Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

5610
{ HOUSE BILL NO.

Introduced by: HON. “KUYA” JOSE ANTONIO R. SY-ALVARADO

AN ACT INSTITUTIONALIZING MICROFINANCE PROGRAMS AND ACCESS TO
CAPITAL TO SUPPORT AND GROW MICRO, SMALL, AND MEDIUM
ENTERPRISES (MSMEs), ALLOCATING FUNDS THEREFOR, AND FOR OTHER
PURPOSES

EXPLANATORY NOTE

Based on the 2018 MSME Statistics posted by the Department of Trade and Industry (DTI),
Philippine Statistics Authority (PSA) recorded a total of 1,003,111 business enterprises operating
in the Philippines. Of the total numbers business enterprises in the country, 998,342 or almost
99.52% are Micro, Small and Medium Enterprises (MSMEs) and 4,769 or just 0.48% are large
enterprises. Micro enterprises constitute 88.45% or 887,272 or of total MSME establishments,
followed by small enterprises at 10.58% or 106, is: and medium enterprises at 0. 49% of 4895) i

MSMEs contributed a lot to our employment: According to the same data needs above, an ‘

5,714,262 jobs or 63.19% of the country’s total employment was generated by MSMEs. The micro
enterprises produced the biggest share of 2,610,221 or 28.86% closely followed by small
enterprises at 27.04% or 2,445,111 while medium enterprises were far behind at 7.29% or 658,930.

However, despite their significant contributions to the country’s economy, MSMEs and micto-
entrepreneurs are not provided sufficient assistance by the government. Their growth is hindered
by different constraints. One major constraint is the difficulty to secure funds and capital.

Ifthe government provided programs and services, such as affordable loans and alternative fading
for MSMEs, we can help them reach their full potential that will greatly contribute to sh€ country’s
economic growth.

Thus, the immediate passage of this bill is earnestly sought.

“KUYA” JOSE ANTONIO R. SAL Es
Repres ive §

First Disthel Of Bi ae aia



HOUSE OF REPRESENTATIVE!
Quezon City

EIGHTEENTH CONGRESS

Republic of the Philippines i
First Regular Session |

}

i

HOUSE BILL NO. 5610

Introduced by: “KUYA” JOSE ANTONIO R. SY-ALVARADO-

AN ACT INSTITUTIONALIZING MICROFINANCE PROGRAMS AND ACCESS TO.
CAPITAL TO SUPPORT AND GROW MICRO, SMALL,AND MEDIUM
ENTERPRISES (MSMEs), ALLOCATING FUNDS THEREFOR, AND FOR OTHER
PURPOSES

Be it enacted by the Senate and House of Represematives of the re in Congress assembled

SECTION 1. Title. — This Act shall be known as the “Puhunam Tulungan, Kaunlaran (PTK) *
Net.” °

SECTION 2. Declaration of Policy. It shall be the policy of the State to promote genuine
inclusive growth and alleviate poverty. |

| It is likewise thé policy of the State to promote a just and dynamic Social order ‘naecnall a4
ensure prosperity, promote full employment, a rising standard of living and an improved quality
of life for all. In pursuit of this, the State shall endeavor to develop & program that (vill ensure that
Se al ee a TES a ee RE SBR geo
opportunities and uplift their lives. |
‘The 1987 Constitution provides that all Sectors of the economy and all regions of the
country shall be given optimum opportunity to develop, Private enterprises, including
corporations, cooperatives, and similar collective organizations, shall be encouraged to broaden
the base of their ownership.

2.3

‘Access to finance and technical support shall be the &. policy of this Act. To i
operationalize this policy, it shall be ensured that: (a) the process for obtaining micro-financing i}
grants and technical suippott in! the Philippines shall be simple dnd practical;\(b) the loan prbcosdls
shall be exclusively used for capital; and (c) interests shall not be tnconscionable and not higher
than prevailing bank rates

SECTION 3. PTK Five-Star Program. The Department of Trade and Industry (DTI), in,
coordination with the Department of Interior and Local Govefnment (DILG), Department of”
‘Agri¢ulture (DA), Department of Science and Technology (DOST), Department of Tourism
(DOT), National Economic and Development Authority (NEDA), and the Technical Education
and Skills Development Authority (TESDA) shall develop a comprehensive program for the
development of micro, small, and medium enterprises (MSMEs) in all regions of the country, The 4
goal of the program is to protect the capital of small proprietors, ensure the success of their i
MSMEs, and transform these MSMEs into five-star businesses by providing them with assistance
and the necessary resources in order to help their businesses flourish.

The DTI shall be guided by the following principles in the development of the PTK. Five-Star
Program:



capital, whether or not they fall under the priority business areas of bat Fespecllve Tegions

a. The Program shall be national in scope but shall be tailored to fit the business environment,
market demands and available resources of each administrative region;

b. The DTI shall create a registry for all MSMEs'per region based on their size category (ie, +

micro, small or meditim) and businiess are (i.e!, agriculture, livestock, fisheries, food
processing, fabric, atd clothing, eco-tourism, activities, pottery and handicrafts, furniture
and hardwood, information and technology, etc.);
¢: Each region shall choose a maximum of five (5) priority business areas todevelopiin 4
to reap the benefits of efficiency and specialization; : i
“Jd. As much as possible, each region shall be encouraged to shooee Auer

business portfolio in order to hedge for risks brought about by natural calamities and

changing market demands;

e. To facilitate the implementation of this Act; cach region shall establish a proprietor’s guild oy
for each of their priority business areas;

f Free technical and administrative support, including, but not limited to, ate
development, skills and leadership training, packaging and design, quality control, market
promotion, client or supplier matching and financial literacy and planning, shall be made
available to MSMEs falling under the five (5) priority business areas in their respective
regions;

8. Every year, the five (5) top-performing enterprises per size and category in each region
shall receive @ Five-Star award and shall be eligible for grants, not less than ten percent
(10%) of their current capital, to be used solely for further business capitalization:

h. Every medium-sized enterprise that evolves into a large enterprise through the help of the,

PTK Five-Star Program shall likewise’ be eligible'for a one-time grant of Twenty-Five
Thousand Pesos (Php 25,000) to be used solely for further business capitalization;

i. There shall be a mandatory review of the PTK Five-Star program every three (3) years in
order to ensure that the program meets Be present market, Fetes

SECTION 4. PTK oda Progriim. In addition to the PTK’ five Star Pro;

im, the:
consultation with the Nationdl Anti-Poverty Commission (NABC) and the Bangko Sande mg

Pilipinas (BSP) shall develop a loan program catering exclusively to micro-enterprises in need of

‘The DTT shall be guided by'the following principles in the development of the joa

program

a. The loans shall be extended only to borrowets who have satisfied the requirements under
this Act;

b. Each loan shall not exceed Ten Thousand Pesos (Php 10, 000) fi first time borrowers, Thirty
Thousand Pesos (Php 30,000) for second time borrowers; and Two Hundred and Fifty
‘Thousand Pesos (Php 250,000) for those borrowing for a third time or oftener, Provided,
that the latter shall be borrowers in good standing. The DTI is hereby authorized to amend

these amounts, after the mandatory review provided in this Act, in ordet to meet present *

market demands,

¢. Collateral shall not be required from borrowers:

d. Loan proceeds shall be exclusively used for capital

¢. The period for repayment shall be mutually agreed upon by the borrower and
Provided, that such repayment period shall be at least three (3) months for a

those borrowing for a third time or oftener:

f. Delivery of the program shall be through partner lenders which are cooperatives and/ot
associations that are registered with the Cooperative Development Authority (CDA), of the
Securities and Exchange Commission (SEC), and the DTI In the absence of such
participating partners lenders in the area, government institutions, centers or facilities, now
existing or may be created by law, which are dedicated to the promotion of inclusive growth
and anti-poverty objectives, are mandated to implement the program:

borrower; at least six (6) months for a second time borrower, and at least one (1) Year ‘for :

1
i



g. The lenders shall have a collection mechanism, whereby payments are made on a weekly
or monthly basis. It shall be the duty of the lender to collect the loan principal, together
with the interest, from the borrower, |

h. Government lenders shall not profit from the microfinance program. Neither shall they be i
entitled to interest proceeds, the amounts of which Shall’ be devoted to.a fund for the
development of MSMEs. Participating partner lenders shall be entitled to a reasonable. nied i
amount of the proceeds of the interest collected by them, hs thay be deters ies ie

and regulations promulgated in implethentation of this Act!”

Priority shall be ‘given to MSMES falling under the priority Bisthest areas 0

respective regions and to MSMEs with innovative businesses; and

J. There shall be a mandatory review of the loan program every three (3) years in order to
ensure that the loan program meets the present market demands.

Inthe pursuit of inclusive growth and poverty alleviation, pertinent rules and regulations
promulgated in the implementation of this Act shall provide for the details, conditionalities, }
and other schemes in the operationalization of the program, such as, but not limited to, penalty i
rates upon default and the dispensation of the proceeds from the loan fase ia a yf 1
SEC 5. Eligibility for Loan Program. To qualify for the ie program Windl this Act} the :
borrower must be: if

‘At least eighteen (18) years of age; iy
‘A member in good standing of the duly-registered cooperative or association, or a resident
of the local governiment unit (LGU); from which he/she intends to avail of the loan;
¢. Willing to'State under oath the facts establishing the foregoing!
4d, Comprehensive feasibility study of the business proposal; and
€. Has attended a DTl-accredited livelihood seminar, as. evidenced * ett
| participatidn, and possesses credit-worthiness, as likewise Proven by acertificate is
the DTI for that purpose | i

oe

SECTION 6. Registration of Cooperatives and Associations. The DTI stall keep a registry
all participating cooperatives and associations for monitoring and! record keeping ptirposes.
Cooperatives and associations which are eligible to participate in Programs provided for-in this ©
Act must register to be included in the database.

SECTION 7. Local Government Unit Participation. Any law, executive order, department
order, ordinance and the like, to the contrary notwithstanding, local government units, through the.
local sanggunian, as defined in the 1991 Local Government Code, are hereby authorized to provide
a loan program in cooperation with the cooperatives/associations, non-governmental

organizations, and people’s organizations that are lending ne Res to MSMEs within their i
jurisdiction,

4

Provided, that in cities or municipalities where there are no such cooperatives/associations,
the local government unit shall, within one year from the effectivity of this Act, require the
municipality social welfare and development office or the local trade and industry office. or iui
livelihood development office in the city or municipal government concerned, ee

implement a loan program consistent with the provisions of this Act, under the si
DTI.

Provided, further, that each participating LGU must prepare a comprehensive feasibility.
study for the development of a loan program. Each LGU must fund, from its internal revenue
allotment, at least Five Million Pesos (Php 5,000,000), where possible and practicable, of Thirty
Percent (30%) of the total funding cost related to small business improvement, agricultural
improvement, institutional advancement and consumer protection, whichever is higher. Likewise, 1
for this purpose, the LGU shall maintain a separate and dedicated office which shall be ge re |
for the over-all implementation of the program in the locality. |


the available funds for the loan program:

In order to promote private sector participation in promoting inclusive growth and
government poverty alleviation efforts, donations for purposes of this Act from the private sector
to an LGU shall be matched with a corresponding amount by the recipient LGU; Provided that,
donations of more than Five Million Pesos (Php 5,000,000) shall be matched by the national
government for the LGU. In any case, should the LGU concerned be financially incapable of
matching a donation, the national government shall augment the internal revenue allotment of such
LGU for this purpose.

SECTION 9. Incentives for Private Support. Any person or corporate entity may donate funds,
equipment, materials or services for the improvement of the PTK Five-Star and/or PTK loan
program. Such donations shall be done through a memorandum of agreement between the
cooperative or association, LGU, and the donor. The agreement shall expressly state the ute zi
the donated funds, materials, or services. :

' All income, legacies, gifts, and donations for the benefit of the program shall be
from the payment of all forms of taxes, fees, assessments, and other charges of the government,
its branches, and subdivisions. Subject to the issuance of the appropriate revenue regulations by
the Bureau of Internal Revenue, the value of the donation shall also be deductible as an

in the determination of the taxable income of any donor.

SECTION 10. Funding. The total amount of One Hundred Twenty-Five Billion Pesos (Php
125,000,000,000) for the next five years upon implementation of this Act or Twenty-Five Billion —
Pesos (Php 25,000,000,000) per year for the next five years upon implementation of this Act, shall -
be appropriated for the initial implementation of the PTK Five-Star Program and the PTK Program,
Said amount shall at all times be divided equitably among each administrative region of the
country. Thereafter, such sums as may be necessary shall be included in the General Appropriation
Act.

In addition, the amount of Five Hundred Million Pesos (Php 500,000,000) is hereby
appropriated as a Special Development Fund to generally support the initial implementation of this
Act. a

‘The funds shall be held in trust by the DTI in collaboration with the Development Bank of
the Philippines (DBP), Land Bank of the Philippines (LBP) and other svepret financial
institutions. The DTI may likewise allocate a portion of the funds to the People” ee
Trust Fund (PDTF) under Republic Act No. 8425, provided that the funds t0 be alfocat
PDTF shall be used solely for microfinance-related organizing activities

which shall ensure the implementing of this Act.

SECTION 12. Role of Government Financial Institutions. All government financial elit
(GIFs) shall set aside funding for microfinance operations to complement the purposes of this Act.
Participating government financial institutions shall include the DBP, LBP, and other GFls,

SECTION 13. PTK Task Force. There shall be a PTK Task Force in charge of coordinating with
banks and financial institutions on their existing programs on microfinancing. This shall be
consolidated and submitted to DTI to be taken into consideration for the PTK Loan Program

SECTION 14. Reports. The DTI Secretary shall submit to the President of the Philippines, the
President of the Senate and the Speaker of the House of Representatives, an annual
accomplishment report on projects covered in this Act, detailing the amount of appropriations
released by end of the calendar year, the extend of the work accomplished, further work. sy be. done, a
and any recommendations for additional appropriations or charges thereof.


Hie
biter

SECTION 15. Full Financial Disclosure, Accountability and Transparency. The DT! a
agency of the program, and the LGU concerned shall quarterly publish, print, and disseminate at
no cost to the public and in an accessible form, in conjunction with Republic Act No. ee
otherwise known as the “Anti-Red Tape Act of 2007”, and through their websites, timely, true,
accurate, and updated Key information relating to the program. Likewise, they shall endeavor to.
translate key information and present them in ak form and means,

A

government agertio ‘shall till such rules and regulations, for the proper and’ effective
implementation of this Act, within sixty (60) days from the date of publication The DTI shall
Publish such rules and regulations once a week for two (2) consectitive weeks in fwo Re pat ‘e
eae circulation. i 4 gees :

Ganon 18. Tatas Clause. Al oe as ae issuances or portion ical
are inconsistent with the provisions of this Act are repealed or pie accordingly.

(2) newspapers of g

Approved,