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Republic of the Philippines fe
HOUSE OF REPRESENTATIVES 2 peceiveD A
Quezon City 2 DATE August 14,2025
= TIME 12:29 pm hg
20th CONGRESS By Jonah
First Regular Session ~~

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HOUSE BILL NO. _ 3735,

Introduced by JUAN CARLOS “ARJO” C. ATAYDE

ING A
AN ACT PROMOTING ENTREPRENEURSHIP BY INSTITUTIONALIZ]
FINANCING PROGRAM FOR MICRO AND SMALL ENTERPRISES
THROUGH THE PONDO SA PAGBABAGO AT PAG-ASENSO PROGRAM.
AND APPROPRIATING FUNDS THEREFOR

EXPLANATORY NOTE

Article Il, Section 9 of the 1987 Constitution states, “The State shall promote a just
and dynamic social order that will ensure the prosperity and independence of the nation and
{ree the people from poverty through policies that provide adequate social services, promote full
employment, arising standard of living, and an improved quality of life fr al.”

Micro and small enterprises (MSEs) form the backbone of the Philippine
economy. Comprising over 99.5% of all registered businesses and employing the
majority of the country’s workforce, these enterprises Play a crucial role in driving
local production, creating jobs, and Sustaining community livelihoods. Despite their
importance, they continue to face a common and persistent challenge: lack of access
to affordable and reliable financing.

Many small entrepreneurs are forced to rely on informal lenders who impose
usurious interest rates— often under the *5-6" system trapping them in cycles of debt
and stifling their growth, Studies from both local and international institutions have
confirmed that Philippine MSEs are among the most underserved in Southeast Asia
in terms of bank credit. While neighboring countries have steadily expanded financing


support for small businesses, lending to this sector in the Philippines remains

disproportionately low.

Research conducted in various regions of the country also reveals that many
MSEs face structural barriers to formal financing. These include irregular income
flows, lack of collateral, limited documentation, and inadequate financial literacy.
Compounding these issues is a deep-seated mistrust of formal financial institutions,

particularly among those in remote or low-income areas.

Recognizing these realities, the Department of Trade and Industry, through its
financing arm—the Small Business Corporation (SBCorp)—launched the Pondo sa
Pagbabago at Pag-Asenso (P3) Program in 2017 as a government-led effort to bridge
the credit gap for micro-entrepreneurs. In its initial rollout, the program successfully
delivered small loans and technical support to thousands of beneficiaries,
demonstrating the feasibility and impact of state-supported microfinance. The
program’s affordability, simplified application process, and use of digital tools helped

reach clients often overlooked by commercial banks.

Building on this success, the proposed P3 Act seeks to institutionalize the
program and expand its reach. The bill provides a sustainable framework for
delivering microcredit, cash assistance, and business development support to
qualified MSEs nationwide. Priority will be given to underserved communities,
industries affected by disasters, and informal sector participants transitioning to
formal entrepreneurship.

The proposed measure also ensures responsible implementation by setting
clear eligibility requirements, defining maximum loan amounts and interest ceilings,
and mandating the use of digital disbursement and repayment systems. In addition

to financial aid, the bill supports capacity building through training, market access
assistance, and financial literacy programs.

Moreover, the measure aligns with national and global efforts to promote
inclusive growth. The Bangko Sentral ng Pilipinas and development institutions such
as the Asian Development Bank have emphasized the importance of empowering


MGSEs through inclusive finance. By providing alternative funding options, the P3
Program reduces dependence on predatory lending and promotes a more equitable

and resilient economic landscape.

In view of the foregoing, immediate passage of this measure is earnestly
sought.

REP. JUAN CARL “ARJO” ATAYDE


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

20th CONGRESS
First Regular Session

HOUSE BILL NO. _3735__

ce

Introduced by REP. JUAN CARLOS: “ARJO” C. ATAYDE
a

AN ACT PROMOTING ENTREPRENEURSHIP BY INSTITUTIONALIZING A.

FINANCING PROGRAM FOR MICRO AND SMALL ENTERPRISES

THROUGH THE PONDO SA. PAGBABAGO AT PAG-ASENSO. PROGRAM
AND APPROPRIATING FUNDS THEREFOR

1 Be it enacted by the Senate and House of Representatives of the Philippines in

2 Congress assembled:

3 SECTION 1. Short Title. - This Act shall be known as the "Pondo sa Pagbabago

4 at Pag-asenso Act."

5 SEC. 2. Declaration of Policy. - It is the declared policy of the State to foster
6 comprehensive national development and inclusive growth and reduce poverty by
7 promoting the growth of Micro and Small Enterprises (MSEs) which facilitate local job
8 creation, production, and trade in the country. Towards this end, the State shall
9 develop policies, plans, and programs, and initiate means to encourage

10 entrepreneurial activities and ease the constraints and challenges of MSEs,

11 particularly on access to financing.

12 SEC. 3. Objectives. - The objectives of this Act are:
13 1. Provide an affordable, accessible, sustainable, and simple financing program
14 for the country’s MSEs, especially those in the poorest populations and

15 underserved areas and industries;


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2. Provide a better alternative to informal lenders or the so-called "5-6" money

lending system availed of by MSEs;
3, Reduce the interest rate at which financial services are made available to MSEs;

4, Encourage the development of entrepreneurship and the Micro, Small and

Medium Enterprise (MSME) sector, particularly MSEs;

5, Support successful business recovery of MSEs following natural or man-made

disasters; and

Provide cash, technical, and administrative assistance to qualified MSEs.

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SEC. 4. Pondo sa Paghabago at Pag-asenso (P3) Program. ~ The Pondo sa
Pagbabago at Pag-asenso Program, hereinafter referred to as the "P3 Program," shall

assist MSEs in the form of:

1. Microfinance or credit;
2. Cash assistance; and
3. Capacity building.

Qualified end-borrowers of the P3 Program shall be MSEs defined in Republic
Act No. 6977, as amended or the "Magna Carta for Micro, Small, and Medium
Enterprises."

The P3 Program shall be accessible through the Small Business Corporation
(SBCorp) and through accredited Partner Financial Institutions (PFIs) such as rural

banks, thrift banks, cooperatives with a license to lend, microfinance non-government
organizations, or lending companies.

SEC. 5. Microfinance or Credit Component of the P3 Program. - The SBCorp
and PFis shall be guided by the following principles in the implementation of the
Microfinance or Credit Component of the P3 Program:


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1. The loanable amount ceiling for individual loans shall be set initially at Two
million pesos (Php2,000,000.00) for direct lending and Three hundred thousand
pesos (Php300,000.00) for lending through accredited PFIs which are regularly
reviewed by the Micro, Small and Medium Enterprise Development (MSMED)

Council;

2, The interest rate shall not exceed one percent (1%) per month for direct lending,
and shall not exceed two and a half percent (2.5%) per month for lending
through accredited PFIs;

There shall be no collateral requirement from the P3 Fund borrowers;

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‘The lenders shall have a collection mechanism, whereby payments are made

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ona daily, weekly, or monthly basis, depending on the business income cycle.
It shall be the duty of the lender to collect the loan principal and the interest
payment from the borrower; and

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Financial technology-enabled systems and processes shall be utilized in the
implementation of the P3 Program. Disbursements shall use digital forms of
payment for both the disbursement of loan proceeds by the lenders, and the

recurring loan payments by the borrowers.
SEC. 6. Lead Implementing Agency.

The SBCorp, as the financing arm of the Department of Trade and Industry (DTD), shall
be the lead implementing agency of the P3 Program.

The SBCorp shall handle all fund deliveries to MSEs through the following modes:
a) Direct lending. The SBCorp shall prioritize underserved or unserved areas and
industries, or those not adequately and effectively served by PFls, including provinces
where poverty incidence remains high based on official poverty statistics from the
Philippine Statistics Authority (PSA);
b) Lending through accredited PFls.

and

The SBCorp may allocate up to five percent (5%) of the total loans disbursed for the
period, sourced from the accumulated funding for the P3 Program to cover its annual


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administrative and operating expenses which shall include the salaries of regular

plantilla personnel involved in the implementation of the P3 Program.

SEC. 7. Cash Assistance and Capacity Building Components of the P3
Program. - The SBCorp, in consultation with the DTT's Bureau of Micro, Small, and
Medium Enterprise Development (BMSMED), National Anti-Poverty Commission
(NAPO), and the Bangko Sentral ng Pilipinas (BSP), shall develop a cash assistance
program exclusively for MSEs in need of capital.

‘The SBCorp shall provide MSEs under the Capacity Building Component with
free technical and administrative support, including but not limited to: product
development, skills and leadership training, packaging and design, quality control,
market promotion, client or supplier matching, and cash literacy and planning.

‘The SBCorp shall be guided by the following principles in the implementation
of the Cash Assistance and Capacity Building Components of the P3 program:

1. The assistance shall be extended only to beneficiaries who have satisfied the

requirements under this Act;

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Each cash assistance shall range from Five thousand pesos (Php5,000.00) to
Fifty thousand pesos (Php50,000.00), depending on the number of employees,
number of years in business, financial hardship, and such other criteria as may
be determined by SBCorp. The SBCorp is hereby authorized to adjust these

amounts to meet present market demands after the mandatory review
provided in this Act;

3. Priority shall be given to MSEs classified under the priority business areas of
their respective regions, particularly the public market vendors to strengthen

their financial capabilities and improve public services; and

4. There shall be a mandatory review of the Cash Assistance and Capacity
Building Components of the P3 Program every three (3) years to ensure that
they meet present market demands.


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SEC. 8. Eligibility for Cash Assistance. - Applicants for Cash Assistance must
comply with the following eligibility requirements:

1. Must be an owner of a registered MSE who is at least eighteen (18) years old;

2. Must not have availed of the cash assistance regardless of the number of

businesses owned;

3, Must be a member in good standing of a duly registered cooperative or
association, ot a resident of the local government unit (LGU) from which the

member intends to avail of the cash assistance;

4. The institution shall have a mechanism whereby cash assistance is made ona

weekly or monthly basis;
5, Must submit a comprehensive feasibility study of the business proposal;

6. Must attend a DT Laccredited livelihood seminar, as evidenced by a certificate
of participation; and

7. Must be willing to state under oath the facts establishing the foregoing.

SEC. 9, Registry of MSEs. - The DTI shall create a registry of all MSMEs per
region based on their size category (i.e., micro, small and medium) and business area
(ie, agriculture, livestock, fisheries, food processing, fabric and clothing, eco-tourism
activities, pottery and handicrafts, furniture and hardwood, information and
technology, etc.).

SEC. 10. Policy Oversight Function. - The MSMED Council shall monitor the
implementation of the P3 Program and shall submit an annual report to the President
of the Philippines and to Congress, through the Congressional Oversight Committee
on Micro, Small and Medium Enterprise Development (COC MSMED) Council.

SEC. 11. Appropriations. - The total amount of One hundred billion pesos
(Php100,000,000,000.00) for the next two (2) years, upon effectivity of this Act, or Fifty
billion pesos (Php50,000,000,000.00) per year for the next two (2) years upon effectivity
of this Act, shall be appropriated for the initial implementation of the P3 Program for


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microfinance, cash assistance, and capacity building program. Thereafter, such sums
as may be necessary shall be included in the annual General Appropriations Act

In addition, the amount of Five hundred million pesos (Php500,000,000.00) is
hereby appropriated as a special development fund to support the initial
implementation of this Act. The funds shall be held in trust by the DTT in collaboration
with the Development Bank of the Philippines (DBP), the Land Bank of the Philippines

(LBP), and other government financial institutions.

SEC. 12. Implementing Rules and Regulations. ~ Within sixty (60) days from
the approval of this Act, the DTT shall formulate and promulgate rules and regulations

necessary for its implementation.

SEC. 13. Separability Clause. - If any provision of this Act is declared
unconstitutional, the remainder thereof not otherwise affected shall remain in full

force and effect.

SEC. 14, Repealing Clause. - All laws, presidential decrees, executive orders,
letters of instruction, proclamations or administrative regulations that are inconsistent

with the provisions of this Act are hereby repealed, amended, or modified

accordingly.

SEC. 15. Effectivity.- This Act shall take effect after fifteen (15) days following
its publication in the Official Gazette or in a newspaper of general circulation.

Approved,