EIGHTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHIUPPINES 
First Regular Session
)
)
S E N A T E
S. No. 
292
•filer of iDr fe^riTtorp
■19 
iUL-8 P3 24
Introduced by Senator PIA S. CAYETANO
AN ACT
INSTITUTIONALIZING MICROFINANCE PROGRAMS FOR THE DEVELOPMENT 
OF 
MICRO 
AND 
SMALL 
ENTERPRISES 
(MSEs), 
ALLOCATING 
FUNDS 
THEREFOR, AND FOR OTHER PURPOSES
EXPLANATORY NOTE
In the Philippines, the tremendous economic impact of micro, small and medium 
enterprises (MSMEs) is readily observable. As of 2011, there are 820,255 business 
enterprises operating in the Philippines. Of these, 99.6% (816,759) are MSMEs, while 
only 0.4% (3,496) are large enterprises. Of the total number of MSMEs, 91.0% 
(743,250) are micro enterprises, 8.6% (70,222) are small enterprises, and 0.4% (3,287) 
are medium enterprises.1
MSMEs also generated a total of 3,872,406 jobs in 2011 versus 2,473,336 for 
large enterprises. This indicates that MSMEs contributed almost 61.0% of the total jobs 
generated by all types of business establishments that year. Of these, 28.0% or 
1,778,353 jobs were generated by micro enterprises; 25.9% or 1,642,492 by small 
enterprises; and 7.1% or 451,561 by medium enterprises.
However, despite these important contributions, 
MSMEs and our micro­
entrepreneurs are not provided adequate assistance by the government. 
In order to 
continue reaping the benefits of MSMEs to our economy, we need to enable our micro­
enterprises to cope with different challenges.
Such challenges can generally be categorized into: (1) non-finandal barriers (cost
1 Department of Trade and Industry, Micro, Small and Medium Enterprises, available at 
http://W W W .dti.govph/dti/index.php?p=321. last accessed 3 June 2014. See also Small 
Enterprises Research and Development Foundation (SERDEF), Inc., and UP-ISSI, Bridging 
the Gap: Philippine SMEs and Globalization, 2001.


of getting electricity, heavy regulation, high tax rates, and corruption); and (2) financial 
barriers (access to finance).
In particular, while MSMEs may have access to finance, the costs and interests 
related to it may be prohibitive. For the Philippines to address the need for better access 
to credit, the State should institutionalize a loan program with a simplified process and 
with low interests that can provide the working class people in need of capital with 
sufficient funds to start their own businesses. Thus, this measure provides a program for 
micro and small enterprises (MSEs) where:
(1) Requirements for loan applications and approval are very basic, and there is 
no collateral requirement;
(2) Loan proceeds are exclusively used for capital;
(3) Interests are not higher than prevailing bank rates (generally around 2% to 
5%);
(4) The lenders have their own collection mechanism; and
(5) The mode of payment is weekly or monthly.
The proposed measure creates a loan program that is similar and as dynamic as 
the infamous '5-5'in terms of access to microfinance, but provides lower interest rates. 
With this measure in place, Filipino families and enterprises would no longer resort to 
borrowing from unconscionable !5-5Tenders and should be able to feel the effects of the 
country's exceptional GDP growth through efficient and effective access to loan facilities.
The proposed measure further creates a comprehensive development and 
assistance program for MSEs, which is national in scope but tailored fit for each 
administrative region. The goal of the program is to protect the capital of small 
proprietors, ensure the success of their MSEs, and transform these MSEs into five-star 
businesses by providing them with assistance and the necessary resources in order to 
help their businesses flourish. The program for enterprises is comprehensive and 
includes grants and loans to MSEs with a budget of P90 Billion for the first five (5) years 
or P18 Billion every year.
In view of the foregoing, approval of this bill is strongly recommended.
PIA S. CAYETANO


EIGHTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
)
S E N A T E
S. No. 
292
... I inir
:ij.
-8  P3 25
Introduced by Senator PIA S. CAYETANO
AN ACT
INSTITUTIONALIZING MICROFINANCE PROGRAMS FOR THE DEVELOPMENT 
OF 
MICRO 
AND 
SMALL 
ENTERPRISES 
(MSEs), 
ALLOCATING 
FUNDS 
THEREFOR, AND FOR OTHER PURPOSES
Be it enacted by the Senate and House o f Representatives o f the Philippines in Congress 
assembled:
1 
Section 1. Short Title. -  This Act shaii be known as the "Tulong Puhunan Act."
2 
Sec. 2. Declaration o f Policy. -  It shaii be the policy of the State to promote
3 
genuine inclusive growth and alieviate poverty.
4 
It is likewise the poiicy of the State to promote a just and dynamic social order
5 
that shall promote full employment, a rising standard of living and an improved quality
6 
of life for ali. The State also recognizes the indispensabie role of the private sector,
7 
encourages private enterprise, and provides incentives to needed investments. In
8 
pursuit of this, the State shaii develop a program that will ensure that all of its citizens
9 
can readily access the necessary capital to pursue opportunities and uplift their lives.
10 
Access to finance and technical support shall be the core policy of this Act. To
11 
operationaiize this policy, it shaii be ensured that:
12 
a) The process for obtaining micro-financing, grants and technical support in the
13 
Phiiippines shaii be simple and practical;
14 
b) The loan proceeds shall be exclusively used for capital; and
15 
c) Interests shall not be unconscionable and not higher than prevailing bank
16 
rates.
17 
Sec. 3. Tulong Puhunan Grant Program. -  The Micro, Small and Medium
18 
Enterprise Development (MSMED) Council, in coordination with the National Economic
19 
and Development Authority (NEDA), National Anti-Poverty Commission (NAPC), the


1 
Peoples' Credit and Finance Corporation (PCFC), and the Technical Education and Skills
2 
Development Authority (TESDA) shall develop a comprehensive program for the
3 
development of micro and small enterprises (MSEs) in all regions of the country. TTie
4 
goal of the program is to protect the capital of small proprietors, ensure the success of
5 
their MSEs by providing them \A/ith assistance and the necessary resources in order to
6 
help their businesses flourish.
7 
The MSMED Council shall be guided by the following in the development of the
8 
Tulong Puhunan Grant Program:
9 
a) The Program shall be national in scope but shall be tailored to fit the business
10 
environment, market demands and available resources of each administrative
11 
region;
12 
b) The DTI shall create a registry for all MSEs per administrative region based on
13 
their size category and business area;
14 
c) Each region shall choose a maximum of five (5) priority business areas to
15 
develop in order to reap the benefits of efficiency and specialization;
16 
d) Each region is encouraged to choose a diversified priority business portfolio in
17 
order to minimize risks brought about by natural calamities and changing
18 
market demands;
19 
e) Each region shall also establish a proprietor's guild for each of their priority
20 
business areas;
21 
f) Free technical and administrative support, including but not limited to product
22 
development, skills and leadership training, packaging and design, quality
23 
control, market promotion, client or supplier matching, and financial literacy
24 
and planning, shall be made available to MSEs falling under the five (5)
25 
priority business areas in their respective regions;
26 
g) Every year, the five (5) top-performing enterprises per size category in each
27 
region shall be recognized and shall be eligible for grants, not less than ten
28 
percent (10%) of their current capital, to be used solely for further business
29 
capitalization;
30 
h) Every micro-sized enterprise that evolves into a small enterprise through the
31 
help of the Tulong Puhunan Grant Program shall likewise be eligible for a one-
32 
time grant of Five Hundred Thousand Pesos (P500,000) to be used solely for
33 
further business capitalization;


1 
i) There shall be a mandatory review of the Tulong Puhunan Grant Program
2 
every three (3) years in order to ensure that the Program meets the present
3 
market demands.
4 
Sec. 4. Tulong Puhunan Loan Program. -  In addition to the Tulong Puhunan
5 
Grant Program, MSMED Council, in consultation with the NAPC, PCFC, and the Bangko
6 
Sentra! ng Pilipinas (BSP) shall develop a loan program catering exclusively to MSEs in
7 
need of capital, whether or not they fall under the priority business areas of their
8 
respective regions.
9 
The MSMED Council shall be guided by the following in the development of the
10 
loan program:
11 
a) Each loan shall not exceed Ten Thousand Pesos (P10,000) for first time
12 
borrowers; Thirty Thousand Pesos (P30,000) for second time borrowers; and
13 
Two Hundred and Fifty Thousand Pesos (P250,000) for those borrowing for a
14 
third time or oftener. Provided, that the MSMED Council is hereby authorized
15 
to amend these amounts, after the mandatory review provided in this Act, in
16 
order to meet present market demands;
17 
b) Collateral shall not be required from borrowers;
18 
c) Loan proceeds shall be exclusively used by the borrower for capital
19 
expenditures;
20 
d) The period for repayment shall be mutually agreed upon by the borrower and
21 
the lender; Provided, that such repayment period shall be at least three (3)
22 
months for a first time borrower; at least six (6) months for a second time
23 
borrower; and at least one (1) year for those borrowing for a third time or
24 
oftener;
25 
e) Delivery of the program shall be through partner lenders which are
26 
microfinance institutions like cooperatives and/or associations, microfinance
27 
non-governmental organizations (NGOs), government-owned or -controlled
28 
corporations (GOCCs), government financial institutions (GFIs) and banks that
29 
are registered with the BSP, Cooperative Development Authority (CDA),
30 
Securities and Exchange Commission (SEC) or the Insurance Commission
31 
(IC), and the DTI. In the absence of such participating partner lenders in the
32 
area, government institutions, centers or facilities, which are dedicated to the
33 
promotion of inclusive growth and anti-poverty objectives, are mandated to


1 
implement the program;
2 
f) The lenders shall have a collection mechanism, whereby payments are made
3 
on a weekly or monthly basis;
4 
g) Government lenders shall not profit from the microfinance program. Neither
5 
shall they be entitled to interest proceeds, the amounts of which shall be
6 
devoted to a fund for the development of MSEs. Participating partner lenders
7 
in the private sector shall be entitled to a reasonable amount of the proceeds
8 
of the interest collected by them, as may be determined in rules and
9 
regulations promulgated in implementation of this Act;
10 
h) Priority shall be given to MSEs falling under the priority business areas of their
11 
respective regions and to MSEs with innovative businesses;
12 
i) This loan program shall be complementary to any existing laws on
13 
microfinance; and
14 
j) There shall be a mandatory review of the loan program every three (3) years
15 
in order to ensure that the loan program meets the present market demands.
16 
The penalty rates upon default, dispensation of the loan proceeds, and other
17 
details and conditionalities of the loan program shall be determined by the MSMED
18 
Council.
19 
Sec. 5. Eligibility for Loan Program. -  To qualify for the loan program under this
20 
Act, the borrower must be:
21 
a) At least eighteen (18) years of age;
22 
b) A member in good standing of a duly-registered cooperative or association, or
23 
a resident of the local government unit (LGU), from which he/she intends to
24 
avail of the loan; and
25 
c) Has attended a DTI-accredited livelihood seminar, as evidenced by 
a
26 
certificate of participation, and possesses credit-worthiness, as likewise
27 
proven by a certificate issued by the DTI for that purpose.
28 
Sec. 6. Registration o f Microfinance Institutions. -  The MSMED Council, through
29 
the DTI, shall keep a registry of all participating microfinance institutions for monitoring
30 
purposes.
31 
Sec. 7. Local Government Unit Participation. -  Any law, executive order,
32 
department order, ordinance and the like, to the contrary notwithstanding, LGUs,
33 
through the local sanggunian, as defined in the 1991 Local Government Code, are


1 
hereby 
authorized 
to 
provide 
a 
loan 
program 
in 
cooperation 
with 
the
2 
cooperatives/associations, NGOs, and peoples' organizations that are lending assistance
3 
to MSEs within their jurisdiction.
4 
Provided, That 
in 
cities 
or 
municipalities 
where 
there 
are 
no 
such
5 
cooperatives/associations, the LGU shall, within one (1) year from the effectivity of this
6 
Act, require the municipal/city social welfare and development office or the local trade
7 
and Industry office or livelihood development office in the city or municipal government
8 
concerned, to develop and implement a loan program consistent with the provisions of
9 
this Act, under the supervision of the DTI.
10 
Provided further, That each participating LGU must prepare a comprehensive
11 
feasibility study for the development of a loan program. Each LGU must fund, from its
12 
internal revenue allotment, allocate at least Five Million Pesos (P5,000,000), where
13 
possible and practicable, or Thirty Percent (30%) of the total funding cost related to
14 
small business improvement, agricultural improvement, institutional advancement and
15 
consumer protection, whichever is higher. Likewise, for this purpose, the LGU shall
16 
maintain a separate and dedicated office which shall be responsible for the overall
17 
implementation of the program in the locality.
18 
Sec. 8. Private Sector Participation and the Matching Fund. -  Participating
19 
cooperatives or associations, and LGUs with loan programs are hereby authorized to
20 
accept donations from the private sector in order to augment the available funds for the
21 
loan program.
22 
In order to promote private sector participation in promoting inclusive growth
23 
and government poverty alleviation/eradication efforts, donations for purposes of this
24 
Act from the private sector to an LGU shall be matched with a corresponding amount by
25 
the recipient LGU; Provided, that donations of more than Five Million Pesos (P5,000,000)
26 
shall be matched by the national government for the LGU. In any case, should the LGU
27 
concerned be financially incapable of matching a donation, the national government
28 
shall augment the internal revenue allotment of such LGU for this purpose.
29 
Sec. 9. Incentives for Private Support. -  Any person or corporate entity may
30 
donate funds, equipment, materials or services for the improvement of the Tulong
31 
Puhunan Grant Program and/or Tulong Puhunan Loan Program. Such donations shall be
32 
done through a memorandum of agreement between the cooperative or association,
33 
LGU, and the donor. The agreement shall expressly state the value of the donated funds.


1 
materials, or services, and shall only be used for the Tulong Puhunan Grant Program
2 
and/or Tulong Puhunan Loan Program.
3 
All Income, legacies, gifts, and donations for the benefit of the program shall be
4 
exempt from the payment of all forms of taxes, fees, assessments, and other charges of
5 
the government. Its branches, and subdivisions. Subject to the issuance of the
6 
appropriate revenue regulations by the Bureau of Internal Revenue, the value of the
7 
donation shall also be deductible as an expense in the determination of the taxable
8 
income of any donor.
9 
Sec. 10. Funding. -  The total amount of Ninety Billion Pesos (P90,000,000,000)
10 
for the next five (5) years upon implementation of this Act or Eighteen Billion Pesos
11 
(P18,000,000,000) per year for the next five (5) years upon implementation of this Act,
12 
shall be appropriated for the initial implementation of the Tulong Puhunan Grant
13 
Program and the Tulong Puhunan Loan Program. Said amount shall at all times be
14 
divided equitably among each administrative region of the country. Thereafter, such
15 
sums as may be necessary shall be Included in the General Appropriations Act.
16 
In addition, the amount of Five Hundred Million Pesos (P500,000,000) is hereby
17 
appropriated as a Special Development Fund to generally support the initial
18 
Implementation of this Act.
19 
The funds shali be held in trust by the DTI in collaboration with the Development
20 
Bank of the Philippines (DBP), Land Bank of the Philippines (LBP) and other GFIs. The
21 
DTI may likewise allocate a portion of the funds to the People's Development Trust Fund
22 
(PDTF) under Republic Act No. 8425 otherwise known as the "An Act Institutionalizing
23 
the Social Reform and Poverty Alleviation Program, Creating for the Purpose the Nationai
24 
Anti-Poverty Councii, Defining its Powers and Functions, and for other Purposes":
25 
Provided, that the funds to be allocated to the PDTF shall be used solely for
26 
microfinance-related organizing activities.
27 
Sec. 11. Primary Implementing Government Agency. -  The DTI shall be the lead
28 
agency, which shall ensure the implementation of this Act.
29 
Sec. 12. Pole o f Government Financial Institutions. -  All GFIs shall set aside
30 
funding for microfinance operations to complement the purposes of this Act.
31 
Participating GFIs shall include the DBP, LBP, and other GFIs.
32 
Sec. 13. Reports. -  The DTI Secretary shall submit to the President of the
33 
Philippines, the President of the Senate and the Speaker of the House of


1 
Representatives, an annual accomplishment report on projects covered in this Act,
2 
detailing the amount of appropriations released by end of the calendar year, the extent
3 
of the work accomplished, further work to be done, and any recommendations for
4 
additional appropriations or charges thereof.
5 
Sec. 14. Full Financial Disclosure, Accountability and Transparency. -  The DTI, as
6 
lead agency of the program, and the LGU concerned shall quarterly publish, print, and
7 
disseminate at no cost to the public and in an accessible form, in conjunction with
8 
Republic Act No. 9485, otherwise known as the "Anti-Red Tape Act of 2007", and
9 
through their websites, timely, true, accurate, and updated key information relating to
10 
the program. Likewise, they shall endeavor to translate key information and present
11 
them in popular form and means.
12 
Sec. 15. Implementing Rules and Regulations. -  The DTI, in consultation with
13 
relevant government agencies, shall prepare such rules and regulations for the proper
14 
and effective implementation of this Act, within sixty (60) days from the date of
15 
publication. The DTI shall publish such rules and regulations once a week for two (2)
16 
consecutive weeks in two newspapers of general circulation.
17 
Sec. 16. Separability Clause. -  If any provision of this Act is declared
18 
unconstitutional, the same shall not affect the validity and effectivity of the other
19 
provisions hereof.
20 
Sec. 17. Repealing Clause. -  All laws, decrees, orders, issuances or portion
21 
thereof, which are inconsistent with the provisions of this Act are hereby repealed or
22 
modified accordingly.
23 
Sec. 18. Effectivity. -  This Act shall take effect fifteen (15) days after its
24 
publication in two (2) newspapers of general circulation.
Approved,