Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 3641

Introduced by Representative Dennis C. Laogan
Ang Kabuhayan Party-List

EXPLANATORY NOT!

It is a policy of the State to encourage the establishment of micro and small enterprises in the
country in order to foster national development, promote inclusive growth, and reduce poverty

levels through the creation of jobs to stabilize the state of living for all citizens.

In 2014, the Philippine Statistics Authority (PSA) reported that of the 946,988 establishments in
the Philippines, 99.6% (942,925) are micro and small enterprises (MSMEs). and of such, 90.3%
(851,756) are micro enterprises and 9.3% (87,283) are small enterprises. These figures have re-

mained relatively the same since 2008.

A report! by the German Development Institute five years earlier (as the latest one available)
stated that in all, Philippine (MSEs) contribute only around 25% of the country’s total gross val-
ue added (GVA), which means that despite their abundance, MSE:

“contribute relatively little to

the economy”.

‘This measure seeks to bridge the gap between the poor economic performance of MSEs and their

large presence and potential contribution to our economy by providing for zero-interest credit

access to qualified MS

With this, the immediate approval of this bill is earnestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL No,_ 3641

Introduced by Representative Dennis C. Laogan
Ang Kabuhayan Party-List

AN ACT

PROMOTING THE FINANCIAL/CREDIT ACCESS OF MICRO AND SMALL EN-
TERPRISES (MSEs) BY EMPOWERIN E BARANGAY DEVELOPMENT COUN-
CILS TO EXTEND ZERO-INTEREST CREDIT ACCESS TO MSEs BY MANDATING
ALL BARANGAYS TO ALLOCATE NOT LESS THAN 5% NOR MORE THAN 10%
FROM ITS GENERAL FUND TO THE PROVISION OF SUCH CREDIT ACCESS,
THEREBY AMENDING R.A. No. 7160, OTHERWISE KNOWN AS THE “LOCAL
GOVERNMENT CODE OF 1991” AND FOR OTHER PURPOSES.

Be it enacted by the Senate and the House of Representatives of the Philippines in Con-
gress assembled:

SECTION 1. Short Title. — This act shall be known as the “Pautang na Walang Tubo
Act of 2016.”

SECTION 2. Declaration of State Policy. — \t is declared the policy of the State to pro-
mote a just and dynamic social order that will ensure the prosperity and independence of the na-
tion and free the people from poverty through policies that provide adequate social services,
promote full employment, a rising standard of living, and an improved quality of life for all,

The State also recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investments.

In addition, the State seeks to hasten economic development at the micro and small en-
terprise level by providing a more accessible avenue for zero-interest credit access extension
s (MSEs), as defined in R.A. 6977, as amend-
Magna Carta for Micro, Small and Medium Enterprises (MSMEs)”,

programs for qualified micro

1d small enterpri

ed, otherwise known as the
and barangay micro business enterprises (BMBEs), as defined in RA 9178, otherwise known as

the “Barangay Micro Business Enterprises (BMBEs) Act of 2002.”

To this end, all barangays within a local government unit across the country are hereby
mandated to allocate not less than 5% nor more than 10% from its general fund to be used for
zero-interest credit access programs for micro and small enterprises: Provided, that the micro and

small enterprises are duly registered business entities: Provided further, that in the case of unreg-


istered MSEs, the Barangay Development Council shall encourage the interested MSEs to regis-
ter their business and shall assist them in processing their business applications as well as the
loan application: Provided further, that in the case of unregistered businesses, financial/credit
access programs shall be allowable after completing a year of operations afier its day of registra-
tion: Provided finally, that the zero-interest credit access extension shall be used for self-growth
of the M

:s and cannot be extended to another business enterprise. In cases of violation/s to any

provisions and/or the implementing rules and regulations of this act, the zero-interest credit ac-

cess extended to the involved bu: ntity shall automatically become due and demandable.

SECTION. 3 Definition of terms. — As used in the Act, the following:

(@) “Barangay Development Council”, or “BDC”, refer to the barangay-level unit

of the local development council, defined in Sec. 106, Title VI, Book 1, which is
designated to assist their corresponding Sanggunian in setting the direction of
economic and social development, and coordinating development efforts within

its territorial jurisdiction.

(b) “Barangay Micro Business Enterprises”, or “BMBEs”, refer to any business
entity or enterprise engaged in the production, processing or manufacturing of
products or commodities, including agro-processing, trading and services, whose
total assets including those arising from loans but exclusive of the land on which
the particular business entity's office, plant and equipment are situated, shall not
be more than Three Million Pesos (P3,000,000.00). The above definition shall be
subject to review and upward adjustment by the SMED Couneil, as mandated un-
der Republic Act No. 6977, as amended by Republic Act No. 8289

(c) “General fund” refers to the fund to which all the income of the barangay from
whatever source shall accrue, in accordance with Sec. 329, Art, I], Chapter III,

Title V, Book II of RA 7160, otherwise known as the “Local Government Code
of 1991.”

(d) “Micro and Small Enterprises” refer to any business activity or enterprise en-

gaged in industry, agribusiness and/or services, whether single proprietorship,
cooperative, partnership or corporation whose total assets, inclusive of those aris-
ing 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 fol-

lowing categories:
i. miero : not more than P3,000,000

ii, small : P3,000,001 - P 15,000,000


(ec) “Zero-Interest Credit Access” refer to the financial/credit access extended to
duly registered Micro and Small Enterprises with zero percent (0%) interest.

SECTION 4. Establishing the Barangay Zero-Interest Credit Access Fund. ~ From the
general fund of each barangay shall be allocated and established the Zero-Interest Credit Access.
‘This shall comprise not less than 5% nor more than 10% of the general fund, to be reserved for
the exclusive purposes defined within this act.

SECTION 5. Purposes. ~ The Barangay Zero-Interest Credit Access Fund shall be uti-
lized for the following purposes only:

(a) Amount. - The Central Bank’s Monetary Board is hereby authorized to issue reg-
d under Section 41 of R.A. No. 879,
otherwise known as “The General Banking Law of 1991” for the implementation

ulations as it may deem necessary as s

of the following:

a. Zero-Interest Credit Access - The maximum credit access extension al-
lowable to a qualified borrower with zero interest shall not exceed the
fair-share identified by the barangay development council of each MSE
in a certain locality. The aggregate sum of the amount borrowed must

not exceed the 10% allocation from the barangay general fund.

b. Credit Access - Depending on the available funds of a barangay, a loan
extension shall be allowed to a qualified borrower, herein enumerated
under Section 8 of this act: Provided, that the Barangay can re-allocate
funds in the Credit Access fund on top of the 10% mentioned in Section
4 of this act; Provided further, that the inter-agency team headed by
BDC Chairman shall set another requirements for the qualified borrow-

ers to comply in order to avail of this credit ac

Emergency Zero-Interest Credit Access ~ Ten percent (10%) of the Ba-
rangay Zero-Interest Credit Access Fund shall be set aside and reserved
for emergency purposes, to be determined and approved by the BDCs,
pursuant to the implementing rules and regulations.

(b) Interest. - The Monetary Board shall prescribe the necessary interest rate on the

credit access and the emergency credit access extensions under this act; Provided,
that the interest rates shall be based on the lowest rate of interest for similar credit

accommodations prevailing at the time.

(c) Payment. - The Monetary Board is hereby authorized to issue regulations as it

may deem necessary as specified under Section 41 of R.A. No. 879, otherwise


known as “The General Banking Law of 1991” for the implementation of the fol-

lowing:

a. Zero-Interest Credit Acc

availed by a qualified borrower shall be
payable within a period of one (1) year: Provided, that the extension of
such zero-interest credit access shall be in consistent with safe and
sound banking practices as provided under Republic Act No. 8791, oth-

erwise known as, “he General Banking Law of 2000.”

b. Credit Access availed by a qualified borrower shall be payable within
the period of three (3) years: Provided, that the extension of such credit
access shall be in consistent with safe and sound banking practices as
provided under Republic Act No. 8791, otherwise known as, “The Gen-
eral Banking Law of 2000.”

c. Emergency Credit Access availed by a qualified borrower shall be pay-
able within the period of five (5) years: Provided, that the extension of

such credit acces:

shall be in consistent with safe and sound banking
practices as provided under Republic Act No. 8791, otherwise known
as, “The General Banking Law of 2000.”

SECTION 6. Empowering the Barangay Development Council. - The Barangay Devel
opment Council (BDC) shall be empowered to extend credit access to qualified borrowers con-
sistent with safe and sound banking practices.

SECTION 7. Additional Functions of the Barangay Development Council. — In addi-
ec. 109, RA

‘Local Government Code of 1991”, the same is amended to read

tion to the current functions of the Barangay Development Council as provided in $

7160, otherwise known as the

as follows:
"Section 109. Functions of Local Development Councils. ~
xx
(b) The barangay development council shall exercise the following functions:
(1) Mobilize people's participation in local development efforts;
(2) Prepare barangay development plans based on local requirements:

(3) Monitor and evaluate the implementation of national or local pro-
grams and projects:

terest credit access extension from

(4) Receive applications for ze1

MSEs within the juris

‘ion of the respective barangays;


(5) Pre-select and shortlist applicant MSEs for review by the
MSMED Council which has jurisdiction over the applicant MSEs;

(6) Grant credit or financing access to qualified MSEs within their lo-
cal jurisdiction;

(7) Perform such other functions as may be provided by law or competent

authority.

SECTION 8. Qualified Borrowers. ~ Business enterprises shall become qualified bor-
rowers if they are within the definition set by RA No. 9501, otherwise known as the “Magna
Carta for Micro, Small and Medium Enterprises” as follows:
(1) Micro Enterprises - duly registered business engaged in industry, agri-
business and/or services that has an asset the size up to P3,000,000.00;
Provided, that the said enterprise shall have an employment size of up to 9
employees, whether a single proprietorship, co-operative, partnership or
corporation.
(2) Small Enterprise - duly registered business engaged in industry, agri-
business and/or services that has an asset size of P3,000,001.00 up to
P15,000,000.00; Provided, that the said enterprise shall have an employ-
ment size from 10 to 99 employees, whether a single proprietorship, co-
operative, partnership or corporation.
(3) Unregistered Micro and Small Enterprises - unregistered micro or
small business entities shall be allowed to become qualified borrowers the
day after the completion of the first year of its operations from the date of

its registration

SECTION 9. Incentive. - Local government units which shall extend credit access speci-
fied in this Act shall be granted development assistance incentives from the national government
through the Department of Budget and Management (DBM).

SECTION 10. Program Administration, - An inter-agency team composed of Barangay
Development Council (BDC) of every Local Government Unit (LGU), Department of Interior
Local Government (DILG), Commission on Audit (COA), Bankers Association of the Philip-
pines (BAP), the Chamber of Thrift Banks (CTB), the Credit Information Corporation (CIC)
shall become jointly responsible for policy guidance, supervision, direction, close monitoring
and evaluation of the barangay zero-interest credit access program under this act. Of which, the
BDC Chairman and the LGU Representative shall serve as the chairperson and co-chairperson,

respectively, of the team


SECTION 10. Implementing Rules and Regulations. ~The Secretary of the DTI, in
consultation with the MSMED Council and the SME Development Council, shall formulate the
necessary rules and regulations to implement the provisions of this Act within ninety (90) days
afier its approval. The rules and regulations issued pursuant to this Section shall take effect fif-
teen (15) days after its publication in a newspaper of general circulation.

SECTION 11. Separability Clause. — If any provision of this Act

tutional, the remainder of this Act not otherwise affected shall remain in full force and effect.

ll be held unconsti~

SECTION 12. Repealing Clause. ~ Any law, presidential decree or issuance, executive
order, letter of instruction, administrative order, rule or regulation contrary to, or inconsistent

with the provisions of this Act is hereby repealed, modified or amended accordingly.

SECTION 13. Effectivity Clause. — This Act shall take effect after fifteen (15) days fol-

lowing its publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved,