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FIFTEENTH CONGRESS OF THE REPUBLIC 
OF THE PHILIPPINES 
Second Regular Session 
) 
) 
) 
SENATE 
S.No. 
3255 
\ 
Prepared by the Committees on Economic Affairs, Banks, Financial Institutions and Ways and 
Means, with Senators Legarda, Villar, Estrada, Drilon, Osmefia and Recto as authors thereof. 
AN ACT 
GOVERNING THE CREATION AND ACCREDITATION OF 
MICROENTERPRISE DEVELOPMENT INSTITUTIONS AND FOR 
OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Title. - This Act shall be known as the "Microenterprise Development 
Institutions Act of 20 II ". 
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to pursue a 
program of poverty eradication wherein poor Filipino families shall be encouraged 
to 
undertake entrepreneurial activities to meet its minimum basic needs including income 
security. In pursuance of this policy, the government shall 
support 
and 
work 
in 
partnership with qualified institutions in the private sector providing general and other 
entrepreneurial services to the poor. 
SEC. 3. Definition of Terms. - For purposes of implementing this Act, the following 
definitions shall apply: 
(a) MICRODEV Accreditation Center refers to the entity created under Section 7 of 
this Act. 
(b) Microenterprise Development Strategy refers to a social reform program to empower 
the poor, manage risks and vulnerabilities and thereby improve their asset base and 
expand access to microfinance services, such as microcredit, micro insurance, 
microsavings, health care and microhousing through a broad package of financial, 
business and human development services and other nonfinancial services, including 
education to enable them to live productive lives. 
(c) Microfinance refers to the provision of a broad range of financial services 
exclusively for the poor to improve the asset base of households and expand their 
access to savings and enable them to raise their income levels and living standards. 
(d) Net Worth refers to the difference between total assets and total liabilities of an 
entity. 
(e) Poor refers to individuals and families whose income fall below the poverty threshold 
as defined by the National Economic and Development Authority or those who cannot 
afford in a sustained manner to provide their minimum basic needs of food, health care, 
education, housing and other essential amenities of life as defined by Republic Act No. 
8425, otherwise known as the "Social Reform and Poverty Alleviation Act". 
(f) Regulatory Authorities refer to the entities as designated under Section 9 of this Act. 
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(g) Social Reform refers to the continuing process of addressing the basic inequities in 
Philippine society through a systematic, unified and coordinated delivery of socio-
economic programs or packages. 
SEC. 4. Recognition of Micro-enterprise Development Institutions (MICRODEVs). -
MICRODEVs are hereby recognized as institutions mandated to implement a microenterprise 
development strategy. MICRODEVs shall be operated as nonstock and nonprofit 
corporations 
in accordance with the Securities and Exchange Commission (SEC) rules 
and regulations and provisions of Title XI (Non-Stock Corporations) of Batas Pambansa Big. 
68, otherwise known as "The Corporation Code of the 
Philippines". 
These 
shall 
be 
governed by a Board of Trustees whose members shall not receive compensation: Provided, 
That no part of the net income ofMICRODEVs inure to the benefit of the members, trustees, 
directors or officers: Provided, fUrther, That the administrative expenses shall in no case 
exceed thitty percent (30%) of the total expenses within a taxable year: Provided, finally, 
That the administrative expenses shall conform with 
the rules and regulations to be 
prescribed by the Department of Finance (DOF) upon the recommendation of the Bureau of 
Internal Revenue (B1R). 
SEC. 5. Powers and Functions of a MICRODEV. - A MICRODEV shall exercise such 
powers and functions and undertake such activities in accordance with the policies, 
programs and services provided in this Act. It shall: 
(a) Provide the poor access to reasonable and affordable credit and related services including 
micro finance, microinsurance, health care and microhousing; 
(b) Provide business development opportunities such as leadership training and 
entrepreneurial skills training; and 
(c) Provide human development services to help the poor achieve a level of sustainability 
and empowerment and adopt measures to promote a spirit of generosity and selfless 
giving among individuals and institutions that would help support all programs directly 
involved in poverty eradication. 
Any accredited MICRODEV shall not undertake deposit-taking activities, 
engage 
in the insurance business and carry out fund management activities without the necessary 
licenses and authority from the relevant regulatory agencies. 
For the purpose of implementing this provision, deposit-taking does not include 
taking of funds from current or prospective borrowers for the purpose of equity build-up of 
an individual borrower's own loans. A MICRODEV shall be a net lender at all times, 
wherein net loans mean total loans minus total equity build-up. 
SEC. 6. Capital Requirements. - A MICRODEV shall have a net worth of Twenty million 
pesos (P20,000,000.00), or in the case of newly organized MICRODEVs, an initial 
net 
worth ofTen million pesos (PI 0,000,000.00). 
SEC. 7. Creation and Composition of the Accrediting Entity. - An accrediting entity to be 
known as the MICRODEV Accreditation Center shall be created under the National Anti-
Poverty Commission (NAPC) to perform the functions provided herein. It shall be composed 
of the following: 
(a) The President of the NAPC or designated representative; 
(b) The Secretary of the DOF or designated representative; 
(c) The Secretary of the Department of Trade and Industry (DTI) or designated 
representative; 
(d) The Governor of the Bangko Sentral ng Pilipinas (BSP) or designated representative; 
(e) The Chairperson of the SEC or designated representative; and 
(f) The President of the Microfinance Council of the Philippines (MFCP) or designated 
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representative. 
The MICRODEV Accreditation Center shall be assisted by a Secretariat in the 
performance of its functions. Funding for its operation shall be sourced from the two percent 
(2%) tax proceeds from MICRODEVs to be remitted to the People's Development Trust 
Fund established under Republic Act No. 8425, as provided for in subparagraph (a) of 
Section 10 of this Act. 
SEC. 8. Powers and Functions of the Accrediting Entity. - The MICRODEV Accreditation 
Center established under this Act shall have the following functions and responsibilities: 
(a) Institute and operationalize a system of accreditation for MICRODEVs; 
(b) Issue certificate of accreditation as a MICRODEV to a nonstock and nonprofit 
corporation applicant: Provided, That, the certificate of accreditation shall be valid only 
for such period as may be prescribed under the implementing rules and regulations of 
this Act: Provided, forther, That no application shall be processed for accreditation as a 
MICRODEV unless the applicant enterprise secures a valid registration or license with 
the government agency that exercises regulatory function over such corporation; 
(c) Monitor the performance of MICRODEVs to ensure compliance with the provisions of 
this Act and its implementing rules and regulations; 
(d) Suspend or revoke any certificate of accreditation upon determination that a 
MICRODEV no longer meets the criteria for accreditation; 
e) Require regular submission of reports by MICRODEVs; 
(f) Collect reasonable accreditation and monitoring fees from a MICRODEV which 
shall be used for the accrediting entity's operational requirements; 
(g) Submit an annual report to the President of the Philippines and the concerned 
committees of both Houses of Congress; and 
(h) Perform such other functions as may be necessary to accomplish the purposes 
and objectives of this Act. 
SEC. 9. Power of the Regulatory Authorities to Examine MICRODEVs. - The BSP and the 
Insurance Commission, in coordination with the accrediting entities, shall have the power to 
examine the operations of MICRODEVs, solely for the purpose of determining that 
MICRODEVs are not engaged in unauthorized undertakings or activities which are 
subject 
to their respective regulations. 
SEC. 10. Taxation of Accredited MICRODEVs. - The taxation of MICRODEVs shall be as 
follows: 
(a) The MICRODEVs shall pay two percent (2%) of the gross income in lieu of all national 
and local taxes which shall be remitted to the National Government. The tax proceeds 
shall form part of the disbursable portion of the People's Development Trust Fund 
established under Republic Act No. 8425. The term "gross income" shall mean gross receipts 
less sales returns, allowances, discounts and other costs of services. The term "cost of 
services" shall mean all direct costs and expenses necessarily incurred to provide the services 
required by the customers and clients including salaries and employee benefits of personnel, 
consultants and specialists directly rendering the service and cost of facilities directly utilized 
in providing the service and cost of supplies. Interest expenses on borrowings for lending 
services of a MICRODEV shall be deductible from gross receipts as part of cost of services 
in arriving at gross income. The term gross income shall exclude donations; 
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(b) Donations to the MICRODEV shall be fully deductible from the gross income of the 
donor subject to the conditions of Section 34(c) of Republic Act No. 8424, 
as 
amended, 
otherwise known as the "National Internal Revenue Code of 1997". 
Provided, 
however, 
That the accreditation of the MICRODEV by the accrediting entity under this Act shall be 
sufficient; 
(c) Donations to the MICRODEV shall be exempt from donor's tax subject to the 
qualifications of Section 101 of Republic Act No. 8424, as amended, otherwise known as the 
"National Internal Revenue Code of 1997": Provided, That for purposes of utilization, 
accreditation granted under this Act shall be sufficient; and 
(d)Transactions of the MICRODEV and its clients shall be exempt from documentary 
stamp tax. 
SEC. 11. Implementing Rules and Regulations. - The NAPC, in coordination with the DOF, 
the BIR, the BSP, the DTI and the MFCP, shall formulate the implementing rules and 
regulations (lRR) of this Act within ninety (90) days after its approval. The IRR shall take 
effect fifteen (15) days after its publication in a newspaper of general circulation in the 
Philippines. 
SEC. 12. Penalty Clause. - If the BSP or the Insurance Commission finds, 
pursuant to its 
power under Section 9 of this Act, MICRODEVs engaging in unauthorized undertakings or 
activities, the BSP or the Insurance Commission may impose administrative 
sanctions 
including, but not limited to, issuance of an order requiring 
the MICRODEV and/or 
the 
directors and/or officers concerned to cease and desist from the indicated practice or 
violation, and may further order that immediate action be taken to correct the conditions 
resulting from such violation. The cease and desist order shall be immediately effective 
upon service of such order to the respondents. Further, MICRODEV s and/or its directors 
and/or officers found to be engaged in unauthorized undertakings and activities shall be 
subject to criminal and administrative fines as provided for in Sections 36 and 37 of 
Republic Act No. 7653 or the New Central Bank Act, and in case of unauthorized activities 
regulated by the Insurance Commission, be liable under the applicable insurance laws. 
SEC. 13. Separability Clause. - The provisions of this Act are hereby declared to 
be 
separable. If any provision of this Act shall be held unconstitutional, the remainder of the 
Act not otherwise affected shall remain in full force and effect. 
SEC. 14. Repealing Clause. - All executive orders, rules and regulations or parts thereof 
which are contrary to or inconsistent with this Act are hereby repealed, amended or modified 
accordingly. 
SEC. 15. Effectivity Clause. - This Act shall take effect after fifteen (15) days from its 
publication in at least two (2) national newspapers of general circulation. 
Approved, 
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