TWENTIETH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
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■■ .•a 1-^ 
'r of !'i ■ ^
25 JUL29 P2:00
SENATE
S. No.
Ri;.CEiV_u Ev
Introduced by Senator Bam Aquino
AN ACT
TO MODERNIZE THE DEVELOPMENT OF MSMES BY AMENDING REPUBLIC 
ACT. NO. 6977, OTHERWISE KNOWN AS THE MAGNA CARTA FOR SMALL 
ENTERPRISES, AS AMENDED BY REPUBLIC ACT NO. 9501, OTHERWISE 
KNOWN AS THE MAGNA CARTA FOR MICRO, SMALL AND MEDIUM
ENTERPRISES
EXPLANATORY NOTE
Micro, small, and medium enterprises (mSMEs) are the backbone of the 
Philippine economy, comprising 99.5% of all businesses and generating over 60% of 
jobs in the country. Despite their economic significance, mSMEs face persistent 
barriers in accessing financing, technology, markets, and government support. These 
challenges are often exacerbated by inconsistencies in how mSMEs are defined and 
classified across agencies and programs.
This bill seeks to amend the Magna Carta for mSMEs to reflect the bold reforms 
and strategic direction outlined in the Philippine mSME Development Plan 2023-2028. 
It is time to modernize the law that supports our entrepreneurs so they can thrive in 
today's fast-changing, digital, and competitive economy.
A key reform introduced in this bill Is the adoption of a harmonized MSME 
classification system using two objective and measurable criteria: employment size 
and annual sales turnover, thereby removing asset size as a determinant. This 
approach aligns with widely adopted international practices and responds to long­
standing concerns from the private sector that asset size is outdated, inconsistently 
applied, and often distorts firm classification. The new thresholds provide a clearer 
and more relevant basis for determining MSME status across all government agencies 
and programs, enhancing consistency in the delivery of support and incentives.
The proposed amendments introduce four other major reforms:
1. Unified MSME Classification and Data System - The bill codifies the harmonized
classification approach and establishes a National mSME Information System.


With better data comes better policy and more targeted, effective support for 
our entrepreneurs.
2. Accelerated Digital Transformation - Digitalization is no longer a luxury; it's a 
necessity. The bill institutionalizes a national digital skills program for MSMEs 
and creates a Digital Transformation Fund to help small businesses overcome 
cost barriers to technology adoption and innovation.
3. Improved Access to Finance - Access to capital remains a top concern for 
MSMEs. This measure strengthens the Small Business Corporation's mandate 
to offer innovative and non-traditional financing models—such as those based 
on movable assets—making credit more accessible, especially for startups and 
underserved enterprises.
4. Greater Participation in Government Procurement - The bill ensures that a 
meaningful portion of government procurement is set aside for mSMEs, coupled 
with provisions for prompt payment. This opens up a steady, reliable domestic 
market for our local businesses, boosting income and encouraging expansion.
These reforms are a long-overdue investment in our country's job creators, 
Innovators, and economic frontliners. By passing this measure, we give our mSMEs a 
fairer shot at success, empower them to compete in a digital economy, and bring 
inclusive growth closer to every Filipino.
In view of the foregoing, the passage of this bill is earnestly sought.


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TWENTIETH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
)
o! i;i-
25 JUL29 P2 *00
SENATE
s. No. 761
Introduced by Senator Bam Aquino
AN ACT
TO MODERNIZE THE DEVELOPMENT OF MSMES BY AMENDING REPUBLIC 
ACT. NO. 6977, OTHERWISE KNOWN AS THE MAGNA CARTA FOR SMALL 
ENTERPRISES, AS AMENDED BY REPUBLIC ACT NO. 9501, OTHERWISE 
KNOWN AS THE MAGNA CARTA FOR MICRO, SMALL AND MEDIUM
ENTERPRISES
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled:
Section 1. Short Title. -This Act shall be known as the "MSME Development 
Modernization Act of 2025."
Sec. 2. Section 3 of Republic Act No. 6977, as amended by Republic Act No. 
8289 and further amended by Republic Act No. 9501, is hereby further amended to 
read as follows:
"SEC. 3. Micro, Small and Medium Enterprises (MSMEs) as Beneficiaries. - For the 
purposes of this Act, "Micro, Small, and Medium Enterprises" (MSMEs) shall be defined 
as any business activity or enterprise engaged in industry, agribusiness, and/or 
services, whether a single proprietorship, cooperative, partnership, or corporation 
[whose 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:] THAT SATISFIES THE 
FOLLOWING TWO CRITERIA:
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(1) EMPLOYMENT SIZE, AND


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(2) ANNUAL SALES TURNOVER,
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BASED ON THE FOLLOWING THRESHOLDS:
CATEGORY
EMPLOYMENT SIZE
ANNUAL SALES TURNOVER
MICRO
NOT MORE THAN 9
EMPLOYEES
NOT MORE THAN PHP
8,000,000
SMALL
10 TO 49 EMPLOYEES
MORE THAN PHP 8,000,000
UP TO PHP 40,000,000
MEDIUM
50 TO 199 EMPLOYEES
MORE THAN PHP
40,000,000 UP TO PHP
250,000,000
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AN ENTERPRISE SHALL BE CLASSIFIED IN THE HIGHEST CATEGORY FOR
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WHICH IT SATISFIES BOTH CRITERIA AS PROVIDED ABOVE.
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PROVIDED, THAT IN CASES WHERE AN ENTERPRISE SATISFIES ONLY ONE
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OF THE REQUIRED CRITERIA IN TWO OR MORE ADJACENT CATEGORIES,
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IT SHALL BE CLASSIFIED UNDER THE HIGHER APPLICABLE CATEGORY. THE
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MICRO, SMALL AND MEDIUM ENTERPRISE DEVELOPMENT (MSMED)
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COUNCIL SHALL ISSUE THE APPROPRIATE GUIDELINES UNDER THE
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IMPLEMENTING RULES AND REGULATIONS TO ADDRESS SUCH INSTANCES
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AND ENSURE THE CONSISTENT AND EQUITABLE APPLICATION OF THIS
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CLASSIFICATION SYSTEM, IN ACCORDANCE WITH THE INTENT OF THIS
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ACT.
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PROVIDED FURTHER, THAT The above [definitions] CLASSIHCATION shall be
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subject to PERIODIC review and adjustments by the Micro, Small and Medium
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Enterprises Development (MSMED) Council under Section 6 of this Act, AT LEAST
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ONCE EVERY FIVE (5) YEARS, OR AS MAY BE WARRANTED, [or upon
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recommendation of sectoral organizations concerned,] taking into account inflation.


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[and other] economic [indicators] CONDITIONS, AND THE
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RECOMMENDATIONS OF SECTORAL ORGANIZATIONS CONCERNED. THESE
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ADJUSTMENTS SHALL ENSURE THE CONTINUED RELEVANCE AND
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RESPONSIVENESS OF THE CLASSIFICATION SYSTEM. [The Council may use
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Other variables such as number of employees, equity capital and assets size.]
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PROVIDED FINALL Y, THAT THIS CLASSIFICATION SYSTEM SHALL SERVE AS
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THE SOLE BASIS FOR DETERMINING MSME STATUS FOR ALL GOVERNMENT
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AGENCIES AND INSTRUMENTALITIES FOR PURPOSES OF GRANTING
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INCENTIVES, DELIVERING ASSISTANCE AND SUPPORT PROGRAMS, AND
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DATA COLLECTION AND REPORTING.
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The Council shall ensure that notwithstanding the plans and programs set for MSMEs
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as a whole, there shall be set and implemented other plans and programs varied and
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distinct from each other, according to the specific needs of each sector, encouraging
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MSMEs to graduate from one category to the next or even higher category.
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Sec. 3. A new section, to be designated as Section 3-A, is hereby inserted after
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Section 3 of the same Act, as amended, to read as follows:
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"SEC. 3-A. NA TIONAL MSME INFORMA TION SYSTEM.” - THERE IS HEREBY
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ESTABLISHED A NATIONAL MSME INFORMATION SYSTEM, WHICH SHALL
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BE A CENTRALIZED DIGITAL DATABASE OF ALL REGISTERED MSMES IN
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THE COUNTRY. THE DTI, THROUGH THE BUREAU OF SMALL AND MEDIUM
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ENTERPRISE DEVELOPMENT (BSMED), SHALL LEAD ITS ESTABLISHMENT
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AND MAINTENANCE. ALL NATIONAL GOVERNMENT AGENCIES AND LOCAL
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GOVERNMENT UNITS (LGUS) ARE HEREBY MANDATED TO INTEGRATE
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THEIR EXISTING MSME DATABASES INTO THIS NATIONAL SYSTEM. THE
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PSA SHALL PROVIDE TECHNICAL ASSISTANCE TO ENSURE DATA
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INTEGRITY AND STATISTICAL VALIDITY. ANONYMIZED AND AGGREGATED
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DATA FROM THIS SYSTEM SHALL BE MADE PUBLICLY AVAILABLE TO
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SUPPORT POLICY RESEARCH AND MARKET ANALYSIS.


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Sec. 4. Section 11-B of the same Act, as amended, is hereby further amended
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to read as follows:
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"SEC. 11-B. Corporate Structure and Powers. - The SB Corporation shall:
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XXX
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For this purpose, the SB Corporation subject to compliance with the rules and
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regulations to be issued by the Bangko Sentral ng Pilipinas (BSP) and the Securities
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and Exchange Commission, shall have the following functions and duties:
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XXX
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"(H) DEVELOP AND ADMINISTER INNOVATIVE FINANCING PROGRAMS
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THAT GO BEYOND TRADITIONAL DEBT-BASED LENDING. THIS SHALL
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INCLUDE THE OPERATIONALIZATION OF RISK-BASED LENDING
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METHODOLOGIES, SUPPORT FOR MOVABLE ASSET-BASED LENDING IN
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LINE WITH THE FULL IMPLEMENTATION OF THE PERSONAL PROPERTY
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SECURITY ACT (REPUBLIC ACT NO. 11057), AND THE CREATION OF
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FINANCING WINDOWS FOR MSMES ADOPTING GREEN AND SUSTAINABLE
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TECHNOLOGIES.
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"(I) BROADEN ITS CREDIT GUARANTEE FACILITIES TO ENCOURAGE
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PRIVATE FINANCIAL INSTITUTIONS TO LEND TO START-UPS, EARLY-
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STAGE ENTERPRISES, AND MSMES IN HIGH-RISK BUT HIGH-POTENTIAL
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SECTORS."
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Sec. 5. A new section, to be designated as Section 16, is hereby inserted after
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Section 15 of the same Act, as amended, with the succeeding sections renumbered
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accordingly:
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"SEC. 16. MANDATORY MSME PARTICIPATION IN GOVERNMENT
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PROCUREMENT. - TO OPTIMIZE THE DOMESTIC MARKET AND SUPPORT
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LOCAL ENTERPRISES, ALL PROCURING ENTITIES OF THE NATIONAL
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GOVERNMENT, ITS DEPARTMENTS, BUREAUS, OFFICES, AND AGENCIES,


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INCLUDING STATE UNIVERSITIES AND COLLEGES (SUCS), GOVERNMENT-
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OWNED AND/OR CONTROLLED CORPORATIONS (GOCCS), AND LOCAL
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GOVERNMENT UNITS (LGUS), SHALL ENSURE THE PARTICIPATION OF
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LOCAL MSMES IN GOVERNMENT PROCUREMENT.
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(A) MANDA TORY SET-ASIDE. - ALL PROCURING ENTITIES SHALL SET ASIDE
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AT LEAST TWENTY PERCENT (20%) OF THEIR TOTAL PROCUREMENT
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VALUE FOR GOODS AND SERVICES FOR THE YEAR TO BE EXCLUSIVELY
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SOURCED FROM LOCAL MSMES. THE GOVERNMENT PROCUREMENT POLICY
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BOARD (GPPB) SHALL, WITHIN SIX (6) MONTHS FROM THE EFFECTIVITY
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OF THIS ACT, ISSUE THE NECESSARY RULES AND REGULATIONS TO
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IMPLEMENT THIS PROVISION.
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(B) SIMPLIFIED BIDDING PROCESS. - THE GPPB SHALL CREATE A
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SIMPLIFIED BIDDING PROCESS WITH REDUCED DOCUMENTARY
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REQUIREMENTS FOR PROCUREMENT PROJECTS BELOW A THRESHOLD TO
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BE DETERMINED BY THE BOARD, WHICH ARE RESERVED FOR MSMES.
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(C) PROMPT PAYMENT. - ALL PROCURING ENTITIES SHALL PAY THEIR
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MSME SUPPLIERS FOR DELIVERED GOODS AND RENDERED SERVICES
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WITHIN A MAXIMUM PERIOD OF THIRTY (30) CALENDAR DAYS FROM THE
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SUBMISSION OF COMPLETE DOCUMENTS. ANY UNJUSTIFIABLE DELAY IN
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PAYMENT SHALL BE SUBJECT TO PENALTIES AS PRESCRIBED BY THE
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GPPB."
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Sec. 6. A new section, to be designated as Section 17, is hereby inserted with
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the succeeding sections renumbered accordingly:
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"SEC. 17. MSME DIGITAL TRANSFORMATION AND CONNECTIVITY. - THE
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STATE RECOGNIZES THE CRITICAL ROLE OF DIGITALIZATION IN
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ENHANCING MSME COMPETITIVENESS. TO THIS END, THE FOLLOWING
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SHALL BE PURSUED:


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(A) NA nONAL DIGITAL SKILLS PROGRAM FOR MSMES - THE DEPARTMENT
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OF INFORMATION AND COMMUNICATIONS TECHNOLOGY (DICT), IN
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COORDINATION WITH THE DTI AND THE TECHNICAL EDUCATION AND
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SKILLS DEVELOPMENT AUTHORITY (TESDA), SHALL ESTABLISH AND
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IMPLEMENT A CONTINUOUS NATIONAL DIGITAL SKILLS PROGRAM. THIS
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PROGRAM SHALL PROVIDE ACCESSIBLE AND AFFORDABLE TRAINING FOR
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MSME OWNERS AND THEIR EMPLOYEES ON CRITICAL DIGITAL
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COMPETENCIES, INCLUDING E-COMMERCE, DIGITAL MARKETING,
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CYBERSECURITY, AND THE USE OF BUSINESS PRODUCTIVITY TOOLS.
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(B) DIGITAL ADOPTION FUND. - THERE IS HEREBY CREATED AN MSME
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DIGITAL ADOPTION FUND, TO BE ADMINISTERED BY THE SMALL BUSINESS
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CORPORATION, WHICH SHALL PROVIDE GRANTS AND SOFT LOANS FOR
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MSMES TO ACQUIRE OR SUBSCRIBE TO ESSENTIAL DIGITAL SOLUTIONS,
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INCLUDING BUT NOT LIMITED TO ENTERPRISE RESOURCE PLANNING
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(ERP) SYSTEMS, CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
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SOFTWARE, AND OTHER PRODUCTiyrTY-ENHANCING TECHNOLOGIES.
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(C) CONNECnVTTY FOR UNDERSERVED AREAS. - THE DICT, IN
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PARTNERSHIP WITH THE PRIVATE SECTOR, SHALL PRIORITIZE THE
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ESTABLISHMENT OF AFFORDABLE AND RELIABLE HIGH-SPEED INTERNET
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CONNECTIVITY, INCLUDING SATELLITE AND OTHER ALTERNATIVE
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TECHNOLOGIES, IN RURAL AND GEOGRAPHICALLY ISOLATED AREAS TO
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ENSURE THAT ALL MSMES CAN PARTICIPATE IN THE DIGITAL ECONOMY."
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Sec. 7. Implementing Rules and Regulations. - Within ninety (90) days from
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the effectivity of this Act, the Department of Trade and Industry, in consultation with
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the MSMED Council and other relevant stakeholders, shall promulgate the necessary
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rules and regulations for the effective implementation of this Act.
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Sec. 8. Separability Clause. - If any provision of this Act is declared
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unconstitutional or invalid, the other provisions not affected thereby shall remain in
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full force and effect.


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Sec. 9. Repealing Clause. - All laws, decrees, executive orders, rules and
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regulations, and other issuances inconsistent with this Act are hereby repealed or
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modified accordingly.
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Sec. 10. Effectivity. - This Act shall take effect fifteen (15) days after its
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publication in the Official Gazette ov in a newspaper of general circulation.
Approved,