FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regular Session 
"11 
SEP -8 P 1 :58 
SENATE 
S.B.No. 2961 
Introduced by SENATOR MANNY 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 repaymene. 
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 intensive2 
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 markets3 
This Bill endeavors to support and work in partnership with qualified institutions, to 
be known as MICROOEVs 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. 
J http://www.umlf.com/whatis/ 
2 Foreword by Kazi F. lalal, Chief, Office of Environment and Social Development in "Micro enterprise 
Development: Not by Credit Alone," ADB 1997 
3 http://www.usaid.gov/our_work/economic_growth_and _ trade/micro/index.html 
o 


'" 
FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
Second Regular Session 
) 
) 
) 
SENATE 
S.B. No. 2961 
Introduced by SENATOR MANNY VILLAR 
AN ACT 
'11 
SEP -8 P 1 :58 
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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: 
1 
SECTION 1. Title. - This Act shall be known as the "Microenterprise Development 
2 
Institutions Act of 2011 ". 
3 
4 
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to 
5 
pursue a program of poverty eradication wherein poor Filipino families shall be encouraged 
6 
to undertake entrepreneurial activities to meet its minimum basic needs including income 
7 
security. In pursuance of this policy, the government shall support and work in partnership 
8 
with qualified institutions in the private sector providing general and other entrepreneurial 
9 
services to the poor. 
10 
11 
SEC. 3. Definition of Terms. - For purposes of implementing this Act, the following 
12 
definitions shall apply: 
13 
(a) MICRODEV Accreditation Center refers to the entity created under Section 7 of 
14 
this Act. 
15 
(b) Microenterprise Development Strategy refers to a social reform program to 
16 
empower the poor, manage risks and vulnerabilities and thereby improve their asset 
17 
base and expand access to microfinance services, 
such as 
microcredit, 
18 
microinsurance, microsavings, health care and microhousing through a broad 
19 
package of financial, business and human development services and other 
20 
nonfinancial services, including education to enable them to live productive lives. 
21 
(c) Microfinance refers to the provision of a broad range of financial services 
22 
exclusively for the Jjoor to improve the asset base of households and expand their 
23 
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 
2 
entity. 
3 
(e) Poor refers to individuals and families whose income fall below the poverty 
4 
threshold as defined by the National Economic and Development Authority or those 
5 
who cannot afford in a sustained manner to provide their minimum basic needs of 
6 
food, health care, education, housing and other essential amenities of life as defined 
7 
by Republic Act No. 8425, otherwise known as the "Social Reform and Poverty 
8 
Alleviation Act". 
9 
(f) Regulatory Authorities refer to the entities as designated under Section 9 of this 
10 
Act. 
11 
(g) Social Reform refers to the continuing process of addressing the basic inequities 
12 
in Philippine society through a systematic, unified and coordinated delivery of socio-
13 
economic programs or packages. 
14 
15 
SEC. 
4. 
Recognition 
of 
Micro-enterprise 
Development 
Institutions 
16 
(MICRODEVs). -
MICRODEVs are hereby recognized as institutions mandated to 
17 
implement a microenterprise development strategy. MICRODEVs shall be operated as 
18 
nonstock and nonprofit corporations in accordance with the Securities and Exchange 
19 
Commission (SEC) rules and regulations and provisions of Title XI 
(Non-Stock 
20 
Corporations) of Batas Pambansa Big. 68, otherwise known as 'The Corporation Code of 
21 
the Philippines". These shall be governed by a Board of Trustees whose members shall not 
22 
receive compensation: Provided, That no part of the net income of MICRODEVs inure to the 
23 
benefit of the members, trustees, directors or officers: Provided, further, That the 
24 
administrative expenses shall in no case exceed thirty percent (30%) of the total expenses 
25 
within a taxable year: Provided, finally, That the administrative expenses shall conform with 
26 
the rules and regulations to be prescribed by the Department of Finance (DOF) upon the 
27 
recommendation of the Bureau of Internal Revenue (BIR). 
28 
29 
SEC. 5. Powers and Functions of a MICRODEV. - A MICRODEV shall exercise 
30 
such powers and functions and undertake such activities in accordance with the policies, 
31 
programs and services provided in this Act. It shall: 
32 
(a) Provide the poor access to reasonable and affordable credit and related services 
33 
including microfinance, microinsurance, health care and microhousing; 
34 
(b) Provide business development opportunities such as leadership training and 
35 
entrepreneurial skills training; and 
36 
(c) Provide human development services to help the poor achieve a level of 
37 
sustainability and empowerment and adopt measures to promote a spirit of 
38 
generosity and selfless giving among individuals and institutions that would help 
39 
support all programs directly involved in poverty eradication. 
40 
2 


Any accredited MICRODEV shall not undertake deposit-taking activities, engage in 
2 
the insurance business and carry out fund management activities without the necessary 
3 
licenses and authority from the relevant regulatory agencies. 
4 
5 
For the purpose of implementing this provISion, deposit-taking does not include 
6 
taking of funds from current or prospective borrowers for the purpose of equity build-up of 
7 
an individual borrower's own loans. A MICRODEV shall be a net lender at all times, wherein 
8 
net loans mean total loans minus total equity build-up. 
9 
10 
SEC. 6. Capital Requirements. - A MICRODEV shall have a net worth of Twenty 
II 
million pesos (P20,OOO,OOO.OO), or in the case of newly organized MICRODEVs, an initial 
12 
net worth of Ten million pesos (P10,OOO,OOO.OO). 
13 
14 
SEC. 7. Creation and Composition of the Accrediting Entity. - An accrediting 
IS 
entity to be known as the MICRODEV Accreditation Center shall be created under the 
16 
National Anti-Poverty Commission (NAPC) to perform the functions provided herein. It shall 
17 
be composed of the following: 
18 
(a) The President of the NAPC or designated representative; 
19 
(b) The Secretary of the DOF or designated representative; 
20 
(c) The Secretary of the Department of Trade and Industry (DTI) or designated 
21 
representative; 
22 
(d) The Governor of the Bangko Sentral ng Pilipinas (BSP) or designated 
23 
representative; 
24 
(e) The Chairperson of the SEC or designated representative; and 
25 
(f) The President of the Microfinance Council of the Philippines (MFCP) or 
26 
designated representative. 
27 
28 
The MICRODEV Accreditation Center shall be assisted by a Secretariat in the 
29 
performance of its functions. Funding for its operation shall be sourced from the two percent 
30 
(2%) tax proceeds from MICRODEVs to be remitted to the People's Development Trust 
31 
Fund established under Republic Act No. 8425, as provided for in subparagraph (a) of 
32 
Section 10 of this Act. 
33 
34 
SEC. 8. Powers and Functions of the Accrediting Entity. - The MICRODEV 
35 
Accreditation Center established under this Act shall have the following functions and 
36 
responsibilities: 
37 
(a) Institute and operationalize a system of accreditation for MICRODEVs; 
38 
39 
(b) Issue certificate of accreditation as a MICRODEV to a nonstock and nonprofit 
40 
corporation applicant: Provided, That, the certificate of accreditation shall be valid 
3 


I 
only for such period as may be prescribed under the implementing rules and 
2 
regulations of this Act: Provided, further, That no application shall be processed for 
3 
accreditation as a MICRODEV unless the applicant enterprise secures a valid 
4 
registration or license with the government agency that exercises regulatory function 
5 
over such corporation; 
6 
7 
(c) Monitor the performance of MICRODEVs to ensure compliance with the 
8 
provisions of this Act and its implementing rules and regulations; 
9 
10 
(d) Suspend or revoke any certificate of accreditation upon determination that a 
II 
MICRODEV no longer meets the criteria for accreditation; 
12 
13 
(e) Require regular submission of reports by MICRODEVs; 
14 
15 
(f) Collect reasonable accreditation and monitoring fees from a MICRODEV which 
16 
shall be used for the accrediting entity's operational requirements; 
17 
18 
(g) Submit an annual report to the President of the Philippines and the concerned 
19 
committees of both Houses of Congress; and 
20 
(h) Perform such other functions as may be necessary to accomplish the purposes 
21 
and objectives of this Act. 
22 
23 
SEC. 9. Power of the Regulatory Authorities to Examine MICRODEVs. - The 
24 
SSP and the Insurance Commission, in coordination with the accrediting entities, shall have 
25 
the power to examine the operations of fIr1ICRODEVs, solely for the purpose of determining 
26 
that MICRODEVs are not engaged in unauthorized undertakings or activities which are 
27 
subject to their respective regulations. 
28 
29 
SEC. 10. Taxation of Accredited MICRODEVs. - The taxation of MICRODEVs 
50 
shall be as follows: 
31 
(a) The MICRODEVs shall pay two percent (2%) of the gross income in lieu of all 
32 
national and local taxes which shall be remitted to the National Government. The tax 
33 
proceeds shall form part of the disbursable portion of the People's Development 
34 
Trust Fund established under Republic Act No. 8425. The term "gross income" shall 
35 
mean gross receipts less sales returns, allowances, discounts and other costs of 
36 
services. The term "cost of services" shall mean all direct costs and expenses 
37 
necessarily incurred to provide the services reqLlired by the customers and clients 
38 
including salaries and employee benefits of personnel, consultants and speCialists 
39 
directly rendering the service and cost of facilities directly utilized in providing the 
40 
service and cost of supplies. Interest expenses on borrowings for lending services of 
4 


I 
a MICRODEV shall be deductible from gross receipts as part of cost of services in 
2 
arriving at gross income. The term gross income shall exclude donations; 
3 
4 
(b) Donations to the MICRODEV shall be fully deductible from the gross income of 
5 
the donor subject to the conditions of 
Section 34(c) of Republic Act No. 8424, 
6 
as amended, otherwise known as the "National Internal Revenue Code of 
1997": 
7 
Provided, however, That the accreditation of the MICRODEV by the accrediting 
8 
entity under this Act shall be sufficient; 
9 
10 
(c) Donations to the MICRODEV shall be exempt from donor's tax subject to the 
1 I 
qualifications of Section 101 of Republic Act No. 8424, as amended, otherwise 
12 
known as the "National Internal Revenue Code of 1997": Provided, That for 
13 
purposes of utilization, accreditation granted under this Act shall be sufficient; and 
14 
15 
(d) Transactions of the MICRODEV and its clients shall be exempt from 
16 
documentary stamp tax. 
17 
18 
SEC. 11. Implementing Rules and Regulations. - The NAPC, in coordination with 
19 
the DOF, the SIR, the SSP, the DTI and the MFCP, shall formulate the implementing rUles 
20 
and regulations (lRR) of this Act within ninety (90) days after its approval. The IRR shall 
21 
take effect fifteen (15) days after its publication in a newspaper of general circulation in the 
22 
Philippines. 
23 
24 
SEC. 12. Penalty Clause. - If the SSP or the Insurance Commission finds, pursuant 
75 
to its power under Section 9 of this Act, MICRODEVs engaging in unauthorized 
26 
undertakings or activities, the SSP or the Insurance Commission may impose administrative 
27 
sanctions including, but not limited to, issuance of an order requiring the MICRODEV and/or 
28 
the directors and/or officers concerned to cease and desist from the indicated practice or 
29 
violation, and may further order that immediate action be taken to correct the conditions 
30 
resulting from such violation. The cease and desist order shall be immediately effective 
31 
upon service of such order to the respondents. Further, MICRODEVs and/or its directors 
32 
and/or officers found to be engaged in unauthorized undertakings and activities shall be 
33 
subject to criminal and administrative fines as provided for in Sections 36 and 37 of 
34 
Republic Act No. 7653 or the New Central Bank Act, and in case of unauthorized activities 
35 
regulated by the Insurance Commission, be liable under the applicable insurance laws. 
26 
37 
SEC. 13. Separability Clause. - The provisions of this Act are hereby declared to 
38 
be separable. If any provision of this Act shall be held unconstitutional, the remainder of the 
39 
Act not otherwise affected shall remain in full force and effect. 
40 
5 


SEC. 14. Repealing Clause. - All executive orders, rules and regulations or parts 
2 
thereof which are contrary to or inconsistent with this Act are hereby repealed, amended or 
3 
modified accordingly, 
4 
5 
SEC. 15. Effectivity Clause. - This Act shall take effect after fifteen (15) days from 
6 
its publication in at least two (2) national newspapers of general circulation, 
7 
8 
Approved, 
9 
10 
11 
6