Republic of the Philippines:
HOUSE OF REPRESENTATIVES
Queson City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 404

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

EXPLANATORY NOTE

The bill recognizes the important role of Micro, Small and Medium Enterprises
(MSMEs) in developing the Philippine economy. It also acknowledges the financial
barriers being faced by the MSMEs in truly achieving sustainable growth. In line with
the foregoing, this bill aims to provide a micro-financing program tagged as “Pondo sa
Pagbabago at Pag-asenso” to MSMEs.

An MSME is defined as any business activity or enterprise engaged in industry,
agri-business and/or services that has: (1) an asset size (less land) of up to PhP100
million; and (2) an employment size with less than 200 employees". They help reduce
poverty by creating jobs for the country’s growing labor force, thus stimulating
economic development in rural and far-flung areas. They also serve as valuable
partners to large enterprises as suppliers and providers of support services. Hence, a
vibrant MSME sector is thus an indication of a thriving and growing economy.

In 1991, the Philippine Congress enacted into law Republic Act No. 6977, further
amended by Republic Act No 8289 in 1997, what is more commonly known as the
“Magna Carta for Micro, Small and Medium Enterprises". Additionally, Republic Act
No. 10644, also known as the “Go Negosyo Act’, sought to push the development of
small businesses through the establishment of "Negosyo Centers” around the country.
These landmark legislations are geared towards the development of the Filipino
entrepreneurial spirit. With over 99% of establishments in the Philippines being
MSMEs by 2015, the Magna Carta provided a business environment conducive for
their growth in the country. MSMEs have contributed over 60% of the total jobs
generated by all types of business establishments.

Based on the definition under Republic Act No. 901 or the Magna Carta foc MSME, which amended RA #289 and RA 6977 (Magn Car for Small
Eire) and onthe establishment category used bythe National Statistics OMie (NSO) respectively


The proposed bill aims to provide an accessible microfinancing program for the
MSMEs in the country in order to enable these businesses to move forward. The
beneficiaries of the “P3 Fund” shall be micro enterprises and entrepreneurs, including
market vendors, agribusinessmen and members of cooperatives, industry
associations and cooperators. This will also allow a better alternative for startups and
small enterprises to get capital for their business, at a lower interest rate.

The approval of this bill is earnestly sought.

LUIS RAYJ ID “LRAY” F. VILLAFUERTE, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 404

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

ee

AN ACT
PROVIDING A SOCIALIZED MICROFINANCING PROGRAM FOR MICRO
ENTERPRISES THEREBY PROMOTING ENTREPRENEURSHIP

Bo it enacted by the Senate and House of Representatives of the Philippines
in Congress assembled:

SECTION 1. Short Title. — This Act shall shall be known as the “Pondo sa Pagbabago
at Pag-asenso’ or the “P3 Act”.

SECTION 2. Declaration of Policy. - It is the declared policy of the State to foster
national development, promote inclusive growth, and reduce poverty by promoting the
growth of micro, small and medium enterprises (MSMEs) that facilitate local job
creation, production and trade in the country. Towards this end, the State shall develop
policies, plans and programs, and initiate means to encourage entrepreneurial
activities, and to ease the constraints and challenges to MSMEs, particularly on
access to financing.

SECTION 3. Objectives. — The objectives of this Act are as follows:

(a) To provide an affordable, accessible and simple micro financing program for
the country's micro enterprises, especially those in the poorest populations;

(b) To provide a better alternative to the informal lenders or the so-called “5-6”
money lending system availed of by micro enterprises; and

(c) To bring down the interest rate at which micro finance is made available to
micro enterprises.


SECTION 4. Creation of the Pondo sa Pagbabago at Pag-asenso (P3). - There
is hereby created the “Pondo sa Pagbabago at Pag-asenso”, hereinafter referred to
as the “P3 Fund”, which shall be lent out to qualified MSMEs under such terms and
conditions that will meet the purposes of this Act.

The beneficiaries of the “P3 Fund” shall be micro enterprises and entrepreneurs,
including market vendors, agribusinessmen and members of cooperatives, industry
associations and cooperators.

The fund shall be primarily lent through conduit financial institutions to be accredited
for the purpose.

SECTION 5. Lead Implementing Agency. - The Small Business Corporation (SB
Corp.), the financing arm of the Department of Trade and Industry (DTI), shall be the
lead implementing agency for the “P3 Fund”. It shall handle the fund delivery to micro
enterprises through the following modes:

a) Direct lending to micro enterprises;

b) Wholesale lending to conduits, such as micro finance institutions (MFIs), rural
banks and credit cooperatives, which shall on-lend the fund to micro
enterprises; and

c) Provision of guarantees to loans granted by the banks to qualified P3
beneficiaries.

To support administrative and operating expenses of the SB Corp., an amount of not
more than ten percent (10%) of the total loans disbursed shall be provided annually to
the SB Corp., to be sourced from the earnings of the “P3 Fund”.

SECTION 6. Features of the “P3 Fund”. — The “P3 Fund” shall have the following
features:
(a) The components of the “P3 Fund” shalll be:
(1) Loan fund; and
(2) Guarantee fund of not more than twenty-five percent (25%) of the total
loan exposure;


(b) The loanable amount for individual loans, and the interest rate to the conduits
and to the end beneficiaries shall be set and regularly reviewed by the Micro, Small
and Medium Enterprise Development (MSMED) Council: Provided, That the interest
rate shall be lower than the prevailing interest rate charged by the MFIs. The interest
earnings shall accrue to the “P3 Fund"; and

(c) There shall be no collateral requirement from the P3 loan beneficiaries.

SECTION 7. Policy Oversight Function. - The MSMED Council shall monitor the
utilization and disbursements of the “P3 Fund”. It shall submit to the President of the
Philippines and to Congress, through the Congressional Oversight Committee on
Micro, Small and Medium Enterprise Development (COC-MSMED), a yearly report on
the status of the “P3 Fund”.

SECTION 8. Appropriations. — The amount necessary to carry out the provisions
of this Act shall be charged against the appropriations released for the purpose under
the General Appropriations Act for the SB Corp. Thereafter, such sums as may be
necessary for the continued implementation of this Act shall be included in the annual
General Appropriations Act.

SECTION 9. Implementing Rules and Regulations. — Within sixty (60) days from
the approval of this Act, the DTI, in consultation with the concerned agencies, shall
formulate and promulgate the necessary rules and regulations to implement the
provisions of this Act. The implementing rules and regulations issued pursuant to this
section shall take effect thirty (30) days after its publication in at least two (2) national
newspapers of general circulation.

SECTION 10. Separability Clause. — If any part or section of this Act is declared
unconstitutional, such declaration shalll not affect in any manner other parts or sections
hereof.

SECTION 11. Repealing Clause. — 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.


SECTION 12. Effectivity. — This Act shall take effect fifteen (15) days after its
publication in the Official Gazette or in any newspaper of general circulation.

Approved,