's~rt<1h> 
SIXTEENTH CONGRESS OF THE 
) 
-iOffl;l' of Hp: ~,tf't('i;Jr~ 
REPUBLIC OF THE PHIILlPPINES 
) 
First Regular Session 
) 
'13 
JUL -8 P 2 :45 
SENATE 
S.No. 615 
RFf'f'I" "BY, J..-;: 
, 
<.J,,' '=0-- \, 
Introduced by Senator Ralph G. Recto 
Explanatory Note 
Smallness cannot disqualify enterprises from taking the driver's seat in the economy. 
Growth in the number of business establishments was reflected in the growth of Micro, Small 
and Medium Enterprises (MSME) sector. Of the 820,255 business enterprises, 99.6% (816, 759) 
were MSMEs. Of the total MSMEs, micro enterprises comprised 91 % (743,250); small, 8.6% 
(70,222); medium, 0.4% (3,287). Likewise, Micro enterprises lead in job generation with 
1,778,353 jobs, or 28 % of total jobs created in 2011. 1 
I 
. 
MSMEs also accounted for 35.7% of Gross Value-Added (GVA) to the economy. It IS 
the accepted view that MSMEs still has immense potential for GV A growth such as being 
exhibited by their counterparts in Indonesia (53.28%), Vietnam (39%) and Thailand (37.8%).2 
In order to distinguish them from Large enterprises and to qualifY for benefits and 
incentives, the Magna Carta for Micro, Small and Medium Enterprises defined then categorized 
MSMEs, thus: 
"Section 3. Micro, Small and Medium Enterprises (MSMEs) as Beneficiaries. - MSMEs 
shall be defined as any business activity or enterprise, engaged in industry, agribusiness and/or 
services, whether single proprietorship, cooperative, partnership or corporation whose total 
assets, inclusive of those arising 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 
following categories: 
micro: 
small: 
medium: 
not more than P3,000,000 
P3,000,001 - PI5,000,000 
PI5,000,001 - PI00,000,000." 
Additionally, the categories are also characterized by the Number of Employees, thus: 
micro: 
1-9 employees 
small: 
1 0-99 employees 
medium: 
100-199 employees. 
To make the Magna Carta responsive to changing economic conditions, the Magna Carta 
and its Implementing Rules mandate a procedure for review and adjustment of the definitions 
based on a semestral review and validation of the MSME Development Plan. These measures 
provided that recommendations to amend the definitions of the three categories shall consider 
inflation and other economic indicators. The MSMED Council shall use other variables such as 
number of employees, equity capital and assets size. 
·http://www.dti.gov.ph/dti!index.php?p=532 (Accessed on March 21, 2013) 
2 MSME Sector at A Glance, March 2012. Senate Economic Planning Office 


However, since the enactment of the Magna Carta in 2008, the definition and categories 
have remained the same. That barred a good number of Small enterprises from enjoying the 
benefits, programs and plans that are helping improve the Business Environment for Micro 
enterprises. 
According to a surVey of enterprises referred to by the MSMED Plan for 2011-2016, the 
second most problematic area in improving the business environment for MSMEs is described as 
follows: "Business registration and licensing procedures are tedious, lengthy, complicated, and 
expensive." For example, the Philippines has the most number of start-up procedures at 15 steps 
compared to other Southeast Asian countries. Singapore has 3 steps; Malaysia, 4; Thailand, 5; 
Indonesia 8; and Vietnam 9.
3 
Recognizing the need to provide an enabling environment for the least capable, the 
Magna Carta extended preferential treatment to Micro enterprises. Of the three categories, Micro 
enterprises enjoy an additional privilege through Section 4. Eligibility for Government 
Assistance. It provides that "registration, with the office of the municipal or city treasurer shall 
be deemed sufficient compliance" with the requirements for registration to qualify for assistance, 
counseling, incentives and promotion. In contrast, Small and Medium enterprises shall have to be 
registered with other agencies. 
Other benefits and privileges were provided in common to both Micro and Small 
enterprises since they need more government assistance compared to Medium and Large 
enterprises. MSEs enjoy preference in the access to funds. Under Section 14. Venture Capital 
and Micro Finance Trust Fund, MSEs shall be provided "collateral-free fixed and working 
capital loans" from the Venture Capital Trust Fund created within the Small Business 
Corporation. 
Likewise, all lending institutions are mandated to set at least 8% of their total loan 
portfolio (TLP) as mandatory allocation of credit resources for Micro and Small enterprises in 
contrast to just 2% of TLP for Medium enterprises, as provided for in Sec. 15 Mandatory 
Allocation of Credit Resources to Micro, Small and Medium Enterprises. 
-
The MSMED Plan for 2011 -
2016 stressed the need to improve the business 
environment to help MSMEs sustain and expand their operations. This bill, therefore, proposes 
to redefine the value of the Micro and Small Enterprise categories in order to make more 
privileges and benefits available to more enterprises. That shall be achieved by Fending the 
definitions, specifically, on the value of total assets of the Micro and Small enterprises, as 
follows: of Micro enterprises to "not more than P7,500,000" from "not more thanlP3,000,000", 
and of Small enterPrises to "P7,500,001 - PlS,OOO,OOO" from "P3,000,001 - PlS,OOO,OOO". 
In view of the foregoing, approval of this bill is earnestly sought. 
Dbg 
3 Philippine Development Plan, 2011-2016. National Economic and Development Authority 


SIXTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
'1) 
JUL -8 P 2 :45 
SENATE 
S, No. 
615 
Introduced by Senator Ralph G. Recto 
AN ACT 
TO EXPAND THE COVERAGE OF MICRO ENTERPRISES AS BENEFlqIARlES OF 
THE MAGNA CARTA FOR MICRO, SMALL AND MEDIUM ENTERPRISES OR 
REPUBLIC ACT NO. 6977, AS AMENDED BY R. A. NO. 8289 ANDI FURTHER 
AMENDED BY R. A. No. 9501 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
1 
SECTION 1. Section 3 of the Magna Carta for Micro, Small and Medium Enterprises or 
2 
R. A. No. 6977, as amended by R. A. No. 8289 and further amended by R. A. No. 9501 is hereby 
3 
further amended to read as follows: 
4 
"SECTION 3. Micro, Small and Medium Enterprises (MSMEs) as 
5 
Beneficiaries. -
MSMEs shall be defined as any business activity or enterprise 
6 
engaged in industry, agribusiness and/or services, whether single proprietorship, 
. 7 
cooperative, partnership or corporation whose total assets, inclusive of those 
8 
arising from loans but exclusive of the land on which the particular business 
9 
entity's office, plant and equipment are situated, must have value falling under the 
10 
following categories: 
11 
micro: not more than [P3,000,000] P7,500,OOO 
12 
small: [P3,000,001] P7,500,OOO - P 15,000,000 
13 
medium: PI5,000,001 - PIOO,OOO,OOO. 
14 
"x x x 
15 
"x x x." 
16 
SEC. 2. Repealing Clause. - All laws, decrees, orders, rules and regulations or parts 
17 
thereof inconsistent with any of the provisions of this Act are hereby repealed, amended or 
18 
modified accordingly. 
19 
SEC. 3. Effectivity Clause. - This Act shall take effect fifteen (15) days after its complete 
20 
publication in the Official Gazette or in at least two (2) newspapers of general circulation. 
Approved.