THIRTEENTH CONGRESS OF THE 
1 
REPUBLIC OF THE PHILIPPINES 
1 
Third Regular Session 
) 
S E N A T E  
S.B.No. 2593 
(In substitution of S.B. Nos. 66,263 and 1997, 
taking into consideration H. B. No. 5811) 
Prepared jointly by the Committees on Economic Affairs; Banks, Financial 
Institutions and Currencies; and Finance with Senators Ejercito-Estrada (L.), Osmefia 
111, Roxas, Gordon, Lapid and Revilla, Jr. as authors thereof. 
“AN ACT 
TO PROMOTE ENTREPRENEURSHIP BY 
STRENGTHENING 
DEVELOPMENT AND ASSISTANCE PROGRAMS TO MICRO, 
SMALL AND MEDIUM SCALE ENTERPRISES, AMENDING FOR 
THE PURPOSE REPUBLIC ACT NO. 6977, AS AMENDED, 
OTHERWISE KNOWN AS THE “MAGNA CARTA FOR SMALL 
ENTERPRISES” AND FOR OTHER PURPOSES 
Be it enacted by the Senate’ and House of Representatives of the Philippines in 
Congress assem bled: 
Section 1. Republic Act No. 6977, as amended, Section 1, is further amended to read 
1 
2 
as follows: 
3 
“Section 1 Title.- This Act shall be known as the Magna Carta for 
4 
MICRO, Small AND MEDIUM Enterprises (MSME). “ 
5 
6 
7 
8 
9 
SEC. 2. Section 2 of the same Act is hereby amended to read as follows: 
“Section 2. Declaration ofPoliccy. - Recognizing that MICRO, small and 
medium scale enterprises (MSME) have the potential for more employment 
generation and economic growth and therefore can help provide a self- 
sufficient industrial foundation for the country, it is hereby declared the policy 
Page 1 


1 
2 
3 
4 
5 
6 
I 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
of the State to promote, support, strengthen and encourage the growth and 
development of [small and medium enterprises] MSME in all productive 
sectors of the economy particularly rural/agri-based enterprises. To this end, 
the State shall undertake to [spur the growth and development of small and 
medium 
enterprises 
throughout 
the 
country] 
PROMOTE 
ENTREPRENEURSHIP, SUPPORT ENTREPRENEURS, ENCOURAGE THE 
ESTABLISHMENTS OF MICRO, SMALL AND MEDIUM ENTERPRISES 
AND ENSURE THEIR CONTINUING VIABILITY AND GROWTH and 
thereby attain countryside industrialization B Y  
.. 
“[a) By assuring, through the establishment of adequate support 
structure, and the creation and promotion of an environment conducive to the 
viability of these enterprises, establishment of mechanisms, the access and 
transfer of appropriate technology needed by small and medium enterprises;] 
“[b] A) [By] intensifying and expanding programs for training in 
entrepreneurship and for skills development for labor; 
“[c] B) [By] facilitating their access to sources of funds; 
“[d] C) [By] assuring to them access to a fair share of government 
contracts and related incentives and preferences; 
“[e] D) [By] complementing and supplementing financing programs for 
MICRO, small and medium enterprises and doing away with stringent and 
burdensome collateral requirements that small entrepreneurs invariably find 
extreme difficulty complying with; 
Page 2 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
“[fl E) [By] instituting safeguards for the protection and 
stability of the credit delivery system; 
“[g] F) [By] raising government efficiency and effectiveness in 
providing assistance to MICRO, small and medium enterprises 
throughout the country, at the least cost; 
“[h] G) [By] promoting linkages between large and small 
enterprises, and by encouraging the establishment of common service 
facilities; 
“[i] H) [By] making the private sector a partner in the task of 
building up MICRO, small and medium enterprises through the 
promotion and participation of private voluntary organizations, viable 
industry associations, and cooperatives; and 
“[j] I) [By] assuring a balanced and sustainable development 
through the establishment of a feedback and evaluation mechanism 
that will monitor the economic contributions as well as bottlenecks and 
environmental effects of the development of MICRO, small and 
medium [scale] enterprises.” 
SEC. 3. Section 3 of the same Act, as amended, is hereby further amended to read as 
follows: 
“Section.3. MICRO, Small and Medium Entepjarise as Beneficiaries. - 
[‘Small and medium enterprise’] MSME shall be defined as any business 
activity or enterprise engaged in industry, agribusiness, and/or services, 
whether single proprietorship, cooperative, partnership or corporation whose 
Page 3 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
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 
: [less than P 1,500,000] NOT MORE THAN P3,000,000 
Small 
: 
[P 1,500,0011 P3,000,001 - P 15,000,000 
Medium : 
P 15,000,001 - [P 60,000,000] P 100,000,000 
“The above definitions shall be subject to review and adjustment [by 
the said Council] motu proprio BY THE MSMED COUNCIL UNDER 
SECTION 6 OF THIS LAW or upon recommendation of sectoral 
organization(s) CONCERNED, taking into account inflation and other 
economic indicators. The Council may use [as] OTHER variables [the] SUCH 
AS number of employees, equity capital and asset size. 
“THE COUNCIL SHALL ENSURE THAT NOTWITHSTANDING THE 
PLANS AND PROGRAMS SET FOR MSMEs AS A WHOLE, THERE SHALL 
BE SET AND IMPLEMENTED OTHER PLANS AND PROGRAMS VARIED 
AND DISTINCT FROM EACH OTHER, ACCORDING TO THE SPECIFIC 
NEEDS OF EACH SECTOR, ENCOURAGING MSME TO GRADUATE FROM 
ONE CATEGORY TO THE NEXT OR EVEN HIGHER CATEGORY.” 
SEC. 4. Section 4 of the same Act, as amended, is hereby further amended to read as 
follows: 
“Section 4. Ehgibihty for Government Assistance. - To qualify for 
assistance, counseling, incentives and promotion under this Act, businesses 
falling under the above definition must be; 
Page 4 


5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
“a) duly registered with the appropriate agencies as presently 
provided by law: Provided, That in the case of micro enterprises as 
defined herein, as defined herein, registration with the office of the 
municipal or city treasurer shall be deemed sufficient compliance with 
this requirement: 
“b) one hundred percent (100%) owned [and], capitalized by 
Filipino citizens, [ifl 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. 
“c) a business activity within the major sectors of the economy, 
namely; industry, services, including the practice of one’s profession, 
the operation of tourism-related establishments, and agri-business, 
which for purposes of this Act refers to any business activity involving 
the manufacturing, processing, and/or production of agricultural 
produce[, excluding farm level agriculturaVcrop production]; and 
“d) it must not be a branch, subsidiary or division of a large- 
scale enterprise [nor may its policies be determined by a large scale 
enterprise or by persons who are not owners or employees of the 
enterprise]. 
“However, this requirement shall not preclude a [small and 
medium enterprise] MSME from accepting subcontracts [from large 
enterprises 
or 
firms] AND 
ENTERING INTO 
FRANCHISE 
PARTNERSHIP WITH LARGE ENTERPRISES OR FROM joining in 
Page 5 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
cooperative activities with other [small and medium enterprises] 
MSME. 
“Programs of the [financing corporation] SMALL BUSINESS 
CORPORATION (SBC) as provided in subsequent [Sections] 
PROVISIONS of this Act shall be exclusively [targeted] DELIVERED 
AND DIRECTED to [medium, small, and micro-sized enterprises] 
BONAFIDE MSMEs. 
“Registered smafl enterprises shall be entitled to a share of at 
least ten percent (10%) of total procurement value of goods and 
services supplied to the Government, its bureaus, offices and agencies 
annually: Provjded, That prices and quality of goods offered by the 
registered small enterprises are competitive. 
“THE DEPARTMENT OF BUDGET AND MANAGEMENT 
SHALL MONITOR THE COMPLIANCE OF GOVERNMENT 
AGENCIES ON THE REQUIRED PROCUREMENT FOR MSME AND 
SUBMIT ITS REPORT TO THE MSMED COUNCIL ON A 
SEMESTRAL BASIS. I‘ 
SEC. 5. Section 5 of the same Act is hereby further amended to read as follows: 
“Section 5. Guiding Prjnciples, - 
To set the pace for [small and 
medium enterprise] MSME development, the State shall be guided by the 
following principles: 
x x x  
Page 6 


1 
2 
3 
4 
5 
6 
I 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
“c) 
Coordination ofgovernment efforts. Government efforts 
shall be coordinated to achieve coherence in objectives, 
All 
appropriate offices, particularly those under the Departments of Trade 
and Industry, Finance, Budget and Management, Agriculture, Agrarian 
Reform, Environment and Natural Resources, Labor and Employment, 
Transportation and Communications, 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 and the Bangko Sentral ng 
Pilipinas, through their national, regional and provincial offices, shall 
to the best of their effort and in coordination with local government 
units, provide the necessary support and assistance to [small and 
medium enterprises] MSMEs. 
x x x  
SEC. 6. A new section, numbered Section 6 is hereby inserted after Section 5 of the 
same Act, to read as follows: 
“Section 6. MICRO, SMALL RND MEDIUM ENTERPRISES 
DEVELOPMEh’TPLAN(MSMEDP). 
- THE PRESIDENT SHALL APPROVE 
A ROLLING THREE-YEAR MICRO, SMALL AND MEDIUM ENTERPRISES 
DEVELOPMENT PLAN PREPARED BY THE MICRO, SMALL AND 
MEDIUM ENTERPRISE COUNCIL THROUGH THE DEPARTMENT OF 
TRADE AND INDUSTRY WHICH SHALL FORM PART OF THE MEDIUM 
TERM PHILIPPINE DEVELOPMENT PLAN (MTDP). 
IT SHALL BE 
Page 7 


1 
FORMULATED IN CONSULTATION WITH THE PRIVATE SECTOR, 
2 
VALIDATED AND UPDATED SEMESTRALLY." 
3 
4 
SEC. 7. Section 6 of the same Act is hereby renumbered as Section 7 and further 
amended to read as follows: 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
1s 
16 
17 
18 
19 
20 
21 
22 
"Section 7 [ 6 1. 
[Creation of A Small and Medium 
Enterprise Development 
Council] MICRO, SMALL AND MEDIUM 
ENTERPRISE DEVELOPMENT COLNCIL . - 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 [Tjto effectively spur the 
growth and development of [small and medium enterprises] 
MSMEs 
throughout the country, and to carry out the policy declared on this Act, [a 
Small and Medium Enterprise Development (SMED) Council is hereby 
created.] AND SHALL NOW BE KNOWN AS THE MICRO, SMALL AND 
MEDIUM ENTERPRISE DEVELOPMENT 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. 
x x x  
,. 
SEC. 8. Section 7 of the same Act, as amended, is hereby renumbered as Section 
7-A, and further amended to read as follows: 
"Section 7-A [7]. Composirion. - The Council shall be headed by the 
Secretary of Trade and Industry as Chairman, and may elect from among 
Page 8 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
themselves a Vice-chairman to preside over the Council meetings in the 
absence of the Chairman. The members shall be the following: 
“a) 
Authority; 
Director General of the National Economic and Development 
“b) 
Secretary of Agriculture; 
“c) 
‘Id) 
“E) SECRETARY OF THE INTERIOR AND LOCAL GOVERNMENT; 
“ [e)] F) 
Secretary of Science and Technology; 
“ [Q] G) 
Secretary of Tourism: 
“ [g)] H) 
The Chairman of the Monetary Board; 
“ [h)] I) 
Chairman of [Small Business Guarantee and 
Finance Corporation] SMALL BUSINESS CORPORATION ; 
“[i)] 
J) 
Chairman of the MICRO, small and medium 
enterprises promotion body which the President shall undertake 
to establish under this Act; [and] 
“ [j)] K) 
Three (3) representatives from the private sector 
at large, all Filipino citizens, to represent Luzon, Visayas and 
Mindanao, and one representative from the MICRO, small and 
medium enterprise sector, to be appointed by the President; and 
“[k] 
L) [a] One (1) representative EACH from the private 
banking sector : [to serve alternately among] the Chamber of 
Secretary of Labor and Employment; 
Secretary of Environment and Natural Resources; 
Page 9 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
Thrift Banks; the Rural Bankers’ Association of the Philippines 
(RBAP); and the Bankers’ Association of the Philippines (BAP); 
“ALL MEMBERS OF THE COUNCIL SO APPOINTED, EXCEPT FOR 
THE .€X-OFFICIO MEMBERS, SHALL SERVE FOR A TERM OF THREE (3) 
YEARS. THE PERSON SO APPOINTED TO REPLACE A MEMBER WHO 
HAS RESIGNED, DIED, OR BEEN REMOVED FOR CAUSE SHALL SERVE 
ONLY FOR THE UNEXPIRED PORTION OF THE TERM. 
‘Cabinet-rank ex-officio members of the Council shall designate an 
undersecretary or assistant secretary, and the chairman of the Monetary Board 
or his representative as their permanent representative in case they fail to 
attend meetings of the Council. 
“The private sector members of the Council shall [initially] 
receive per diem of [One] TWO thousand pesos (P[ 112,000) per meeting, for 
a maximum of twenty-four (24) meetings per year, which ber diem may be 
adjusted] AMOUNT SHALL BE DETERMINED by the Council: Provided, 
That THE AMOUNT AND any such adjustment shall take effect upon 
approval of the [ President.] MSMED COUNCIL. 
“ [The Department of Trade and Industry shall allocate Five million 
pesos (P5,000,000.00) 
out of its savings for the initial operating expenses of the 
Council, after which the Council’s budget shall be included in the annual 
appropriation of the Department of Trade and Industry.] 
“THE 
COUNCIL 
SHALL 
HAVE 
A 
SEPARATE 
ANNUAL 
APPROPRIATION WHICH SHALL BE PROVIDED IN THE GENERAL 
Page 10 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
APROPRIATIONS ACT STARTING IN THE FISCAL YEAR IMMEDIATELY 
FOLLOWING THE APPROVAL OF THIS ACT. 
“The Council may [, from time to time,] call upon the participation of 
any NATIONAL OR LOCAL government agency [or], association of local 
government officials OR PRIVATE SECTOR ORGANIZATION in its 
deliberations especially when such agency OR PRIVATE SECTOR 
ORGANIZATION is directly or indirectly concerned with and/or affecting the 
growth and development of [small and medium enterprises] MSMEs in any 
particular area or manner. 
“The Council may create an Executive Committee of five (5) members 
elected by the Council from among themselves or their designated permanent 
representatives, with at least two (2) members representing the private sector, 
and with authority to act for and on behalf of the Council during intervals of 
council meetings, and within the specific authority granted by the Council.” 
Section 8 of the same Act, as amended, is hereby renumbered as Section 
SEC. 9. 
7-B and further amended to read as follows: 
“SECTION 7-B [8]. 
Powers and Functions. - The 
[Small and 
Medium Enterprise Development (SMED)] MSMED Council shall have the 
following powers, duties and functions: 
“a) 
To help establish the needed environment and opportunities 
the growth and development of the [small and medium 
conducive to 
22 
enterprises] MSME sector; 
Page 11 


8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
“b) 
To recommend to the President and the Congress all policy 
matters affecting [small and medium scale enterprises] MSMEs; 
“c) 
To formulate a comprehensive [small and medium enterprises] 
MSME development plan to be integrated into the National Economic and 
Development Authority (NEDA) Development Plans; 
“d) 
To coordinate and integrate various government and private 
sector activities relating to 
[small and medium enterprises] 
MSME 
development; 
“e) 
To review existing policies of government agencies that would 
affect the growth and development of 
[small and medium enterprises] 
MSMEs and recommend changes to the President and [/or to the] Congress 
THROUGH THE COMMITTEE ON ECONOMIC AFFAIRS OF THE SENATE 
AND 
THE 
SPECIAL 
COMMITTEE 
ON 
ENTREPRENEURSIP 
DEVELOPMENT, OR ANY APPROPRIATE COMMITTEE OF THE HOUSE 
OF REPRESENTATIVES, whenever deemed necessary. This shall include 
efforts to simplify rules and regulations, as well as procedural and 
documentary requirements in the registration, financing, and other activities 
relevant to [small and medium enterprises] MSMEs; 
‘‘Q To monitor and determine the progress of various agencies 
geared towards the development of the sector. This shall include overseeing, 
in coordination with local government units and the Department of THE 
INTERIOR 
AND Local 
Government 
as 
well 
as 
private 
sector 
Page 12 


1 
2 
3 
4 
5 
6 
I 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
groups/associations, the developments among [small and medium enterprises] 
MSMEs [particularly the cottage and micro-sized firms]; 
“g) 
To promulgate implementing guidelines, programs, and 
operating principles as may be deemed proper and necessary in the light of 
government policies and objectives of this Act; 
“h) 
To provide the appropriate policy and coordinative framework 
in assisting relevant government agencies, in coordination with [ the National 
Economic and Development Authority] NEDA and the Coordinating Council 
for the Philippine Assistance Program, as may be necessary, in the tapping of 
local and foreign funds for 
[small and medium enterprises] 
MSME 
development; 
“i) 
To promote the productivity and viability of [small and 
medium enterprises] MSMEs by way of directing and/or assisting relevant 
government agencies and institutions at the national, regional and provincial 
levels towards the: 
“1) Provision of business training courses, technical training for 
technicians and skilled laborers and continuing skills upgrading 
programs; 
“2) Provision of labor-management guidance, assistance and 
improvement of the working conditions of employees in [small and 
medium-sized firms] MSMEs; 
“3) Provision of guidance and assistance regarding product 
quality/product development and product diversification; 
Page 13 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
“4) Provision of guidance and assistance for the adoption of 
improved production techniques and commercialization of 
appropriate technologies for the product development and for 
increased utilization of indigenous raw materials; 
“5) Provision of assistance in marketing and distribution of products 
of 
[small and medium enterprises] 
MSMEs through local 
supply-demand information, industry and provincial profiles, 
overseas marketing promotion, domestic market linkaging and the 
establishment of common service facilities such as common and/or 
cooperative bonded warehouse, grains storage, agro-processing and 
drying facilities, ice plants, refrigerated storage, cooperative 
trucking facilities, etc; 
“6) Intensification of assistance and guidance to enable greater 
access to credit through a simplified multi-agency financing 
program; to encourage development of other modes of financing 
such as leasing and venture capital activities; to provide effective 
credit guarantee 
systems, and encourage the formation of credit 
guarantee associations, including setting up of credit records and 
information systems and to decentralize loan approval mechanisms; 
“7) Provision of concessional interest rates, lower financing fees, 
which may include incentives for prompt credit payments, 
arrangements tying amortizations to business cash flows, effective 
Page 14 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
substitution of government guarantee cover on loans for the 
borrower’s lack of collateral; 
“8) Provision of bankruptcy preventive measures through the 
setting up of a mutual relief system for distressed enterprises, and 
the establishment of measures such as insurance against 
extraordinary disasters; 
“9) Intensification of information dissemination campaigns and 
entrepreneurship education activities; 
“10) Easier access to and availment of tax credits and other tax and 
duty incentives as provided by the Omnibus Investment Code and 
other laws; 
“1 1) Provision of support for product experimentation and research 
and development activities as well as access to information on 
commercialized technologies; and 
“12) Provision of more infrastructure facilities and public utilities to 
support operations of [small and medium enterprises] MSMEs; 
“j) 
To submit to the President and the Congress THROUGH THE 
SENATE COMMITTEE ON ECONOMIC AFFAIRS AND THE SPECIAL 
COMMITTEE ON ENTREPRENEURSHIP DEVELOPMENT, OR ANY 
APPROPRIATE COMMITTEE OF THE HOUSE OF REPRESENTATIVES, a 
yearly report on the status of [small and medium enterprises] MSMEs in the 
country, including the progress and impact of 
all relevant government 
policies, programs and legislation as well as private sector activities; 
Page 15 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
“k) 
To assist in the establishment of modern industrial estates 
outside urban centers; [and] 
“1) 
Generally, to exercise all powers and hnctions necessary for the 
objectives and purposes of this Act[.]; AND 
“M) TO APPROVE THE MSMEDP, COORDINATE, MONITOR AND 
ASSESS THE IMPLEMENTATION THEREOF, AND WHEN NECESSARY, 
INSTITUTE APPROPRIATE ADJUSTMENTS THEREON IN THE LIGHT OF 
CHANGING CONDITIONS IN BOTH DOMESTIC AND INTERNATIONAL 
ENVIRONMENT. “ 
SEC. 10. Section 9 of the same Act, as amended is hereby renumbered as Section 8 
and amended to read as follows: 
“SEC. 8 [9]. Designation of the Bureau of MICRO, Small and Medium 
Business Development as a Council Secretariat. - The Bureau of MICRO, 
Small and Medium Business Development is hereby designated to act as the 
Council Secretariat and shall have the following duties and functions: 
xxx 
SEC. 11. 
amended, and numbered as Section 9 to read as follows: 
A new section is hereby inserted after Section 9 of the same Act, as 
“SECTION 9. APPROPRIATIONS. - FUNDING OF ACTIVITIES AND 
OPERATIONAL EXPENSES OF THE COUNCIL SHALL BE SUPPORTED BY 
CONTRIBUTIONS FROM THE GOVERNMENT AND THE PRIVATE 
SECTOR. THE AMOUNT OF CONTRIBUTION BY THE GOVERNMENT 
WILL BE RECOMMENDED BY THE DEPARTMENT OF TRADE AND 
Page 16 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
INDUSTRY, UPON CONSULTATION WITH THE DEPARTMENT OF 
BUDGET AND MANAGEMENT, AND APPROVED BY THE PRESIDENT. 
THE ANNUAL CONTRIBUTIONS OF THE GOVERNMENT SHALL BE 
INCLUDED 
IN 
THE ANNUAL APPROPRIATIONS ACTS AFTER 
CONSULTATIONS WITH THE DEPARTMENT OF BUDGET AND 
MANAGEMENT.” 
SEC. 12. 
as follows: 
Section 10 of the same Act, as amended, is hereby further amended to read 
“Section. 10. Rationalization 
of Existing MICRO, Small 
and 
Medium 
EnteTrise Programs and Agencies. - The 
MSMED Council 
shall conduct continuing review of government programs for [small and 
medium enterprises] 
MSMEs and submit to Congress and the President a 
report thereon together with its policy recommendations.” 
[The President is hereby also empowered to establish a small and 
medium enterprise promotion body which shall be the principal’government 
agency that will formulate, implement, coordinate and monitor all non- 
financing government programs, including fee-based services, to support and 
promote micro, small and medium enterprises. It shall be attached to the 
Department of Trade and Industry and shall be under the policy, program and 
administrative supervision of the SMED Council. The said office shall receive 
no less than fifty percent (50%) of the assets, and budgetary allocations of the 
agencies for promotion, development and financing of small and medium 
Page 17 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
enterprises that may be henceforth dissolved and/or abolished and absorbed, 
incorporated and integrated into the SMED Council.] 
SEC. 13. 
read as follows: 
Section 11 of the same Act, as amended, is hereby further amended to 
"Section 11. Creation of [Small Business Guarantee and finance 
Corporation] SMALL BUSINESS CORPORATION - There is hereby created 
a body corporate to be known as the Small Business Guarantee and Finance 
Corporation, hereinafter referred to as the [SBGFC,] SMALL BUSINESS 
CORPORATION (SBC), which shall 
[source and adopt development 
initiatives for globally competitive small and medium enterprises in terms of 
finance, technology, production, management and business linkages, and 
provide, promote, develop and widen in both scope and service reach various 
alternative modes of financing for small and medium enterprises, including 
hut not limited to, direct and indirect project lending, venture capital, 
financial leasing, secondary mortgage andor rediscounting of loan papers to 
small businesses, secondaryhegional stock markets: 
Provided, That crop 
production financing shall not be serviced by the Corporation.] BE CHARGED 
WITH 
THE 
PRIMARY 
RESPONSIBILITY 
OF 
IMPLEMENTING 
COMPREHENSIVE POLICIES AND PROGRAMS TO ASSIST MICRO, 
SMALL AND MEDIUM ENTERPRISES IN ALL AREAS, INCLUDING BUT 
NOT LIMITED TO FINANCE, INFORMATION SERVICES, TRAINING AND 
MARKETING. 
Page 18 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
[The Corporation shall guarantee loans obtained by qualified small and 
medium enterprises, local andor regional associations’ small enterprises and 
industries, private voluntary organizations and/or cooperatives, under such 
terms and conditions adopted by its Board. It may guarantee loans up to one 
hundred percent (100%). It may also provide second level guarantee (i.e., 
reinsurance) on the credit and/or investment guarantees made by credit 
guarantee associations and other institutions in support of small 
entrepreneurs.] 
“[The Corporation shall become liable under its guarantees upon proof 
that the loan has become past due under such terms and guidelines adopted by 
its Board and printed on the contract of guarantee.] 
“[The Small Business Guarantee Finance Corporation shall:] 
“[a) be attached to the Department of Trade and Industry and 
shall be under the policy, program and administrative supervision of 
the SMED Council;] 
“[b) have its principal place of business in Metro Manila and 
endeavor to have one or more branch offices in every province of the 
country;] 
“[c) exercise all the general powers conferred by law upon 
corporations under the Corporation Code as are incidental or 
conducive to the attainment of the objectives of this Act;] 
Page 19 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
“[d) have a board of directors upon which the powers of the 
Corporation shall be vested, to be composed of nine (9) members 
including:] 
“1)[ three (3) members from the private sector appointed by the 
President upon recommendation of the SMED Council and from 
among whom the Chairman of the Board shall be appointed by the 
President to serve on a full-time basis;] 
“[2) the Secretary of Trade and Industry or his Undersecretary; 
and] 
“[3) a representative from each of the five (5) government 
financial institutions mandated in this Act to provide the initial capital 
of the Corporation, who shall be designated, under guidelines agreed 
upon by the Board Chairmen of said institutions;] 
“[e) notwithstanding the provisions of Republic Act No. 6758, 
and Compensation Circular No. 10, series of 1989 issued by the 
Department of Budget and Management, the Board of Directors of 
SBGFC shall have the authority to extend to the employees and 
personnel thereof the allowance and fringe benefits similar to those 
extended to and currently enjoyed by the employees and personnel of 
other government financial institutions.]” 
SEC. 14. A new sub-section is inserted after section 11 of the same Act, as amended, 
to read as follows: 
Page 20 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
“SECTION 11-A. COMPOSITION OF THE BOARD OF DIRECTORS 
ANDIi’Y PO WEIRS - THE SBC CORPORATE POWERS SHALL BE VESTED 
ON A BOARD OF DIRECTORS COMPOSED OF ELEVEN (11) MEMBERS 
WHICH SHALL INCLUDE THE FOLLOWING: 
“A) 
“B) 
THE SECRETARY OF FINANCE 
‘IC) 
THE SECRETARY OF TRADE AND INDUSTRY 
A PRIVATE SECTOR REPRESENTATIVE TO BE APPOINTED 
BY THE PRESIDENT UPON THE RECOMMENDATION OF THE MSMED 
COUNCIL; 
‘ID) 
SEVEN (7) REPRESENTATIVES OF THE SBC COMMON 
STOCK SHAREHOLDERS WHO SHALL BE ELECTED BASED ON 
PROPORTIONAL DISTRIBUTION, IN ACCORDANCE WITH SECTION 24 
OF THE CORPORATION CODE; AND 
“E) 
THE PRESIDENT OF THE SBC AS EX-OFFICIO MEMBER 
AND TO SERVE AS VICE CHAIRMAN OF THE BOARD. 
“THE PRESIDENT SHALL APPOINT THE CHAIRMAN 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. THE PERSON SO APPOINTED TO 
REPLACE A MEMBER WHO HAS RESIGNED, DIED, OR BEEN REMOVED 
FOR CAUSE SHALL SERVE ONLY FOR THE UNEXPIRED PORTION OF 
THE TERM. 
Page 21 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
“THE BOARD OF DIRECTORS SHALL HAVE, AMONG OTHERS 
THE FOLLOWING SPECIFIC POWERS AND AUTHORITIES: 
“A) 
FORMULATE POLICIES NECESSARY TO CARRY OUT 
EFFECTIVELY THE PROVISIONS OF THIS CHARTER AND TO 
PRESCRIBE, 
AMEND 
AND 
REPEAL 
BY-LAWS, 
RULES 
AND 
REGULATIONS FOR THE EFFECTIVE OPERATIONS OF THE SMALL 
BUSINESS CORPORATION, 
“B) 
ESTABLISH 
SUCH 
BRANCHES, 
AGENCIES 
AND 
SUBSIDIARIES AS MAY BE DEEMED NECESSARY AND CONVENIENT; 
“C) 
COMPROMISE OR RELFASE, IN WHOLE OR IN 
PART, ANY CLAIM OR LIABILITY WHATSOEVER FOR OR AGAINST 
THE SBC, INCLUDING INTEREST, PENALTIES, FEES AND/OR OTHER 
CHARGES IN ACCORDANCE TO ITS OWN BY-LAWS AND BANGKO 
SENTRAL NG PILIPINAS RULES; 
”D) 
FIX THE FEATURES OF NON-VOTING PREFERRED 
SHARES WHICH SHALL BE PRINTED ON THE STOCK CERTIFICATES 
EVIDENCING THE SAME; 
“E) 
EXERCISE ALL SUCH OTHER POWERS AS MAY BE 
NECESSARY OR INCIDENTAL TO CARRY OUT THE SMALL BUSINESS 
CORPORATION PURPOSES; 
“F) 
NOTWITHSTANDING THE PROVISIONS OF REPUBLIC ACT 
NO. 6758 AND COMPENSATION CIRCULAR NO. 10, SERIES OF 1989 
ISSUED BY THE DEPARTMENT OF BUDGET AND MANAGEMENT, THE 
Page 22 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
BOARD SHALL HAVE THE AUTHORITY TO PROVIDE FOR THE 
ORGANIZATIONAL STRUCTURE AND STAFFING PATTERN OF SBC AND 
TO EXTEND TO THE EMPLOYEES AND PERSONNEL THEREOF 
SALARIES, ALLOWANCE AND FRINGE BENEFITS SIMILAR TO THOSE 
EXTENDED TO AND CURRENTLY ENJOYED BY EMPLOYEES AND 
PERSONNEL OF OTHER GOVERNMENT FINANCIAL INSTITUTIONS.” 
SEC. 15. A new sub-section is hereby inserted after Section 11 of the same Act, as 
amended, to read as follows: 
“SECTION 11-B. CORPORATE STRUCTURE AND POWERS. - THE 
BE 
ADMINISTRATIVELY 
ATTACHED 
TO 
THE 
DEPARTMENT OF TRADE AND INDUSTRY AND 
SHALL BE UNDER THE POLICY AND PROGRAM 
SUPERVISION OF THE MSMED COUNCIL. 
HAVE ITS PRINCIPAL OFFICES IN METRO MANILA 
AND WHENEVER NECESSARY, ESTABLISH BRANCH 
OFFICE IN THE PROVINCES. 
EXERCISE ALL THE GENERAL POWERS EXPRESSLY 
CONFERRED BY LAW UPON CORPORATIONS UNDER 
THE CORPORATION CODE, INCLUDING THOSE 
POWERS THAT ARE INCIDENTAL OR NECESSARY TO 
THE ATTAINMENT OF THE OBJECTIVE OF THIS ACT. 
Page 23 


1 
2 
FOLLOWING FUNCTIONS AND DUTIES: 
3 
(A) 
SOURCE AND ADOPT DEVELOPMENT INITIATIVES 
4 
FOR GLOBALLY COMPETITIVE MSME IN FINANCE 
5 
AND BUSINESS TECHNOLOGIES; 
6 
(B) 
TO EXTEND ALL FORMS OF FINANCIAL ASSISTANCE 
7 
WHICH MAY BE IN THE FORM OF DIRECT LENDING, 
8 
AND TECHNICAL ASSISTANCE TO QUALIFIED AND 
9 
REGISTERED MSME. SBC MAY ALSO ENGAGE IN 
10 
WHOLESALE LENDING PROVIDED THAT IT SHALL 
11 
NOT IN ANY GIVEN TIME BE MORE THAN FIFTY 
12 
PERCENT (50%) OF ITS TOTAL AVAILABLE LOAN 
13 
PORTFOLIO. THE SBC SHALL BE GIVEN TWO (2) 
14 
YEARS FROM THE EFFECTIVITY OF THIS ACT TO 
15 
COMPLY WITH THIS REQUIREMENT. 
16 
(C) 
GUARANTEE LOANS OBTAINED BY QUALIFIED 
17 
MSME UNDER SUCH TERMS AND CONDITIONS 
18 
19 
(D) 
HOLD, PURCHASE, LEASE OR OTHERWISE ACQUIRE 
20 
AND OWN REAL AND PERSONAL PROPERTY, 
21 
INTRODUCE NECESSARY IMPROVEMENTS THEREON 
22 
AND 
TO 
SELL, 
MORTGAGE, 
ENCUMBER 
OR 
“FOR THIS PURPOSE, THE SBC MAY AMONG OTHERS, SERVE THE 
ADOPTED BY THE SBC BOARD OF DIRECTORS; 
Page 24 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
OTHERWISE DISPOSE OF THE SAME AS MAY BE 
NECESSARY IN THE NORMAL COURSE OF BUSINESS; 
FORMULATE MEANS AND METHODS OF ACCEPTING 
ALTERNATIVE COLLATERALS AND IMPLEMENTING 
ALTERNATIVE LOAN EVALUATION MODELS; 
APPLY FOR, RECEIVE AND ACCEPT GRANTS AND 
DONATIONS FROM SOURCES WITHIN AND OUTSIDE 
THE COUNTRY, 
(F) 
(GI 
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 
GOVERNMENT, 
ITS 
AGENCIES AND INSTRUMENTALITIES OR ANY 
GOVERNMENT FINANCIAL INSTITUTION; 
03 
ESTABLISH AN MSME ACADEMY WHICH SHALL 
PROVIDE COURSES AND DEVELOPMENT PROGRAMS, 
TRAINING, ADVICE, CONSULTATION ON BUSINESS 
CONCEPTUALIZATION 
AND 
FEASIBILITY, 
FINANCING, MANAGEMENT, CAPACITY BUILDING, 
HUMAN RESOURCES, MARKETING, 
AND SUCH 
OTHER SERVICES TO SUPPORT THE NEEDS OF 
MSMEs . 
Page 25 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
ESTABLISH, OPERATE, AND ADMINISTER A SMALL 
BUSINESS 
INCUBATION 
PROGRAM 
IN 
COORDINATION WITH ACADEMIC INSTITUTIONS, 
DEPARTMENT OF SCIENCE AND TECHNOLOGY AND 
OTHER APPROPRIATE GOVERNMENT ENTITIES 
THAT WILL PROVIDE SPACE FOR START-UP AND 
EXPANDING FIRMS, SHARED USE OF EQUPMENT 
AND WORK AREAS, DAILY MANAGEMENT SUPPORT 
SERVICES 
ESSENTIAL 
TO 
HIGH-QUALITY 
COMMERCIAL 
OPERATIONS, 
TECHNICAL 
ASSISTANCE AND OTHER SERVICES TO DEVELOP 
INNOVATIVE AND DESERVING MSMEs. 
CONDUCT 
A 
NATIONWIDE 
INFORMATION 
CAMPAIGN WITH THE PHILIPPINE INFORMATION 
AGENCY THAT SHALL INFORM THE PUBLIC OF ALL 
PROGRAMS AND SERVICES, GOVERNMENT AND 
NON-GOVERNMENT, AVAILABLE TO MSMES. 
(K) 
PROVIDE LOCAL AND INTERNATIONAL NETWORK 
AND LINKAGES FOR MSME DEVELOPMENT; 
(L) 
COMPILE AND INTEGRATE STATISTICAL DATABANK 
ON PHILIPPINE MSMEs; 
(M) 
SET-UP NEW MSME CENTERS AND REVITALIZE 
ALREADY 
ESTABLISHED 
MSME 
CENTERS 
TO 
Page 26 


5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
PROVIDE MSMEs IN THE REGIONS EASIER ACCESS 
TO SERVICES SUCH AS, BUT NOT LIMITED TO, THE 
FOLLOWING 
i. 
ACCEPT AND ACT ON ALL REGISTRATION 
APPLICATIONS OF MSME; 
ii. 
STREAMLINE REGISTRATION PROCESS AND 
FACILITATE SPEEDY REGISTRATION FOR 
THE 
ESTABLISHMENT 
OF 
BUSINESS 
ENTERPRISES IN THE COUNTRY, 
iii. 
PROVIDE 
ALL 
INFORMATION 
AND 
REFERRAL SERVICES IT SHALL DEEM 
NECESSARY 
OR 
ESSENTIAL 
TO 
THE 
DEVELOPMENT 
AND 
PROMOTION 
OF 
MSME; 
CONDUCT OTHER PROGRAMS OR PROJECTS 
FOR ENTREPRENEURIAL DEVELOPMENT IN 
THEIR RESPECTIVE AREAS.” 
iv. 
SEC. 16. Section 12 of the same Act, as amended, is hereby further amended to read 
as follows: 
“Section 12. Capitahzation and Funding OF THE SBC. - The [Small 
Business Guarantee and Finance Corporation] SBC shall have an authorized 
capital stock of 
[Five] TEN billion pesos [(P 5,000,000,000.00)] 
(PlO,OOO,OOO,OOO.OO). 
The 
initial 
capital of 
One billion 
pesos 
Page 27 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
(Pl,OOO,OOO,OOO.OO) shall be established from a pool of funds to be contributed 
in the form of equity investments in common stock by the Land Bank of the 
Philippines (LBP), the Philippine National Bank (PNB), the Development 
Bank of the Philippines (DBP), in the amount of Two hundred million pesos 
(P200,000,000.00) each. The Social Security System (SSS) and the Government 
Service Insurance System (GSIS) shall also set aside Two hundred million 
pesos (P200,000,000.00) each [to be placed in preferred stocks of the SBGFC] 
FOR THE SBC. AUTHORIZED CAPITAL STOCK OFTHE SMALL BUSINESS 
CORPORATION SHALL BE DIVIDED INTO 80,000,000 COMMON SHARES 
AND 20,000,000 PREFERRED SHARES WITH A PAR VALUE OF ONE 
HUNDRED PESOS (P100.00) PER SHARE: 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 FORM PART OF THE CAPITALIZATION 
OF THE CORPORATION PROVIDED, FURTHER, THAT HOLDERS OF 
PREFERRED SHARES ISSUED UNDER REPUBLIC ACT 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 
Page 28 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
from government owned or controlled corporations, and investments of 
private financial institutions and corporations[ .I: PROVIDED, THAT ANY 
INVESTMENT FROM THE PRIVATE SECTOR SHALL ONLY BE IN THE 
FORM OF PREFERRED SHARES. 
“TO ALLOW FOR CAPITAL BUILD-UP, SBC SHALL BE GIVEN A 
FIVE (5) YEAR GRACE PERIOD ON DIVIDEND COMMITMENTS 
BEGINNING ON THE DATE OF EFFECTIVITY OF THIS AMENDMENT. 
THEREAFTER, IT MAY ONLY DECLARE AS DIVIDEND NOT MORE 
THAN 30% OF ITS NET INCOME AND THE REST WITHHELD AS 
RETAINED EARNINGS.” 
SEC. 17. 
amended, to read as follows: 
New sections are hereby inserted after Section 12 of the same Act, as 
“SECTION 13. LIMITED SOWREIGN GUARANTEE FOR SMALL 
BUSINESS 
CORPORATION. - 
MSME 
CREDIT 
GUARANTEE 
15 
16 
17 
18 
19 
20 
OF THE CORPORATION. 
21 
OBLIGATIONS CONTRACTED AND INCURRED BY SBC BY VIRTUE OF 
THE PROVISIONS OF THIS ACT, SHALL BE GUARANTEED BY THE 
REPUBLIC OF THE PHILIPPINES, BOTH AS TO PRINCIPAL SUMS AND 
INTEREST PAYMENT: PROVIDED, THAT SUCH GUARANTEE SHALL 
NOT EXCEED THREE HUNDRED PERCENT (300%) OF THE NET WORTH 
“THE REPUBLIC OF THE PHILIPPINES SHALL SUCCEED TO ALL 
22 
23 
THE RIGHTS TO THE COLLATERALS, NOTES OR OTHER INSTRUMENTS 
TO THE EXTENT OF THE PAYMENTS MADE, UNLESS THE SUMS SO 
Page 29 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
PAID BY THE REPUBLIC OF THE PHILIPPINES SHALL BE REFUNDED BY 
THE CORPORATION WITHIN A REASONABLE TIME.” 
“SECTION 14. GUARANTEE RESERVE FUVD. - THE SMALL 
BUSINESS CORPORATION SHALL SET ASIDE FIVE PERCENT (5%) OF ITS 
ANNUAL NET OPERATING REVENUES BEFORE INTEREST AS RESERVE 
OR SINKING FUND TO ANSWER FOR GUARANTEE CALLS. THIS FUND 
SHALL BE CALLED THE GUARANTEE RESERVE FUND (GRF). 
“THE PRIMARY PURPOSE OF THE GRF IS TO ASSURE THE LONG- 
TERM FINANCIAL VIABILITY OF THE GUARANTEE CALLS. THE 
AMOUNT SET ASIDE FOR THE RESERVE FUND SHALL BE SUBJECT TO 
THE CONDUCT OF AN ACTUARIAL STUDY TO DETERMINE THE 
APPROPRIATE REQUIREMENT, BUT IN NO CASE SHALL IT BE LOWER 
THAN 5% OF THE ANNUAL NET OPERATING REVENUE OF THE 
CORPORATION AS PRESCRIBED IN THE ACT.” 
SEC. 18. Section 13 of the same Act, as amended, is hereby renumbered as Section 
15, and hrther amended to read as follows: 
“Section 15 [ 131. Mandatoq Allocation of Credit Resources to MICRO, 
Small and Medium Enreqmses. - For the 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 [six] EIGHT percent [6] (8%) FOR MICRO AND SMALL 
ENTERPRISES and at least two percent (2%) for [small and] medium 
~ 
enterprises [, respectively, J of their total loan portfolio based on their balance 
Page 30 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
sheet as of the end of the previous quarter, and make it available for [small and 
medium enterprise] MSME credit as herein contemplated. 
“COMPLIANCE OF THIS PROVISION SHALL BE: 
ACTUAL EXTENSION OF LOANS TO QUALIFIED AND 
REGISTERED MICRO, SMALL AND MEDIUM ENTERPRISES; 
OR 
ACTUAL SUBSCRIPTION OF PREFERRED SHARES OF 
STOCK OF SBC; OR 
WHOLESALE LENDING TO PARTICIPATING FINANCIAL 
INSTITUTIONS (PFIs) FOR ON-LENDING TO SMES; OR 
PURCHASE/DISCOUNT OF MSME RECEIVABLES; OR 
LOANS GRANTED TO EXPORTJMPORT, AND DOMESTIC 
TRADERS SUBJECT TO COMPLIANCE WITH SECTION 3 OF 
THIS ACT; OR 
SUBSCRIBWPURCHASE LIABILITY INSTRUMENTS AS MAY 
BE OFFERED BY SBC. 
“The Bangko SentraI ng Pilipinas[, in consultation with the Council,] 
MAY PRESCRIBE ALTERNATIVE FORMS OF COMPLIANCE SUBJECT TO 
THE APPROVAL OF THE MSMED COUNCIL. FURTHER, THE BANGKO 
SENTRAL NG PILIPINAS shall formulate rules for the effective 
implementation of this provision: Provided, That the purchase of government 
notes, securities and other negotiable instruments[, with the exception of such 
instruments as may be offered by the SBGFC which do not pay market rates,] 
Page 31 


1 
shall not be deemed compliance with the foregoing provisions: Provided, 
2 
3 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
further, That the Bangko Sentral ng Pilipinas shall establish an incentive 
program to encourage lending to [small and medium] MSME industries 
beyond the mandatory credit allocation to said enterprises, such as possible 
reduction in bank‘s reserve requirement. 
“The MSMED Council shall set up the appropriate systems to monitor 
all loan applications of [small and medium enterprises] MSMEs in order to 
account for the absorptive capacity of the MICRO, small and medium 
enterprise sector. 
‘The Bangko Sentral ng Piripinas shall [require lending institutions 
covered by this Act to] furnish to the [Small and Medium Development 
’ 
Council] MSMED Council on a quarterly basis [regular] COMPREHENSIVE 
reports 
[on their compliance with the above provisions on the mandatory 
credit allocation for small and medium enterprises and expeditiously act on 
the Council’s reports of non-compliance therewith.] ON THE BANKS’ 
COMPLIANCE, NON-COMPLIANCE AND PENALTIES OF THE ABOVE 
PROVISIONS ON THE MANDATORY CREDIT ALLOCATION FOR MSME.” 
SEC. 19. New sections to be numbered as sections 16 and 17 are hereby inserted after 
Section 13 of the same Act, as amended, to read as follows: 
“SECTION 16. MICRO, SMALL, RND MEDIUMEWERPRISE WEEK 
- IN ORDER TO INSTITUTE CONTINUING AWARENESS OF THE 
PRIMACY OF SMALL BUSINESS IN NATION-BUILDING AND IN PEOPLE 
EMPOWERMENT, AND TO CELEBRATE AND ESPOUSE THE FIRM 
Page 32 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
COMMITMENT OF THE STATE IN THE PROMOTION, GROWTH AND 
DEVELOPMENT OF SMALL BUSINESS, THE SECOND WEEK OF JULY OF 
EVERY YEAR SHALL BE DECLARED AS THE “MICRO, SMALL, AND 
MEDIUM ENTERPRISE DEVELOMENT WEEK”. THE MSMED COUNCIL, 
THE DEPARMENT OF TRADE AND INDUSTRY, AND THE SBC SHALL BE 
JOINTLY RESPONSIBLE IN ORGANIZING ACTIVITIES FOR THE EVENT.” 
“SECTION 17. PRESIDENTIAL A WARDS FOR OWSTANDING 
MSME - 
PRESIDENTIAL AWARDS FOR OUTSTANDING MSME, 
CONSISTING OF REWARDS IN CASH OR IN KIND SHALL BE GRANTED 
TO ONE HUNDRED PERCENT (100%) FILIPINO-OWNED COMPANIES 
DURING THE MSME DEVELOPMENT WEEK.” 
SEC. 20. 
Section 14 of the same Act, as amended, on Penal Clause is hereby 
renumbered as Section 18. 
SEC. 21. A new section is hereby inserted after Section 14 of the same Act, to read as 
follows: 
“SECTION 19. IMPLEMEmING RULES AND REGUZATIONS. - 
THE DEPARTMENT OF TRADE AND INDUSTRY, THROUGH THE 
BUREAU OF MICRO, SMALL AND MEDIUM BUSINESS DEVELOPMENT 
AND IN CONSULTATION WITH OTHER CONCERNED GOVERNMENT 
AGENCIES, NON-GOVERNMENT ORGANIZATIONS AND PRIVATE 
SECTOR INVOLVED IN THE PROMOTION OF MICRO, SMALL AND 
MEDIUM ENTERPRISES, SHALL FORMULATE THE IMPLEMENTING 
RULES AND REGULATIONS (IRR) NECESSARY TO IMPLEMENT THE 
Page 33 


1 
2 
3 
4 
5 
6 
7 
8 
9 
10 
11 
PROVISIONS OF THIS ACT WITHIN NINETY (90) DAYS FROM THE 
APPROVAL OF THIS ACT. 
THE IRR ISSUED PURSUANT TO THIS 
SECTION SHALL TAKE EFFECT THRITY (30) DAYS AFTER PUBLICATION 
IN A NATIONAL NEWSPAPER OF GENERAL CIRCULATION.” 
SEC. 22. Separability Clause. - The provisions of the 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. 
parts thereof, inconsistent herewith are hereby repealed or modified accordingly. 
SEC. 
24. Effectivity Clause. - This Act shall take effect within fifteen (15) days 
from its publication in at least two (2) national newspapers of general circulation. 
23. Repealing Clause. - All laws, executive orders, rules and regulations, or 
Approved, 
Page 34