Republic of the Philippines,
HOUSE OF REPRESENTATIVE
Quezon City

SIXTEENTH CONGRESS
First Regular Session

House Bil No.__1061

Introduced by Hon. Neptali M. Gonzales II

EXPLANATORY NOTE

‘The State recognizes the complementary roles of government and non-
government institutions in providing and protecting the interests of the poor
through the institutions of related micro-finance services.

This bill seek to establish Micro-Enterprise Development Institutions
(MEDIs) which shall be organized as non-profit institutions accredited by the
proper government authorities, primarily to implement a social reforms
program that would empower the poor to manage their risks and
vulnerabilities, improve their asset base and expand access to micro-finance
services such as insurance, health care, education, housing and the other
value added services that would eradicate poverty in the Philippines.

‘The proposed bill shall allow the MEDIs to pay a tax of only two
percent (2%) of the gross income in lieu of all national and local taxes and
such proceeds shall form part of the disbursable portion of the People’s
Development Trust Fund established under Republic Act. No, 8425,
otherwise known as the “Social Reform and Poverty Alleviation Act.” Thus,
the tax scheme shall lower the costs of borrowing in the absence of income
tax, value added tax, documentary stamp tax, other forms of percentage tax
and local tax.

In view of the foregoing, approval of this bill is highly recommended.

NEPTALI ZALES IL


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Republic of the Philippines
HOUSE OF REPRESENTATIVE
Quezon City

SIXTEENTH CONGRESS
First Regular Session

1061

House Bill No.

Introduced by Hon. Neptali M. Gonzales II

AN ACT
GOVERNING THE CREATION AND ACCREDITATION OF MICRO-
ENTERPRISE DEVELOPMENT INSTITUTIONS, AND FOR OTHER
PURPOSES

Be it enacted by the Senate and the House of Representatives in Congress
assembled:

SECTION 1. Title. This Act shall be known as the “Micro-Enterprise
Development Institution 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:


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a) MICRODEV Accreditation Center refers to the entity created under
Section 7 of this Act;

b) Micro-Enterprise 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 micro-finance
services, such as micro-credit, micro-insurance, micro-savings, health
care and micro-housing through a broad package of financial,
business and human development services and other non-financial
services, including education to enable them to live productive lives;

©) Micro Finance refers to the provision of a broad range of financial
services exclusively for the poor to improve the asset base of
household 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
the Republic Act No. 8425, otherwise known as the “Social Reform
and Poverty Alleviation Act”;

f) Regulatory Authorities refer to the entities as designated under Section

9 of this Act; and


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g) Social Reform refers to the continuing process of addressing the basic
inequities in Filipino society through a systematic, unified and
coordinated delivery of socio-economic programs or packages;
SEC. 4. Recognition of Micro-Enterprise Development Institutions
(MICRODEVs). Micro-Enterprise Development Institutions (MICRODEVs) are
hereby recognized as institutions mandated to implement a micro-enterprise
development strategy. MICRODEVs shall be operated as non-stock and non-
profit corporations in accordance with the Securities and Exchange
Commission (SEC) rules and regulations and provisions of Title XI (Non-
Stock Corporations) of Batas Pambansa Blg. 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 member,
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 upon the recommendation of the Bureau of Internal
Revenue.

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:


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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 loan. A
MICRODEY 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

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shall be created under the National Anti-Poverty Commission (NAPC) to

perform the functions provided hereof. It shall be composed of the following:

a) The President of the NAPC or designated representative;

b) The Secretary of the Department of Finance (DOF) or designated
representative;

©) 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;

¢) The Chairperson of the SEC or designated representative; and

f) The President of the Microfinance Council of the Philippines (MFCP) or
designated representative.

‘The MICRODEV Accrediting 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 Peoples Development Trust Fund established under R. A, No.
8425 as provided for in subparagraph (a) of Section 10 of this Act.

SEC. 8 Power 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
non-profit corporation applicant: Provided, That the certificate of
accreditation shall be valid only for such period as may be prescribed
under that implementing rules and regulations of this Act; Provided,

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further, That no application shall be processed for accreditation as a

MICRODEV unless applicant enterprise secures a valid registration or

licensed with the government agency that exercises regulatory

function over such corporation;

¢) Monitor the performances of MICRODEVs to ensure compliance with
the provisions of this Act and its implementing rules and regulations;

d) Suspended 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;

f) 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
concerned 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 activities which are subject to their
respective regulations,

SEC. 10. Taxation of Accredited MICRODEVs. The taxation of

MICRODEVSs shall be as follows;


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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 from part of the
disbursable portion of the Peoples Development Trust Fund
established under R.A No.8245. The term gross income shall mean
gross receipts less sales returns, allowances, discounts and the 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 © 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.8242, as

amended otherwise known as the National Internal Revenue Code of


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1997: Provided, That for purpose of utilization, accreditation granted
under this Act shall be sufficient; and

d) Transactions of MICRODEV and its clients shall be exempt from
documentary stamp tax.

SEC. 11. Implementing Rules and Regulations. The NAPC, in
coordination with the DOF, BIR, BSP, DTI and 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 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 and order requiring the MICRODEV and/or the
directors and/or officers concerned 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 of desist
order shall be immediately effective upon service of such order to the
respondents.

Further, MICRODEVs and/or its directors and/or officers found to be
engaged in unauthorized undertaking and activities shall be subject to
criminal and administrative fines as provided in Section 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 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. This Act shall take effect fifteen (15) days

after its publication in at least two (2) newspapers of national circulation.

Approved,