‘SIXTEENTH CONGRESS OF THE)
REPUBLIC OF THE PHILIPPINES)
First Regular Session )

:S
HOUSE re oeue

INTRODUCED BY HONORABLE MARK A. VILLAR

EXPLANATORY NOTE

The concept of microenterprise was founded by Dr. Mohammad Yunus and
emerged in the developing world through the Grameen Bank (Bank of the Poor) in
the country of Bangladesh in 1976, with the fundamental principle that credit is a
human right. The bank was established with the practice of making small loans to the
poor - predominantly women to help them obtain economic self-sufficiency. The
Grameen Bank has been extremely successful, reporting a 97% rate of repayment.

Much of Asia's vast and growing population forms part of the economy that
lies outside the regulatory framework of governments in what is known as the
informal sector. The informal sector, whether rural or urban, comprises small scale
and microenterprises producing and distributing goods and services in unregulated,
but competitive markets. The enterprises are generally independent, largely family
owned, employ low levels of skills and technology, and are highly labor intensive

In this era of globalization, generating economic growth in developing
countries while reducing poverty is a fundamental development challenge. To ensure
that the contribution of microenterprises to key subsectors and national economies is
maximized, and that the poor are not left out of market development,
microenterprises need access to finance, business services, and improved inputs.
They also need a conducive enabling environment that facilitates rather than inhibits
their participation in markets

This Bill endeavors to support and work in partnership with qualified
institutions, to be known as MICRODEVs which will implement a microenterprise
development strategy in order to provide general and other entrepreneurial services
to the poor with the end in view of alleviating poverty and raising the quality of life for
all Filipinos.

Thus, the passage of this Bill is earnestly sought.

'

AF LZ __

MARK A. VILLAR


SIXTEENTH CONGRESS OF THE)
REPUBLIC OF THE PHILIPPINES)
First Regular Session )
HOUSE OF REPRESENTATIVES

HOUSE BILL NO._3609

Introduced by HONORABLE MARK A. VILLAR

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 2013".

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, micro savings, health care and micro
housing 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,

(©) 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

(1) Regulatory Authorities refer to the entities as designated under Section 9
of this Act.

(g) Social Reform refers to the continuing process of addressing the basic
inequities in Philippine society through a systematic, unified and
coordinated delivery of socioeconomic 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 non-stock 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 of MICRODEVs inure to the benefit of the members, trustees,
directors or officers: Provided, further, That the administrative expenses shall in no
case exceed thirty 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 intemal 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, micro insurance, health care and micro
housing;

(b) Provide business development opportunities such as leadership training and
entrepreneurial skills training; and

(©) 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 of Ten million pesos (P10,000,000.00).

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

(0 The President of the Microfinance Council of the Philippines (MFCP) or
Designated 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 non-stock 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, further,
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;

(a) 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;

() 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
‘concemed 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;

(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

(4) 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 (IRR) 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 concemed 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 andior 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,