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‘TWENTIETH CONGRESS SG ay
First Regular Session Wo INDEXES

2510

HOUSE BILL No.

Introduced by REP. RAMIL L. HERNANDEZ

AN ACT PROMOTING ENTREPRENEURSHIP
BY ESTABLISHING A SUSTAINABLE FINANCING PROGRAM FOR MICRO AND SMALL
ENTERPRISES THROUGH THE PONDO SA PAGBABAGO AT PAG-ASENSO PROGRAM,
AND APPROPRIATING FUNDS THEREFOR

EXPLANATORY NOTE

Micro and Small Enterprises (MSEs) are the backbone of the Philippine economy,
serving as crucial drivers of local job creation, production, and trade. Despite their
significant contribution to national development and poverty reduction, MSEs often face
challenges in being granted affordable and accessible financing. This difficulty
frequently forces them to resort to informal lenders charging exorbitant interest rates,
hindering their growth potential and sustainability.

This proposed measure, otherwise known as the "Pondo sa Pagbabago at Pag-asenso
Act” or the "P3 Act," directly addresses these critical financing gaps. It is rooted in the
State's declared policy to foster national development, promote inclusive growth, and
reduce poverty by supporting the expansion of MSEs. The bill aims to provide a better
alternative to informal lending systems by offering affordable, accessible, and simple
financing program for the country's MSEs, especially those in the poorest populations
and underserved areas.

Key provisions of this Act include:

+ Creation of the Pondo sa Pagbabago at Pag-asenso (P3) Fund: This dedicated
fund will be specifically lent out to qualified micro and small enterprises, as
defined under the "Magna Carta for Micro, Small and Medium Enterprises
(MSMEs)".

+ Accessible Financing Mechanism: The P3 Fund will be accessible through the
Small Business Corporation (SB Corp.) and a network of accredited partner
financial institutions (PFls), including rural banks, thrift banks, development

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banks, cooperative banks, cooperatives, non-stock savings and loan associations,
microfinance non-government organizations, and lending companies.

Lead Implementing Agency: The SB Corp,, the financing arm of the Department
of Trade and Industry (DTI), is designated as the lead implementing agency,
responsible for both direct lending (40% of the fund) and lending through
accredited PFls (60% of the fund). SB Corp. is mandated to prioritize lending to
underserved and unserved areas and MSE segments.

Favorable Loan Features: The P3 Fund loans are designed with features
beneficial to MSEs, including:
© An effective interest rate not exceeding one percent (1%) per month for
direct lending and two and a half percent (2.5%) per month for lending
through accredited PFls. This aims to significantly bring down interest
rates.
© Nocollateral requirement for beneficiaries.
© Flexible collection mechanisms adaptable to the livelihood project income
cycle (daily, weekly, or monthly).

Policy Oversight and Accountability: The Micro, Small and Medium Enterprise
Development (MSMED) Council will monitor the utilization and disbursements
of the P3 Fund and submit quarterly reports to the President and Congress,

Appropriations: The necessary funds for the initial implementation will be
charged against the current year's appropriations of the SB Corp. with
subsequent amounts included in the annual General Appropriations Act.

This proposed measure is approved on third reading in the House of Representatives as
House Bill No. 7363 in March 2023 and was transmitted to the Senate in the same year.
By enacting the "P3 Act,” the State reaffirms its commitment to inclusive economic
growth by empowering micro and small enterprises with the vital financial resources
they need to thrive. This measure will not only promote entrepreneurship and stimulate
local economies but also significantly contribute to poverty alleviation and the creation
of more sustainable livelihoods across the country.

In view of tie foregoing, the approval of this measure is earnestly sought.

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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

‘TWENTIETH CONGRESS
First Regular Session

2510

Introduced by REP. RAMIL L. HERNANDEZ

AN ACT PROMOTING ENTREPRENEURSHIP
BY ESTABLISHING A SUSTAINABLE FINANCING PROGRAM FOR MICRO AND SMALL
ENTERPRISES THROUGH THE PONDO SA PAGBABAGO AT PAG-ASENSO PROGRAM,
AND APPROPRIATING FUNDS THEREFOR

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 “Pondo sa Pagbabago at Pag-
asenso Act” or the “P3 Act”.

Section 2. Declaration of Policy. - It is the declared policy of the State to foster national
development, promote inclusive growth, and reduce poverty by promoting the growth
of micro and small enterprises (MSEs) that facilitate local job creation, production and
trade in the country. Towards this end, the State shall develop policies, plans and
programs, and initiate means to encourage entrepreneurial activities, and to ease the
constraints and challenges to MSEs, particularly on access to financing.

Section 3. Objectives. - The objectives of this Act are:

a. To provide an affordable, accessible, and simple financing program for the
country's MSEs, especially those in the poorest populations and underserved
areas;

b. To provide a better alternative to informal lenders or the so-called “5-6”
money lending system availed of by micro enterprises;

c. To bring down the interest rate at which financial services is made available
to MSEs;

d. To boost the development of entrepreneurship and the micro, small and
medium enterprise (MSME) sector, particularly the MSEs; and

¢. To support the recovery of MSEs from the effects of the covid-19 pandemic
lockdown and ensure their viability.

Section 4. Creation of the Pondo sa Pagbabago at Pag-asenso (P3) Fund. - There is
hereby created the Pondo sa Pagbabago at Pag-asenso Fund, hereinafter referred to as

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the “P3 Fund”, which shall be lent out to qualified MSEs under such terms and
conditions that will meet the purposes of this Act.

The beneficiaries of the P3 Fund shall be the micro and small enterprises, as
defined under Republic Act No. 6977, as amended, otherwise known as the "Magna
Carta for Micro, Small and Medium Enterprises (MSMEs)".

The fund shalll be accessible through the Small Business Corporation (SB Corp.)
and through accredited partner financial institutions (PFls) such as rural banks, thrift
banks, development banks, cooperative banks, cooperatives, non-stock savings and
loan associations, microfinance non-government organizations, or lending companies.

For efficient implementation and operation, cooperatives except cooperative
banks and insurance cooperatives shall be under the sole supervision and examination
of the Cooperative Development Authority (CDA); all other financial entities,
corporations and financial intermediaries, such as non-government organizations,
financing companies, non-stock savings and loan associations, microfinance non-
government organizations, and lending investors shall be under the Securities and
Exchange Commission (SEC); banks shall be under the Bangko Sentral ng Pilipinas
(BSP); and insurance companies shall be under the Insurance Commission (IC).

Cooperative banks shall be under the supervision and examination of the CDA
and BSP; while insurance cooperatives shall be under the supervision and examination
of the CDA and Insurance Commission (IC).

Section 5. Lead Implementing Agencies. - The SB Corp., the financing arm of the
Department of Trade and Industry (DTI), shall be the lead implementing agency for the
P3 Fund. The SB Corp. shall handle the fund delivery to MSEs through the following
modes:

a. Direct lending for forty percent (40%) of the P3 Fund; and

b. Lending through accredited PFls for sixty percent (60%) of the P3 Fund.

The SB Corp. shall prioritize lending to underserved and unserved areas and MSE
segments of the country, subject to the review and approval of the Micro, Small and
Medium Enterprise Development (MSMED) Council.

With the goal to achieve greater outreach to all provinces and barangays of the
country, financial technology-enabled systems and processes can be utilized in the
implementation of the P3 program.

‘An amount sourced from the accumulated P3 Fund of not more than five percent
(5%) of the total loans disbursed for the period can be used by the SB Corp. to support
its annual administrative and operating expenses for the P3 Fund, inclusive of the cost
of regular plantilla personnel, up to the extent of their involvement in developing and
managing the P3 loan portfolios.

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Section 6. Features of the P3 Fund. - The P3 Fund shall have the following featur

a. The loanable amount for individual loans shall be set and regularly reviewed
by the MSMED Council;

b. The effective interest rate to be imposed on the loan availed of by the P3
Fund beneficiaries 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 PFs;

¢. The interest earnings shall accrue to the P3 Fund;

d. There shall be no collateral requirement from the P3 Fund loan beneficiaries;
and

¢. The lenders shall have a collection mechanism, whereby payments are made
on a daily, weekly, or monthly basis, or depending on the livelihood project
income cycle, It shall be the duty of the lender to collect the loan principal
and the interest payments from the borrower.

Section 7. Policy Oversight Function. - The MSMED Council shall monitor the
utilization and disbursements of the P3 Fund. It shall submit to the President of the
ippines and to Congress, through the Congressional Oversight Committee on Micro,
Small and Medium Enterprise Development (COC-MSMED), a quarterly report on the
status of the P3 Fund.

Section 8. Appropriations. - The initial amount for the implementation of this Act shall
be charged against the current year’s appropriations of the SB Corp. Thereafter, such
amount necessary shall be included in the annual General Appropriations Act.

Section 9. Implementing Rules and Regulations. - Within sixty (60) days from the
approval of this Act, the DTI, in consultation with the stakeholders concerned, shall
formulate and promulgate the necessary rules and regulations to implement the
provisions of this Act.

Section 10. Separability Clause. - If any part or section of this Act is declared
unconstitutional, such declaration shall not affect in any manner other parts or sections
hereof.

Section 11. Repealing Clause. - Section 22 of Republic Act No. 8367, otherwise known
as the “Revised Non-Stock Savings and Loan Association Act of 1997” is hereby
repealed. All laws, decrees, proclamations, issuances, or ordinances that are contrary to
or inconsistent with the provisions of this Act are hereby amended, repealed or
modified accordingly.

Section 12. Effectivity. - This Act shall take effect fifteen (15) days after its publication
in the Official Gazette or in a newspaper of general circulation.

Approved,

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