Republic of the Philippines

, VATS 2
House of Representatives [7 LATESE 14222 %m

Quezon City, Metro Manila

Nineteenth Congress
First Regular Session

HOUSE BILL No, 4821

Introduced by Representative Christian S. Unabia

EXPLANATORY NOTE

Data from the Philippine Statistics Authority for the calendar year 2020
show that more than 1.08 million establishments were in operation in the
Philippines and generated 8.57 million total employments during the reference
year. Of this number, micro, small and medium enterprises (MSMEs)
comprised about 99.5% of the total establishments. MSMEs contribute
significantly to the economy of the country, to wit:

(1) Employ 62.66% of the total labor force;

(2) Contribute 35.7% to the total value added;

(3) Account for 25% of the country’s total exports revenue; and
(4) Represent 60% of all exporters in the Philippines.

These data reveal that entrepreneurs have so much to offer the Philippine
society. Entrepreneurs are the backbone of the economy and the engines of
economic growth. Entrepreneurs and MSMEs facilitate local job creation,
trade and production in the country.

However, MSMEs face a myriad of problems that hinder their growth
and development, namely:

(1) Poor business environment and high cost of doing business;
(2) Lack of access to finance;

(3) _ Low productivity and efficiency; and

(4) Lack of access to markets.



It is in society’s best interest that these barriers or issues be addressed to
continue providing existing and aspiring Filipino entrepreneurs with adequate
access to opportunities.

On the lack of access to markets, the government, specifically the
Department of Trade and Industry, implements marketing programs and
Projects to increase the MSMEs’ access to domestic and international markets,
Marketing events, such as trade fairs and selling missions, are conducted to
give the MSMEs the chance to meet a broader market for their products.
However, the duration of such events is very short.

This proposed measure aims to mandate the national government to
allocate at least 10% of all its procurement Opportunities for goods and services
to eligible MSMEs and provide duly registered micro and small enterprises a
discount of at least 20% on shipping and delivery fees for their products and
Taw materials, mandate private malls, supermarkets, shopping centers, and other
commercial selling establishments to provide free space equivalent to 0.5% of
the selling area for every 5,000 sqm. to an authorized MSME store, and
mandate private malls to allocate 20% of their total rentable space to local
MSMESs which shall be extended a 20% discount on rental rates, and shall not
charge royalty, goodwill, commission, percentage of sales and other similar
schemes upon the MSMEs, among others.

This bill will not only strengthen and encourage the growth and
development of MSMEs but will also Promote entrepreneurship by enhancing
the financing programs for MSMEs and encouraging them to register by giving
them additional benefits.

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

CHI s


Republic of the Philippines

House of Representatives
Quezon City, Metro Manila

Nineteenth Congress
First Regular Session

HOUSE BIL L NO. 4821

Introduced by Representative Christian S. Unabia

AN ACT

FURTHER PROMOTING ENTREPRENEURSHIP BY
STRENGTHENING THE FINANCING AND OTHER SUPPORT
PROGRAMS FOR 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 (MSMEs)”
Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

SECTION 1. Section 2 of Republic Act No. 6977, as amended, is hereby
further amended to read as follows:

“SEC. 2. Declaration of Policy. — Recognizing that MSMEs have
the potential [fer] TO GENERATE more employment [generation]
and SPUR economic growth and therefore can help provide a self-

sufficient industrial foundation for the country, it is hereby declared

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the policy of the State to promote, support, strengthen and encourage
the growth and development of MSMEs in all productive sectors of
the economy particularly rural/agri-based MANUFACTURING,
FINANCE AND SERVICES enterprises. To this end, the State shall
recognize the specific needs of the MSMEs and shall undertake to
promote entrepreneurship, support entrepreneurs, encourage the
establishment of MSMEs and ensure their continuing viability and

growth and thereby attain countryside industrialization by:

XXX.

SEC. 2. Section 4 of the same Act, as amended, is hereby further amended

to read as follows:

“SEC. 4. Eligibility for Government Assistance. — To qualify for
assistance, counseling, incentives and promotion under this Act,
businesses falling under the above definition must be:

“(a) duly registered with the appropriate agencies as presently
provided by law: Provided, That in the case of micro enterprises as
defined herein, registration with the office of the municipal or city
treasurer shall be deemed sufficient compliance with this requirement;

“THE APPLICATION OF AN MSME FOR ANY PERMIT
AND LICENSE FROM ANY LOCAL GOVERNMENT UNIT,

INCLUDING A BARANGAY, SHALL BE APPROVED


PROVISIONALLY, SUBJECT TO THE FINAL APPROVAL OF
THE APPLICATION AND THE ISSUANCE OF THE PERMIT
OR LICENSE APPLIED FOR.

“THE TOTAL COST FOR THE ISSUANCE OF PERMITS,
LICENSES, CERTIFICATIONS, AND OTHER SIMILAR
DOCUMENTS REQUIRED FOR THE CONDUCT OF
BUSINESS FOR REGISTERED MICRO ENTERPRISES,
SHALL NOT EXCEED FIVE HUNDRED PESOS (P500.00).
FOR REGISTERED SMALL ENTERPRISES, THE TOTAL
COST SHALL NOT EXCEED FIVE THOUSAND PESOS
(P5,000.00) FOR A PERIOD OF FIVE (5) YEARS.”

“(b) one hundred percent (100%) owned, capitalized by Filipino
citizens, whether single proprietorship or partnership. If the enterprise
is a juridical entity, at least sixty percent (60%) of its capital or
outstanding stocks must be owned by Filipino citizens;

“()XXX;

“(d) xx x;



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annually.| THE NATIONAL GOVERNMENT, ITS BUREAUS,
OFFICES AND AGENCIES SHALL ALLOCATE AT LEAST
TEN PERCENT (10%) OF ALL ITS PROCUREMENT
OPPORTUNITIES FOR GOODS AND SERVICES TO
ELIGIBLE MSMEs IN ACCORDANCE WITH THE
PROVISIONS OF REPUBLIC ACT NO. 9184, OTHERWISE
KNOWN AS THE “GOVERNMENT PROCUREMENT REFORM
ACT,” AND ITS IMPLEMENTING RULES AND
REGULATIONS,

“The [Department —of —Budget—and—Management]
GOVERNMENT PROCUREMENT POLICY BOARD shall
FORMULATE RULES FOR THE EFFECTIVE
IMPLEMENTATION OF THIS PROVISION AND monitor the
compliance of government agencies on the required procurement for
MSMESs and submit its report to the MSMED Council on a semestral
basis and to the Congress of the Philippines, through its appropriate
committees on a yearly basis.

“DULY REGISTERED MICRO AND SMALL
ENTERPRISES ARE ENTITLED TO A DISCOUNT OF AT
LEAST TWENTY PERCENT (20%) ON SHIPPING AND

DELIVERY FEES FOR THEIR PRODUCTS AND RAW


MATERIALS, AS WELL AS FOR MAILING, FREIGHT AND
OTHER SIMILAR SERVICES PROVIDED BY EITHER
PUBLIC OR PRIVATE COURIERS.

“THE OFFICER-IN-CHARGE OF THE OPERATION OF
GOVERNMENT BUILDINGS, STRUCTURES AND OPEN
AREAS, INCLUDING PUBLIC MARKETS, WHETHER WET
OR DRY, AIRPORTS, SEA PORTS, FISH PORTS, PARKS,
ZOOS, CONVENTION CENTERS, ENTERTAINMENT
CENTERS, TOURISM CENTERS, SCHOOLS, SCHOOL
CAMPUSES, AND OTHER SIMILAR STRUCTURES OR
AREAS SUITABLE FOR SELLING OR MARKETING,
WHETHER PERMANENT OR TEMPORARY, THAT MAY BE
USED AS SELLING AREAS, SHALL PROVIDE AN
AUTHORIZED MSME STORE FREE SPACE MEASURING
AT LEAST ONE PERCENT (1%) OF THE TOTAL SPACE
AVAILABLE.

FOR PURPOSES OF THIS ACT, FREE SPACE REFERS
TO THE SPACE THAT MAY BE USED FOR SELLING
PURPOSES WITHOUT NEED FOR THE PAYMENT OF

RENT, GOODWILL FEES, ROYALTIES, COMMISSION,


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PERCENTAGES ON SALES, NOR ANY OTHER SIMILAR
SCHEME.

“THE OPERATIONS MANAGER OF PRIVATE MALLS,
SUPERMARKETS, SHOPPING CENTERS, COMMERCIAL
SELLING ESTABLISHMENTS, STRUCTURES, OR AREAS
WITH A SELLING AREA, WHETHER PERMANENT OR
TEMPORARY, MEASURING AT LEAST FIVE THOUSAND
SQUARE METERS (5,000 SQM), INCLUDING COMMON
AREAS, BUT EXCLUDING PARKING SPACES AND
DRIVEWAYS, SHALL PROVIDE FREE SPACE OR AREA
EQUIVALENT TO ONE HALF OF ONE PERCENT (0.5%) OF
THE SELLING AREA FOR EVERY FIVE THOUSAND
SQUARE METERS (5,000 SQM) OF SELLING AND COMMON
SPACE, TO ANY AUTHORIZED MSME STORE.

“THE MSMED COUNCIL OF THE CONCERNED
CITY, MUNICIPALITY OR BARANGAY SHALL APPROVE
THE MSME STORE THAT MAY OCCUPY THE FREE
SPACE, UPON THE RECOMMENDATION OF THE LOCAL
OFFICE OF THE DEPARTMENT OF TRADE AND

INDUSTRY. THE FREE SPACE ALLOCATED FOR THE


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MSME STORE SHALL BE PROVIDED IN THE FOLLOWING
ORDER OF PREFERENCE:

(1) ONE TOWN ONE PRODUCT (OTOP) STORE OR GO
LOKAL! STORE OF THE DEPARTMENT OF TRADE
AND INDUSTRY;

(2) MSME KUMUNIDARAN PRODUKTO AT
RESONABLENG SERBISYO STORE (OR “KUMPARE
STORE”); OR

(3) A LOCAL MICRO OR SMALL ENTERPRISE STORE.

“ONCE AN MSME STORE IS IN PLACE, REMOVAL OR
REPLACEMENT SHALL NOT BE ALLOWED EXCEPT FOR
VALID CAUSE AND AFTER OBSERVANCE OF DUE
PROCESS.

“THE OPERATIONS MANAGER OF PRIVATE MALLS
SHALL ALSO ALLOCATE TWENTY PERCENT (20%) OF
THEIR TOTAL RENTABLE SPACE TO LOCAL MICRO AND
SMALL ENTERPRISES WHICH SHALL BE EXTENDED A
TWENTY PERCENT (20%) DISCOUNT ON RENTAL RATES.
PRIVATE MALLS SHALL NOT CHARGE ROYALTY

CHARGES, GOODWILL CHARGES, COMMISSION


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CHARGES, PERCENTAGE OF SALES, AND OTHER

SIMILAR SCHEMES UPON THE MSMEs.”

SEC. 3. Section 5 of the same Act, as amended, is hereby further amended

to read as follows:

“SEC. 5. Guiding Principles. — To set the pace for MSME
development, the State shall be guided by the following principles:

“(a) Minimal set of rules and simplification of procedures and
requirements. All government agencies having to do with MICRO
AND small enterprises shall pursue the principles of minimum
regulation to ensure stability of rules and to encourage entrepreneurial
spirit among the citizenry. The agencies shall see to it that procedural
tules and requirements, within their respective offices in coordination
with other agencies, are minimized in the act of registration, availment
of financing and accessing other government services and
assistance].];

“(b) Role of the private sector. In order to hasten growth and
expansion of MICRO, small and medium enterprises, the private
sector throughout the country shall be encouraged to assist in the
effective implementation of this Act by participating in government
programs for MICRO, small and medium enterprises strictly in

accordance with the law, and consistent with the attainment of the


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purposes hereof. To encourage private sector participation, the
Council, in consultation with the concerned sector, may recommend
simplified procedure and localized incentives to MICRO AND small
enterprises. The Government shall encourage the organization and
establishment of MICRO, small and medium enterprise industry
associations at the local and regional levels preferably unified under a
national federation/association|.];

“(c) Coordination of government efforts. Government efforts
shall be coordinated to achieve coherence in objectives. THE
DEPARTMENT OF TRADE AND INDUSTRY AND [AH] THE
appropriate offices, particularly [these—under} the Departments of
[Frade-andIndustry,] Finance, Budget and Management, Agriculture,
Agrarian Reform, Environment and Natural Resources, Labor and
Employment, Transportation [and———Communications],
INFORMATION AND COMMUNICATIONS TECHNOLOGY,
Public Works and Highways, Science and Technology, Interior and
Local Government and Tourism as well as the National Economic and
Development Authority, Philippine Information Agency,
SECURITIES AND EXCHANGE COMMISSION and the Bangko
Sentral ng Pilipinas, through their national, regional and provincial

offices shall, to the best of their efforts and in coordination with local


government units, provide the necessary support and assistance to
MSMEs; AND

XXX,

SEC. 4. Section 6 of the same Act, as amended, is hereby further amended

to read as follows:

“SEC. 6. Micro, Small and Medium Enterprises Development
Plan (MSMEDP). — The President OF THE PHILIPPINES shall
approve a six-year micro, small and medium enterprises development
plan prepared by the Department of Trade and Industry (DTI) which
shall form part of the [Medium—Ferm] Philippine Development Plan
[@4FPBP)] (PDP). It shall be formulated in consultation with the
private sector, validated and updated semestrally. Such plan shall

include a component on a micro credit financing scheme.”

SEC. 5. Section 7 of the same Act, as amended, is hereby further amended

to read as follows:

“SEC. 7. Micro, Small and Medium Enterprise Development
(MSMED) Council. — The existing Small and Medium Enterprise
Development Council, which was created by Republic Act No. 6977,
as amended by Republic Act No. 8289, shall be strengthened to
effectively spur the growth and development of MSMEs throughout

the country, and to carry out the policy declared in this Act and shall


20

2

now be known as the Micro, Small and Medium Enterprise
Development (MSMED) Council. The Council shall be attached to the
Department of Trade and Industry and shall be constituted within sixty
(60) days after the approval of this Act.

“The Council shall be the primary agency responsible for the
promotion, growth and development of MICRO, small and medium
enterprises in the country by way of facilitating and closely
coordinating national efforts to Promote the viability and growth of
MICRO, small and medium enterprises, including assisting relevant
agencies in the tapping of local and foreign funds for MICRO, small
and medium enterprise development, as well as Promoting the use of
existing programs, as well as seeking ways to maximize the use of

our labor resources.”

SEC. 6. Section 7-A of the same Act, as amended, is hereby further

amended to read as follows:

“SEC. 7-A. Composition of the Micro, Small and Medium
Enterprises Development (MSMED) Council. ~ The members of the
Council shall be the following:

“(a) The Secretary of Trade and Industry as Chairperson;

“(b) The Secretary of Agriculture;

“(c) The Secretary of the Interior and Local Government;


“(D) THE SECRETARY OF FINANCE;

“[€4)] (E) Three (3) representatives from the MSME sector, [te

Fepresentative fromthe microenterprise-sector] DESIGNATED BY A

NATIONAL ORGANIZATION REPRESENTING THE MSMEs;

AND

“[é@)] (F) The [Chairman] PRESIDENT of THE Small Business

Corporation.
“A. Advisory Unit. — There shall be an Advisory Unit to the Council,
which shall consist of the following:
“(a) The Secretary of Science and Technology;
“(b) The Governor of the Bangko Sentral ng Pilipinas;
“(C) THE COMMISSIONER OF THE SECURITIES AND
EXCHANGE COMMISSION;
“[€©)] (D) The President of the Land Bank of the Philippines;
“[(] (E) The President of the Development Bank of the

Philippines;


“[¢e)] (F) The Director General of the National Economic and
Development Authority;

“G) THE EXECUTIVE DIRECTOR OF THE
COOPERATIVE DEVELOPMENT AUTHORITY;

“(H) A REPRESENTATIVE OF A_ NATIONAL
ORGANIZATION REPRESENTING THE MSMEs;

“11 (D) One (1) representative from the labor sector, to be
nominated by accredited labor groups;

“[ée)] (J) A representative from the private banking sector to
serve [alternatively] ALTERNATELY between the [e]Chamber of
[t]Thrift [b]Banks, and the Rural Banker’s Association of the
Philippines (RBAP);

“{@)] (K) A representative of the microfinance nongovernment
organizations (NGOs), DESIGNATED BY THE MICROFINANCE
NGO REGULATORY COUNCIL;

“[@] (L) A representative of the University of the Philippines-
Institute for Small Scale Industries (UP-ISSI); [and]

“1 (M) The President of the Credit Information

Corporation|.];


“(N) ONE (1) REPRESENTATIVE FROM THE WOMEN
SECTOR DESIGNATED BY THE PHILIPPINE COMMISSION
ON WOMEN;

“(O) ONE (1) REPRESENTATIVE FROM THE YOUTH
SECTOR DESIGNATED BY THE NATIONAL YOUTH
COMMISSION; AND

“(P) A REPRESENTATIVE FROM NON-STOCK
SAVINGS AND LOAN ASSOCIATIONS DESIGNATED BY
THE ALLIANCE OF NON-STOCK SAVINGS AND LOAN
INSTITUTIONS, INC. (ANSLI).

“KXX?

SEC. 7. Section 7-B of the same Act, as amended, is hereby further

amended to read 6 as follows:

“SEC. 7-B. Powers and Functions. —

“A. The MSMED Council shall have the following powers,
duties and functions:

“XXX;

“(d) To review the existing policies of government agencies that
would affect the growth and development of MSMEs and recommend

changes to the President OF THE PHILIPPINES and Congress

through the Committee on Economic Affairs of the Senate and the


20

Committee on [Small—Business—and—Entrepreneurship] MICRO,

SMALL AND MEDIUM ENTERPRISE Development of the House
of Representatives, whenever deemed necessary. This shall include

efforts to simplify rules and regulations, as well as review of the

applicability and relevance of procedural and documentary
requirements in the registration, financing, and other activities
relevant to MSMEs the result shall be included in the annual report to
be submitted to Congress;
“XXX;
“(h) To promote the productivity and viability of MSMEs IN
DTI’S TOP PRIORITY INDUSTRIES FOR DEVELOPMENT by
way of directing [and/Jor assisting relevant government agencies and
institutions at the national, regional and provincial levels towards the:
“XXX;
“(12) Through appropriate government agencies:
“XXX;
“(f) Set-up new MSME NEGOSYO centers and revitalize
already established MSME NEGOSYO centers to provide MSMEs in
the regions easier access to services such as[but-nettimitedte;] the
following:

XXX.


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“B. ADDITIONAL FUNCTIONS OF THE MSMED COUNCIL.
— TO SUPPORT THE ESTABLISHMNENT OF GO NEGOSYO
CENTERS UNDER REPUBLIC ACT NO. 10644, OTHERWISE
KNOWN AS THE “GO NEGOSYO ACT,” THE MSMED
COUNCIL SHALL HAVE THE FOLLOWING ADDITIONAL
FUNCTIONS:
“(1) COORDINATING AND OVERSIGHT BODY FOR
THE MSME NEGOSYO CENTER. — THE MSMED
COUNCIL, THROUGH THE DTI, SHALL ACT AS THE
COORDINATING AND SUPERVISING BODY FOR ALL
THE AGENCIES INVOLVED IN THE ESTABLISHMENT
AND OPERATION OF THE MSME NEGOSYO CENTERS.
FURTHER, THE MSMED COUNCIL SHALL MONITOR
AND ASSESS THE PROGRESS OF THE MSME
NEGOSYO CENTERS, WHICH SHALL BE INCLUDED IN
ITS ANNUAL REPORT SUBMITTED TO THE
CONGRESS;
“(2) PROVISION OF A COMPLIANCE GUIDE. - FOR
EACH RULE OR GROUP OF RELATED RULES ISSUED
BY ANY GOVERNMENT AGENCY FOR COMPLIANCE

BY MSMES, THE COUNCIL SHALL PUBLISH


COMPLIANCE GUIDELINES IN PLAIN LANGUAGE OR

IN THE LOCAL DIALECT, IF NECESSARY.

“THE COUNCIL SHALL PREPARE SEPARATE
COMPLIANCE GUIDES COVERING GROUPS OR CLASSES
OF SIMILARLY AFFECTED MSMES AND SHALL
COOPERATE WITH INDUSTRY ASSOCIATIONS TO
DEVELOP AND DISTRIBUTE SUCH COMPLIANCE GUIDES.
THE PUBLICATION OF EACH COMPLIANCE GUIDE
SHALL INCLUDE THE POSTING OF THE GUIDE IN A
CONSPICUOUS LOCATION ON THE WEBSITE OF THE

AGENCY, AND DISTRIBU

TION OF THE GUIDE TO KNOWN
INDUSTRY CONTACTS, SUCH AS SMALL ENTITIES,
ASSOCIATIONS OR INDUSTRY LEADERS AFFECTED BY
THE RULE. THE ISSUING GOVERNMENT AGENCY SHALL
PUBLISH AND DISSEMINATE THE COMPLIANCE RULES
WITHIN NINETY (90) DAYS FROM THE DATE OF
ISSUANCE;
“(3) CONDUCT OF RESEARCH ON WOMEN
ENTREPRENEURSHIP. - THE COUNCIL SHALL
CONDUCT RESEARCH TO SUPPORT WOMEN

ENTREPRENEURSHIP INCLUDING


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ENTREPRENEURIAL BEHAVIOR, BARRIERS,
PARTICIPATION AND CESSATION RATES,
DISCRIMINATORY PRACTICES AND CONTRIBUTION
TO THE NATIONAL ECONOMY AND GROWTH;

“(4) POLICY FORMULATION ON WOMEN
ENTREPRENEURSHIP. - THE COUNCIL SHALL
PROVIDE POLICY DIRECTION TOWARDS
RECOGNIZING WOMEN’S PROPENSITY AND TALENT
IN ENTREPRENEURSHIP AS WELL AS ESTABLISH
LINKAGES THAT WILL ENABLE MORE
OPPORTUNITIES FOR WOMEN TO ENGAGE IN
ENTREPRENEURSHIP; AND

“(8) DEVELOPMENT OF ENTREPRENEURIAL
EDUCATION AND TRAINING. - THE MSMED COUNCIL
SHALL DEVELOP, IN COORDINATION WITH THE
DEPARTMENT OF EDUCATION, TECHNICAL
EDUCATION AND SKILLS DEVELOPMENT
AUTHORITY, AND COMMISSION ON HIGHER
EDUCATION, A COURSE CURRICULUM OR TRAINING
PROGRAM IN ENTREPRENEURSHIP THAT

PROMOTES ENTREPRENEURIAL CULTURE AND

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COMPETENCE. ENTREPRENEURSHIP SHALL BE
INTEGRATED IN THE CURRICULUM OF
EDUCATIONAL AND TRAINING INSTITUTIONS IN

ALL LEVELS.”

SEC. 8. A new section denominated as Section 7-C is hereby inserted after

Section 7-B of the same Act, as amended, to read as follows:

“SEC. 7-C. CITY, MUNICIPAL, AND BARANGAY MSMED
COUNCIL, - THERE SHALL BE CREATED A MSMED
COUNCIL IN EVERY CITY, MUNICIPALITY, AND
BARANGAY WITH AUTHORITY TO PROPOSE POLICIES
THAT ARE GEARED TO ASSIST MSMEs IN THE AREAS OF
PRODUCTIVITY ENHANCEMENT, MARKETING,
ACHIEVING SUSTAINABILITY BY EXTENDING CREDIT
TO CUSTOMERS, AND IMPLEMENTING EFFICIENT LOAN
COLLECTION SYSTEMS, AMONG OTHER STRATEGIES.

“THE CITY OR MUNICIPAL MSMED COUNCIL IS
COMPOSED OF THE CITY OR MUNICIPAL BUSINESS
PERMIT AND LICENSING OFFICER AS CHAIRPERSON,
THE PRESIDENT OF THE ASSOCIATION OF BARANGAY
CAPTAINS, THE PRESIDENT OF THE SANGGUNIANG

KABATAAN FEDERATION, THE TOURISM OFFICER, AND

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1 THE CITY OR MUNICIPAL AGRICULTURIST OR THE CITY

2 PLANNING OFFICER, AS MEMBERS.

3 “THE BARANGAY MSMED COUNCIL IS COMPOSED
4 OF THE PUNONG BARANGAY AS CHAIRPERSON,

5 THE SANGGUNIANG KABATAAN CHAIRPERSON, A
6 REPRESENTATIVE OF THE LADIES’ BRIGADE OR
7 LADIES’ SECTOR, A REPRESENTATIVE OF THE
8 BARANGAY PUBLIC SAFETY OFFICE, AND A
9 REPRESENTATIVE OF THE SENIOR CITIZENS, AS
10 MEMBERS.

n “THE CITY, MUNICIPAL, AND BARANGAY MSMED
n COUNCILS SHALL COORDINATE AND FORMULATE
B MEASURES TO ENSURE THE OPERATIONAL AND
“ FINANCIAL VIABILITY OF MSMES WITHIN THEIR

1s TERRITORIAL JURISDICTION, TAKING INTO

16 CONSIDERATION THE RELEVANT FACTORS AFFECTING
7 THE CAPACITIES OF THE MSMEs.”
18 SEC. 9. Section 8 of the same Act, as amended, is hereby further amended

19 to read as follows:
20 “SEC. 8. Designation of the Bureau of Micro, Small and Medium

2 Enterprise Development as Council Secretariat. — x X x:


1 “(1) to prepare, in coordination with local government units

2 [and/or] or associations of local government officials, and recommend
3 annual as well as medium-term MICRO, small and medium enterprise
4 development plans for approval of the Council;

5 “XXX;

6 “(3) to assist the Council in coordinating and monitoring
7 MICRO, small and medium enterprise policies and programs and
8 activities of all government agencies with respect to MICRO, small
9 and medium enterprises;

10 “(4) to prepare, collate and integrate all inputs to the Council’s

u yearly report on the status of MICRO, small and medium

12 enterprises in the country;
B “XXX.”
is SEC. 10. Section 11 of the same Act, as amended, is hereby further

1s amended to read as follows:

16 “SEC. 11. Creation of THE Small Business [Guarantee—and
” Finanee] Corporation. — There is hereby created a body corporate to
18 be known as the Small Business [Guarantee-and-Finance] Corporation,
9 hereinafter referred to as the [Smal—Business—Corporation(SB
20 Corperation)] SB CORPORATION, which shall be charged with the

a primary responsibility of implementing comprehensive policies and

23


Programs to assist MSMEs in all areas, including but not limited to

finance and information services, training and marketing.”

SEC. 11. Section 11-A of the same Act, as amended, is hereby further

amended to read as follows:

“SEC. 11-A. Composition of the Board of Directors and its
Powers. — The SB Corporation [eerperate-pewers-shall-be-vested-on]
SHALL HAVE a Board of Directors composed of [eleven—H)]
THIRTEEN (13) members which shall include the following:

“(a) The Secretary of Trade and Industry

“(b) The Secretary of Finance;

“(C) THE PRESIDENT OF THE GOVERNMENT
SERVICE INSURANCE SYSTEM (GSIS);

“(D) THE PRESIDENT OF THE SOCIAL SECURITY
SYSTEM (SSS);

“[e] (E) A private sector representative to be appointed by the
President OF THE PHILIPPINES upon the recommendation of the
MSMED Council;

“[d] (F) Seven (7) representatives of the SB Corporation
common stock shareholders who shall be elected based on
proportional distribution, in accordance with Section [24] 23 of the

REVISED Corporation Code; and


“[e)] (G) The president of the SB Corporation as ex-officio
member and to serve as vice [chairman] CHAIRPERSON of the
Board.

“The President OF THE PHILIPPINES shall appoint the
[chairman] CHAIRPERSON of the Board from among its members.

“All members of the Board so appointed, except for the ex-officio
members, shall serve for a term of three (3) years [without
reappointment] AND MAY BE REAPPOINTED TO ANOTHER
TERM UNLESS EARLIER REVOKED. IF THE TERM OF
THE INCUMBENT MEMBER HAS EXPIRED, THE MEMBER
SHALL CONTINUE TO FUNCTION IN A HOLDOVER
CAPACITY UNTIL A REPLACEMENT HAS BEEN
APPOINTED AND QUALIFIED. [Fhe] ANY person [se] appointed
to replace a member who has resigned, died, or been removed for
cause shall serve only for the unexpired portion of the term.

“The Board of Directors shall have, among others, the following

specific powers and authorities:

“xxx; and

“Of . ws ¢ . 6158



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authorityte-p] Provide for the organizational structure, [and] staffing

of ether government financial-institutions-| AND COMPENSATION
OF EMPLOYEES AND PERSONNEL OF THE SB

CORPORATION, FOR SUBMISSION TO THE GOVERNANCE
COMMISSION FOR GOCCs.”
SEC. 12. Section 11-B of the same Act, as amended, is hereby further
amended, to read as follows:
“SEC. 11-B. Corporate Structure and Powers. —

“A. The SB Corporation shall:

“XXX.

“B. [For—this—purpese;] [t]The SB Corporation [subject—te

Commission,] shall have the following functions and duties:
“(a) Source and adopt development initiatives for globally
competitive MSMES in finance and business technologies;
“(b) [Fe-extend] EXTEND all forms of financial assistance,

EXCEPT GRANTS AND SUBSIDIES, to eligible MSMEs,

26


AND ALLOW RETAIL LENDING IN AREAS WHERE
PRIVATE BANKS ARE INCAPABLE TO SERVE,
SUBJECT TO CONSULTATION WITH PRIVATE
BANKS. SB Corporation may also engage in wholesale lending
The SB Corporation shall be given two (2) years from the
effectivity of this Act to comply with this requirement;

“(0) [Guarantee

of—Direeters;} ESTABLISH AN ENTERPRISE

REHABILITATION FUND FOR CALAMITY-STRICKEN
MSMEs NOT TO EXCEED FIVE HUNDRED MILLION
PESOS —_(P500,000,000.00) AS PART OF SB
CORPORATION’S CAPITALIZATION BY THE
NATIONAL GOVERNMENT;

“XXX;

“(f) Apply for, receive and accept grants and donations from
sources within and outside the country; [and]

“(g) Hold, own, purchase, acquire, sell, mortgage, dispose
or otherwise invest or re-invest in stocks, bonds, treasury bills,

debentures, securities and similar forms of indebtedness of the

7


1 government, its agencies and instrumentalities or any
2 government financial institution[.]; AND

3 “(H) SUBMIT AN ANNUAL REPORT TO THE
4 MSMED COUNCIL, THE CONGRESS OF THE
3 PHILIPPINES AND THE GOVERNANCE COMMISSION
6 FOR GOCCs ON THE PERFORMANCE AND
7 FINANCIAL CONDITION OF THE CORPORATION.

8 “THE SB CORPORATION IS EXEMPT FROM
9 SECURING PRIOR BANGKO SENTRAL NG PILIPINAS (BSP)
10 AUTHORIZATION FOR ENGAGING IN QUASI-BANKING
u ACTIVITIES AND IS NOT SUBJECT TO BSP SUPERVISION
2 AND REGULATION FOR SUCH ACTIVITIES.”

3 SEC. 13.A new subsection is hereby inserted after Section 11-B of the
14 same Act, as amended, and numbered as Section 11-C to read as follows:

1s “SEC. 11-C. SB CORPORATION MANAGEMENT. - THE
16 BOARD OF THE SB CORPORATION IS FULLY
7 RESPONSIBLE AND ACCOUNTABLE FOR’ THE
18 PERFORMANCE OF THE CORPORATION’S MANDATE. TO
19 ENSURE THIS, THE BOARD IS CONSTITUTED AS A

20 MANAGING BOARD, LED BY ITS CHAIRPERSON, TO

28


CONCEPTUALIZE THE STRATEGIC PLANS AND POLICIES
OF THE CORPORATION.

“THE SB CORPORATION SHALL ADOPT A BALANCED
SCORECARD MANAGEMENT APPROACH, SUBJECT TO
THE REVIEW AND APPROVAL OF THE GOVERNANCE
COMMISSION FOR GOCCs, TO ENABLE IT TO MANAGE
ITS FINANCIAL PERFORMANCE WHILE PURSUING ITS
PUBLIC POLICY OBJECTIVES OF SUPPORTING MICRO,

SMALL AND MEDIUM ENTERPRISES DEVELOPMENT.”

SEC. 14. Section 12 of the same Act, as amended, is hereby further amended to

read as follows:

SEC. 12. Capitalization and Funding of the SB Corporation. —
The SB Corporation shall have an authorized capital stock of ONE
HUNDRED BILLION PESOS (P100,000,000,000.00), WHICH
SHALL BE DIVIDED INTO 800,000,000 COMMON SHARES
AND 200,000,000 PREFERRED SHARES WITH A PAR VALUE
OF ONE HUNDRED PESOS (P 100.00) PER SHARE.

The initial capital of One Billion Pesos (P1,000,000,000.00)
{shall-be] established from a pool of funds contributed in the form
of equity investments [ia-commen-steck] by the Land Bank of the

Philippines (LBP), the Development Bank of the Philippines


0

(DBP), Social Security System (SSS) and the Government Service
Insurance System (GSIS) in the amount of Two Hundred Million
Pesos (P200,000,000.00) each SHALL REMAIN PART OF THE
CAPITALIZATION OF SB CORPORATION. Provided, That the
common shares which have been issued, including those issued
against the assets of the KKK Guaranty Fund consolidated under
the Small Business Corporation by virtue of Executive Order No.
233, Series of 2000 and Executive Order No. 19, Series of 2001
and including those already subscribed, shall LIKEWISE
REMAIN part of the capitalization of the corporation. Provided,
Surther, That holders of preferred shares issued under Republic Act
No. 6977, as amended, shall have the option to convert the same
into common shares.

Additional equity funding shall come from trust placements of
excess and unused funds of existing government agencies, bilateral
and multilateral official development assistance _ funds,
subscriptions from government owned or controlled corporations
AND THE NATIONAL GOVERNMENT THROUGH THE
DEPATMENT OF BUDGET AND MANAGEMENT (DBM), and

investments of private financial institutions and corporations.

30


10

Provided, finally, That any investment from the private sector shall

only be in the form of preferred shares.

the-date-of-effectivity-of this amendment—Thereafierit] THE SB.
CORPORATION may [only}-declare as dividend not more than

thirty percent (30%) of its net income and the rest withheld as
retained earnings.

SEC. 15. Section 14 of the same Act, as amended, is hereby further
amended to read as follows:

“SEC. 14. Venture Capital and Micro Finance Trust Fund. — The SB
Corporation may set aside an amount of money to encourage the setting up of a
venture capital and micro finance trust fund for the purpose of promoting
AVAILABLE business opportunities [available] to THE MSME sector. The
Venture Capital Fund shall be used mainly for venture capital finance
especially in technology-oriented industries. The micro finance trust fund shall
be used to provide collateral-free fixed and working capital loans to micro and
small enterprises run by those emerging out of poverty. THE INITIAL
AMOUNT OF AT LEAST TEN PERCENT (10%) OF THE EQUITY
CONTRIBUTION OF THE NATIONAL GOVERNMENT TO THE

CAPITALIZATION OF THE SMALL BUSINESS CORPORATION,

31


NOT TO EXCEED FIVE HUNDRED MILLION PESOS
(P500,000,000.00), SHALL BE APPROPRIATED TO FUND THE
VENTURE CAPITAL AND MICRO FINANCE TRUST FUND.”

SEC. 16. Section 15 of the same Act, as amended, is hereby further

amended to read as follows:

10

20

“SEC. 15. Mandatory Allocation of Credit Resources to Micro,
Small and Medium Enterprises. — For [the] AN ADDITIONAL
period of 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 [eigh

two percent (2%) for medium enterprises] TEN PERCENT (10%) of

their total loan portfolio based on their balance sheet as of the end of

the previous quarter FOR MSMEs, and make it available for MSME
credit as herein contemplated: PROVIDED, THAT A MAXIMUM.
OF ONE PERCENT (1%) THEREOF IS ALLOCATED FOR
MEDIUM ENTERPRISES.

“Compliance of this provision shall be:

“(a) actual extension of loans to eligible MSMEs; or

“XXX; OF


20

au

“(f) [subseribe/purchase] SUBSCRIPTION or PURCHASE of
liability instruments as may be offered by the SB Corporation. THE
SAME SHALL NOT BE CONSIDERED AS QUASI-BANKING
OPERATIONS, AND SHALL NOT REQUIRE A QUASI-
BANKING LICENSE FROM THE BSP; OR

“(G) EXTENSION OF LOANS TO MSME VALUE CHAIN
ACTORS WHO ALLOW MSMEs TO PARTICIPATE IN
ORGANIZED OR FORMAL VALUE CHAINS.

FOR PURPOSES OF THIS ACT, VALUE CHAIN ACTORS
INCLUDE TRADERS, SUPPLIERS, PROCESSORS, OR
AGGREGATORS WHO CONDUCT LINKED SEQUENCE OF
VALUE ADDING ACTIVITIES INVOLVED IN BRINGING A
PRODUCT TO FINAL CONSUMERS.

“The Bangko Sentral ng Pilipinas AND THE SECURITIES
AND EXCHANGE COMMISSION shall, IN CONSULTATION
WITH THE MSMED COUNCIL AND THE DEPARTMENT OF
TRADE AND INDUSTRY 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 Sentral ng Pilipinas AND THE

3


20

2

SECURITIES AND EXCHANGE COMMISSION, IN

CONSULTATION WITH ALL STAKEHOLDERS, shall

establish [an] A MEANINGFUL incentive [pregram] SYSTEM to

the-mandatory_credit-alecationto-said-enterprises,] COMPLIANCE

WITH THIS PROVISION, such as possible reduction in bank’s
reserve requirement[.]: PROVIDED, FINALLY, THAT THE
BANGKO SENTRAL NG PILIPINAS AND THE SECURITIES
AND EXCHANGE COMMISSION SHALL ALIGN THEIR
REGULATIONS ON THE PENALTIES FOR BANKS AND
OTHER ENTITIES FOR NONCOMPLIANCE WITH THE
PROVISION FOR MANDATORY LENDING.

“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. EACH LENDING
INSTITUTION SHALL DESIGNATE A CHIEF COMPLIANCE
OFFICER WHO SHALL PREPARE AND SIGN THE REPORT
ON COMPLIANCE AND NONCOMPLIANCE WITH THE
MANDATORY CREDIT ALLOCATION FOR SUBMISSION
TO THE BANGKO SENTRAL NG PILIPINAS IN THE CASE

OF BANKS, AND THE SECURITIES AND EXCHANGE


20

2

COMMISSION IN THE CASE OF NON- BANK FINANCIAL
INTERMEDIARIES. The Bangko Sentral ng Pilipinas AND THE
SECURITIES AND EXCHANGE COMMISSION’S SENIOR
OFFICER WITH THE RANK OF AT LEAST A DIRECTOR
shall furnish to the MSMED Council on a quarterly basis
comprehensive reports on the [banks] LENDING INSTITUTION’S
compliance[,] AND noncompliance [and—penaltiesef] WITH the
above provisions on the mandatory credit allocation for MSMEs|.]
AND SHALL SIGN AND SUBMIT AN ANNUAL REPORT ON
THE AMOUNTS OF THE PENALTIES FOR
NONCOMPLIANCE WITH THE MANDATORY LENDING
PROVISION OF THIS ACT.

“ALL BANKS SHALL PROVIDE ACCESS TO DEPOSIT
ACCOUNTS, SUCH AS SAVINGS, CHECKING AND DEBIT
ACCOUNTS, TO REGISTERED MSMEs. FINANCIAL
TECHNOLOGY SHALL BE PROVIDED TO MSMEs TO
ENSURE THEIR FINANCIAL INCLUSION.

“ALL LENDERS SHALL REPORT CREDIT
INFORMATION AND TRANSACTIONS OF MSMEs TO A
NATIONAL CREDIT REGISTRY TO MONITOR PROPER

COMPLIANCE AND EFFICIENT IMPLEMENTATION.


20

“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 rights

under applicable laws.”

SEC. 17. Section 18 of the same Act, as amended, is hereby further
amended to read as follows:

“SEC. 18. Congressional Oversight Committee. — To monitor and oversee
the implementation of this Act, there shall be a Congressional Oversight
Committee on Micro, Small and Medium Enterprise Development (COC-
MSMED) composed of the chairpersons of the Senate Committee on Economic
Affairs and the House Committee on [Smal-Business-and—Entrepreneurship
Development] MICRO, SMALL AND MEDIUM ENTERPRISE

DEVELOPMENT as chairperson and co-chairperson, respectively; x x x .”


2

20

a

SEC. 18. Section 19 of the same Act, as amended, is hereby further

amended to read as follows:

“SEC. 19. Penalty Clause. — The Bangko Sentral ng Pilipinas IN
CASE OF BANKS, AND THE SECURITIES AND EXCHANGE
COMMISSION IN CASE OF NON-BANK FINANCIAL
INTERMEDIARIES, shall impose administrative sanctions and
other penalties on the lending institutions for non{-]compliance with
THE MANDATORY LENDING AS PROVIDED UNDER
SECTION 16 [previsiens] of this Act [inchiding-afine-of notes
than-Five- hundred thousand-pesos-(P500,000-00)].

THE PENALTY FOR NONCOMPLIANCE WITH THE
MANDATORY LENDING SHALL NOT BE LESS THAN FIVE
HUNDRED THOUSAND PESOS (P500,000.00) BUT NOT
MORE THAN FIVE MILLION PESOS (P5,000,000.00), IN
PROPORTION TO THE BANK’S OR OTHER ENTITY’S
LEVEL OF COMPLIANCE: PROVIDED, THAT IN CASE OF
FAILURE OF THE MANDATED ENTITIES TO COMPLY
WITH THE MANDATORY CREDIT ALLOCATION, AN
ADDITIONAL PENALTY EQUIVALENT TO TWENTY
PERCENT (20%) PER ANNUM OF THE TOTAL AMOUNT OF

NONCOMPLIANCE SHALL BE IMPOSED.

37


20

“Penalties on noncompliance shall be directed to the
development of the MSME sector. Ninety percent (90%) of the
penalties collected [should] SHALL go to the [MSMED-Couneit
Fund] “START-UP FUND” AS PROVIDED UNDER REPUBLIC
ACT NO. 10644, while the remaining ten percent (10%) [should]
SHALL be [given] REMITTED to the BSP, THE SECURITIES
AND EXCHANGE COMMISSION, OR THE APPROPRIATE
AGENCY THAT EXERCISES REGULATORY JURISDICTION
OVER SUCH LENDING ENTITY, to cover for administrative
expenses.

“THE CHAIRPERSON OF THE MSMED COUNCIL
SHALL SUBMIT TO THE CONGRESS OF THE PHILIPPINES
AN ANNUAL REPORT ON THE STATUS OF THE
PENALTIES REMITTED, INCLUDING ITS UTILIZATION IN
RELATION TO THE IMPLEMENTATION OF SERVICES TO
MSMEs IN THE AREAS OF CAPACITY BUILDING,
TECHNOLOGY INFORMATION, INFORMATION
COLLECTION AND DISSEMINATION, AND OTHER
INTERVENTIONS FOR MSME DEVELOPMENT, GROWTH

AND SUSTAINABILITY.”


2

SEC. 19. A new section denominated as Section 19-A is hereby inserted

after Section 19 of the same Act, as amended, to read as follows:

“SEC. 19-A. OTHER VIOLATIONS. — EXCEPT FOR
SECURITIES COVERED UNDER REPUBLIC ACT NO. 8799,
OTHERWISE KNOWN AS “THE SECURITIES REGULATION
CODE,” ENTITIES SHALL SECURE THE NECESSARY
APPROVAL OF THE SECURITIES AND EXCHANGE
COMMISSION BEFORE RECEIVING INVESTMENTS AS
WELL AS GIFTS, ITEMS OR OTHER COMMODITIES,
EITHER IN THE FORM OF CASH OR ITS EQUIVALENT
CASH VALUE IN CONSIDERATION OF RETURN OF
PROFIT OR BENEFIT COMING FROM MORE THAN
TWENTY (20) INDIVIDUALS. THE PRESIDENT, MANAGER
OR OFFICER OF ANY ENTITY WHO FAILS TO SECURE
SUCH APPROVAL SHALL SUFFER THE PENALTY OF
IMPRISONMENT OF NOT LESS THAN THIRTY (30) DAYS
BUT NOT MORE THAN ONE HUNDRED EIGHTY (180)
DAYS, OR A FINE OF NOT LESS THAN TEN THOUSAND
PESOS (P10,000.00) BUT NOT MORE THAN ONE HUNDRED
THOUSAND PESOS (P100,000.00), OR BOTH, AT THE

DISCRETION OF THE COURT.


20

“ANY PERSON, WHETHER NATURAL OR JURIDICAL,
WHO FAILS TO ACQUIRE THE APPROVAL OF THE FOOD
AND DRUGS AUTHORITY AND THE DEPARTMENT OF
TRADE AND INDUSTRY FOR SELLING, MARKETING, AND
DISTRIBUTING REGULATED PRODUCTS AND SERVICES
SHALL SUFFER THE PENALTY OF IMPRISONMENT OF
NOT LESS THAN THIRTY (30) DAYS BUT NOT MORE THAN
ONE HUNDRED EIGHTY (180) DAYS, OR A FINE OF NOT
LESS THAN TEN THOUSAND PESOS (P10,000.00) BUT NOT
MORE THAN ONE HUNDRED THOUSAND PESOS
(P100,000.00) OR BOTH, AT THE DISCRETION OF THE

COURT.”

SEC. 20. Implementing Rules and Regulations. — Within ninety (90)
days from the effectivity of this Act, the Secretary of Trade and Industry shall,
through the Director of the Bureau of Micro, Small and Medium Enterprise
Development and in consultation with the Governor of the Bangko Sentral ng
Pilipinas in the case of banks, and the Chairperson of the Securities and
Exchange Commission in the case of non-bank financial intermediaries, and the
officer-in-charge of other concerned government agencies, nongovernment

organizations and private sector agencies involved in the promotion of MSMEs,

40


issue the necessary rules and regulations for the effective implementation of this
Act.

SEC. 21. Separability Clause. -If any provision or part of this Act is
declared invalid or unconstitutional, the remaining parts or provisions not
affected shall remain in force and effect.

SEC. 22. Repealing Clause. — Section 10 of Republic Act No. 10644 is
repealed. Sections 7-A and 7-B of Republic Act No. 6977, as amended by
Republic Act No. 8289, Republic Act No. 9501, and Republic Act No. 10644,
are hereby amended. All laws, decrees, proclamations, issuances, or ordinances
that are contrary to or inconsistent with the provisions of this act are hereby
amended, repealed or modified accordingly.

SEC. 23. Effectivity. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,

41