326

Introduced by HON. JOY MYRA S. TAMBUNTING

EXPLANATORY NOTE

Section 9 of Article II of the 1987 Constitution declares as a 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 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 services
such as savings, insurance, credit and even health care by capacitating them with economic
and productive opportunities.

In view of the foregoing, the passage of this bill is earnestly sought.

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RA S. TAMBUNTING



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 3326

Introduced by HON. JOY MYRA 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 2019"

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.

Pursuant thereto, the government shall work in partnership with qualified institutions
in the private sector for the poor to have more access to micro-finance, 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. - This 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 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;

c.) "Poor" - refers to individuals and families whose income fall below the poverty
threshold as defined by 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 of 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 accredited MEDI was created or organized;
or
(iii) 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 a specific project within a period not to exceed five (5)
years, and the projects 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 placement, 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
Fifty Million Pesos (P50,000,000.00).

SECTION 7. Supervision and Accreditation. The Accrediting Entity established under
this Act shall establish and operationalize a system of accreditation to rmine the
qualifications of the MEDI. It shall have the following functions and responsibilities:

(a) Examine, evaluate and accredit the MEDI as a pre-requisite for its registration with
the BIR for purposes of tax exemption under this Act.

(b) Issue 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 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 return, allowances, discount 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 regulation of this Act within sixty (60)
days after its approval. Such rules and regulations shall take effect fifteen (15) days after
their publication in a newspaper of general circulation in the Philippines.

SECTION 13. Separability Clause. - If 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 fifteen (15) day after its publication
in the Official Gazette or in a newspaper of general circulation.

Approved,