Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

VENTEENTH CONGRESS
Second Regular Session

7457

HOUSE BILL NO.

Introduced by Representatives Peter “Sr. Pedro” M. Unabia, Raymond Democrito C. Mendoza,
Jocelyn S. Limkaichong and Salvador B. Belaro, Jr.

EXPLANATORY NOTE

Social enterprises (SEs) are the answer to the country’s primary problems of poverty and
inequality. To be considered an SE, the organization needs to have: (1) a social mission, (2) wealth-
creating means, and (3) wealth distribution mechanism. SEs engage with the marginalized—not only
‘as employees, suppliers or customers—but as partners in the business and partners in development.
‘The marginalized are empowered to make decisions related to the business, and are given capacity
building programs with the hope of helping them to be part of their own development.

To be a social enterprise is not dependent on the number of employees or asset size of the
organization, but rather on its social mission. Some SEs may be considered as MSMEs due to their
asset and workforce size. However, unlike MSMEs, SEs operate with a social mission.

Because SEs balance both economic and social impact, they need more public and
government support. The Poverty Reduction through Social Entrepreneurship (PRESENT) Bill will
address the biggest difficulties of SEs and will establish the framework to ensure the sector's growth,
development, and sustainability. Moreover, it will highlight the promotion of education about the SE
sector.

Because it is in the government's best interest to provide basic services and to include the
marginalized in the formal economy, the bill seeks to provide additional support and incentives to
SEs to help them stay financially stable as they work to fulfill their social mission. The bill provides
tax incentives, guarantee pool funds, loans, technical assistance, non-collateralized loans and
capacity building activities for SEs to make them more competitive, provided that they meet the legal
definition of SEs and make available adequate transformational and transactional services relative to
their size and capacity.

To ensure that social enterprises will continue to flourish in the Philippines, it is proposed
that social entrepreneurship be taught in all higher education and vocational institutions. This is to
make people understand the importance of SEs in the current business ecosystem and also see social
entrepreneurship as a viable career option.


Moreover, the PRESENT Bill is in line with the state policy in Article II Section 9 of the
1987 Constitution, which states that:

“The State shall promote a just and dynamic social order that will ensure the prosperity
and independence of the nation and free the people from poverty through policies

that provide adequate social services, promote full employment, a rising standard of
living and an improved quality of life for all.”

Finally, social enterprises are the potential game changer in achieving the 2030 Sustainable
Development Goals (SDGs), among which are zero poverty, no hunger, reduced inequality, decent
jobs and inclusive growth, and sustainable communities.

In view of the foregoing, the immediate passage of the Poverty Reduction through Social
Entrepreneurship Bill is earnestly sought.

PETPR CANNY RA’ C. MENDOZA
A AE hae
ye IMKAICHONG SALVADOR B. BELARO, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
‘Second Regular Session

HOUSE BILL No.2 457

Introduced by Representatives Peter “Sr. Pedro” M. Unabia,
Raymond Democrito C. Mendoza, Jocelyn S. Limkaichong and Salvador B.Belaro, Jr.

AN ACT
ORDAINING THE PROMOTION OF SOCIAL ENTERPRISES TO ALLEVIATE POVERTY,
ESTABLISHING FOR THE PURPOSE THE POVERTY REDUCTION THROUGH SOCIAL
ENTREPRENEURSHIP (PRESENT) PROGRAM, AND PROVIDING INCENTIVES AND
BENEFITS THEREFOR

CHAPTER!
GENERAL PROVISIONS

SECTION 1. Short Title. - This Act shall be known as the “Poverty Reduction through
Social Entrepreneurship Act.”

SECTION 2. Statement of Policy. - As provided in the Constitution of the Republic
of the Philippines, it is the declared policy of the State to promote a just and dynamic social
order that will ensure the prosperity and independence of the nation and free the people from
poverty through policies that provide adequate social services, promote full employment, a
rising standard of living, and an improved quality of life for all. In Article II, Sections 10 and
14, it is further declared that the State shall provide social justice in all phases of national
development and that the State values the dignity of every human person and guarantees full
respect for human rights.

In Article XII, Section 1, it is further stated that the goals of the national economy are
‘a more equitable distribution of opportunities, income, and wealth; a sustained increase in the
amount of goods and services produced by the nation for the benefit of the people; and an
expanding productivity as the key to raising the quality of life for all, especially the
underprivileged.

The State shall promote industrialization and full employment based on sound
agricultural development and agrarian reform, through industries that make full and efficient
use of human and natural resources, and which are competitive in both domestic and foreign
markets. However, the State shall protect Filipino enterprises against unfair foreign
competition and trade practices.


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The State also recognizes the important role of enterprises in the economy as the
major agent of development, creating off-farm employment opportunities and providing
transitional means for improving the livelihood of the people

Towards this end, the State shall pursue a poverty reduction program that promotes
an environment conducive to the development and growth of a vibrant social enterprise sector
engaged in poverty reduction, economic and social development. It shall empower the poor
as primary stakeholders in social enterprises, establish mechanisms essential to realizing their
potential and achieving their full growth, and extend the assistance necessary for their
advancement. The State shall likewise ensure that the provision for technical and financial
assistance, incentives and other services are free from any condition that might infringe upon
the autonomy or organizational integrity of the social enterprises to enable them to develop
into viable and vital anti-poverty agents, and a strong social entrepreneurship movement which
will be instrumental in reducing poverty in the country.

SECTION. 3. Definition of Terms. - As used in this Act:

a) Social Enterprise or SE refers to a wealth-creating organization, however
organized, whether an association, single proprietorship, partnership, corporation, or a
cooperative or any other legal form, whose primary stakeholders are marginalized sectors
of society, engaged in providing goods and services that are directly related to its mission
of improving societal well-being. It is established to achieve triple bottom lines such as
financial, social and ecological. It generates profit or surplus with due regard to social and
environmental costs, and makes a pro-active contribution to resolving social and
environmental problems.

A social enterprise for purposes of this act shall mean a Social Enterprise with the Poor
as Primary Stakeholders (SEPPS). A SEPPS is a social enterprise that explicitly declares
and pursues poverty reduction/alleviation or improving the quality of life of specific
segments of the poor as principal objective. A SEPPS engages and invests in the poor to
become effective workers, suppliers, clients and/or owners, and/or ensures that a
substantive part of the wealth created by the enterprise is distributed to, or benefits them.
In addition to reinvesting its surplus or profits back to the enterprise to sustain the fulfilment
of its social mission, a SEPPS also uses its surplus or profits and mobilizes other resources
to assist the poor to become partners in SE or value chain management/governance and
to become partners in community, sectoral and societal transformation.

b) Absolute poverty refers to the condition of the household below the food threshold
level;

©) Assets refer to all kinds of properties, real or personal, owned by the social
enterprise (SE) as defined in paragraph (dd) of this Section and used for the conduct of its
business: Provided, That for the purpose of exemption from taxes and to benefit from other
incentives under this Act, this term shall mean all kinds of properties, real or personal, owned
and/or used by the SE for the conduct of its business;

d) Basic sectors shall refer to the disadvantaged sectors of Philippine society,
namely: farmer-peasant, artisanal fisherfolk, workers in the formal sector and migrant workers,

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workers in the informal sector, indigenous peoples and cultural communities, women, persons
with disability, senior citizens, victims of calamities and disasters, youth and students, children,
and urban poor as defined under Republic Act (R.A.) No. 8425, otherwise known as the “Social
Reform and Poverty Alleviation Act’;

e) Bottom line shall refer to the objectives or purposes for which a SE is established,
Triple bottom line shall refer to social, ecological and financial objectives;

) Capability building refers to the process of enhancing the viability and
sustainability of SEs and pertain to education, training, coaching and other learning events
like study tours; technical, consultancy and advisory services; assistance in organizational
systems development; technology incubation, development and dissemination; value chain
and subsector development; conduct of SE trade fairs and missions; networking and policy
advocacy initiatives and other such activities that enable SEs to be effective and efficient
vehicles for poverty reduction. The term capability building precludes the grant of any loan or
equity funds to the SE and shall in no way refer to the provision of equity investments, seed
funding, partnership's seed funds, equity participation, start-up funds or any such activity that
connotes the infusion of capital or funds from the government or from the SE Development
Fund created under Section 16 of this Act;

9) Civil society organizations refer to private voluntary organizations of citizens that
are established to pursue a mission, usually involving the interest of the public, marginalized
groups or specific sectors of society. They include non-government organizations, socio-civic
groups, foundations and people's organizations;

h) Council shall refer to the SE MSMED Council;

i) Cooperative shall refer to an autonomous and duly registered association of
persons, with a common bond of interest, who have voluntarily joined together to achieve their
social, economic, and cultural needs and aspirations by making equitable contributions to the
capital required, patronizing their products and services and accepting a fair share of the risks
‘and benefits of the undertaking in accordance with universally accepted cooperative principles
as defined in R.A. 6938, as amended by R.A. 9520, otherwise known as the “Philippine
Cooperative Code of 2008";

j) Corporate Social Responsibility or CSR shall refer to the commitment of a private
enterprise or business to contribute on a voluntary basis to a sustainable social and economic
development by working with relevant stakeholders to improve their lives in ways that are good
for business, the social reform agenda, the sustainable development agenda, and society at
large. CSR-related activities shall include, but not be limited to, the following: 1) Charitable
programs and projects; 2) Scientific research; 3) Youth and sports development; 4) Cultural
or educational promotion; 5) Services to veterans and senior citizens; 6) Social welfare; 7)
Environmental sustainability; 8) Health development; 9) Disaster relief and assistance; and
Employee and worker welfare related CSR activities;

k) Economic subsectors are networks of related actors and enterprises performing
various functions in value chains. These actors and enterprises transform raw materials into
finished products, or develop services, and distribute or provide them through market channels

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to final consumers; they may be identified by key raw material source, by finished product or
final service provided. An economic subsector may be comprised of several competing value
chains. By understanding the dynamics of economic subsectors and using them as units of
planning social entrepreneurship interventions, government agencies, support institutions and
SEs shall more effectively reach and benefit a greater number of poor in poverty reduction

programs;

}) Empowerment strategy shall mean a development strategy that enables the
marginalized sectors to own, manage, and control SEs in order for them to reap maximum
benefits from it and which acts as a channel for directly distributing income;

m) — Fair trade shall refer to a trading partnership based on dialogue, transparency
and respect and which seeks greater equity in international trade and the transformation and
adaptation of trading structures and practices in favor of the poor and disadvantaged by
offering better trading conditions to, and securing the rights of, marginalized producers and
workers;

1) Fair trade organizations shall mean enterprises certified by internationally and
nationally recognized Fair Trade networks;

©) __ Fair trade principles refer to the values adopted by fair trade organizations in
their day-to-day operation. These include creating opportunities for economically-
disadvantaged producers; transparency and accountability; payment of a fair price; ensuring
No child labor and forced labor; commitment to non-discrimination, gender equity and freedom
of association; ensuring good working conditions; providing capacity building; and, respect for
the environment;

p) Foundation shall mean the categorization of a non-profit organization that
typically either donates funds and support to other organizations or provides the source of
funding for its own charitable purposes. Unlike a company, foundations have no shareholders
though they may have a board, an assembly and voting members. A foundation may hold
assets in its own name for the purposes set out in its constitutive documents, and its
administration and operation are carried out in accordance with its statutes or articles of
association rather than fiduciary principles;

@) __GPPB refers to the Government Procurement Policy Board established in
accordance with Article X of R.A.No.9184, otherwise known as the “Government Procurement
Reform Act:”

ot) Intermediation strategy shall refer to a development strategy that provides
financial, agricultural, business development and institutional development services to the
entrepreneurial poor and employers of the poor and provides as well product development
and marketing support using the principles of fair trade to marginalized producers. A SE
engaged in intermediation strategy need not be owned by the marginalized stakeholders but
provide immediate access to services among a critical mass of these marginalized
stakeholders;


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s)  Marginalized Sectors shall refer to groups of people who are stigmatized or
marginalized by virtue of their physical, psychological, economic, social or cultural
circumstance;

1) Micro-enterprise as defined in R.A. No. 6977, as amended by R.A. No. 9501,
otherwise known as the "Magna Carta for Small Enterprises,” shall refer to any business
activity or enterprise engaged in industry, agribusiness and/or services, whether 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 a value of not more than Three Million Pesos
(P3,000,000.00). This amount is subject to review and adjustments by the Micro, Small and
Medium Enterprises Development (MSMED) Council, taking into account inflation and other
‘economic indicators and may use other variables such as number of employees, equity capital
and assets size;

u) Microfinance shall refer to the provision of a broad range of financial services
such as deposits, loans, payment services, money transfers and insurance products to the
poor and low-income households and their microenterprises and small businesses, to enable
them to raise their income levels and improve their living standards;

v) Minimum basic needs shall refer to the needs of a Filipino family pertaining to
survival (food and nutrition; health; water and sanitation), security (shelter; peace and order,
public safety, income and livelihood); and enabling services (basic education and literacy,
Participation in community development, family and psycho-social care);

w) — Non-Government Organization or NGO refers to a duly registered non-stock,
non-profit organization focusing on the upliftment of the basic or disadvantaged sectors of
society by providing advocacy, training, community organizing, research, access to resources,
and other similar activities and, as defined under Section 34 (H)(2)(c) of Republic Act No.
8424, as amended, otherwise known as the National Internal Revenue Code of 1997,
organized and operated exclusively for scientific, research, educational, character-building
and youth and sports development, health, social welfare, cultural or charitable purposes, or
a combination thereof, and no part of the net income of which inures to the benefit of any
private individual;

x) People's Organization or PO refers to a self-help group belonging to the basic
sectors and/or disadvantaged groups composed of members having a common bond of
interest who voluntarily join together to achieve a lawful common social or economic end;

y) Persons with Disability shall refer to individuals with restriction or different
abilities, as a result of a mental, physical or sensory impairment, to perform an activity in the
manner or within the range considered normal for a human being;

2) Poor shall refer to individuals and families whose income fall below the poverty
threshold as defined by the National Economic and Development Authority and/or are
deprived of the means to provide in a sustained manner their minimum basic needs of food,
health, education, housing and other essential amenities of life, as defined under R.A. 8425;


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aa) Poverty reduction/alleviation shall mean overcoming the income, resource, and
capability deprivation among the poor as defined in the preceding paragraph and the
marginalized sectors as defined in paragraph (q) hereof;

bb) Private Enterprise shall refer to an organization engaged in a business activity
organized for the purpose of accumulating profit and whose primary stakeholders and
beneficiaries are its owners;

cc) Procuring Entity refers to any branch, department, office, agency, or
instrumentality of the government, including state universities and colleges, government-
‘owned and/or - controlled corporations, government financial institutions, and local
government units procuring Goods, Consulting Services and Infrastructure Projects;

dd) Resource mobilization strategy shall refer to a development strategy intended to
generate income from the sale of products and services of a SE in order to finance or subsidize
the operations of its core development program or development interventions among the
marginalized sectors;

ee) SEGFP refers to the SE Guarantee Fund Pool created under this Act;

ff) Social development refers to the continuing process of addressing the needs of
society, beginning with the people's minimum basic needs, through a systematic
implementation of socioeconomic programs or packages;

99) Social Enterprise Service Institution refers to an organization that provides
assistance to SEs for them to become viable and sustainable and which assistance pertains
to supplying needs such as trainings, education and other capacity-building measures,
research and development, and other similar activities;

hh) Social Enterprise Advocacy Group refers to an organization whose primary
purpose is supporting the cause of SEs especially with regard to public policy and articulating
issues or causes related to social entrepreneurship;

ii) Social entrepreneur refers to an innovative individual or institution that promotes
the creation and operationalization of enterprises or livelihood endeavors for those in need or
which address social problems and improve societal well-being;

i Social entrepreneurship entails innovations designed to explicitly improve
societal well-being, housed within entrepreneurial organizations, which initiate, guide or
contribute to change in society;

kk) Social inclusion strategy refers to the development strategy that assists groups
of people who are stigmatized or marginalized by virtue of their physical, psychological,
economic, social or cultural circumstance in order to restore their dignity by not only removing
the barriers that limit their access to the delivery of basic social services and employment, but
more importantly, by nurturing work and other environments that create avenues for their
participation as productive members of society;


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l) Social Investors are individuals or institutions that choose to put in money to a
business endeavor or activity not principally for financial profit but to fulfill a social mission
which may include poverty reduction, concern for environmental protection, strong
‘organizational governance, and a desire for a more economically just world;

mm) Social reform refers to the continuing process of addressing the basic inequities
in society through a systematic, unified and coordinated delivery of socioeconomic programs
or packages;

nn) Transactional roles refer to enterprise-related functions performed by the poor
that involve an exchange of goods or services for money including being workers, suppliers,
clients or owners;

00) Transformational roles are functions performed by the poor as conscious agents
of change to lift their own selves from poverty and to participate in group efforts to improve the
quality of life of their community, sector or society as a whole;

pp) Transactional services pertain to enterprise or market-driven activities, such as
providing loans, demonstrating new technologies or conducting trainings that are necessary
for the poor in the SE system to effectively and efficiently perform their roles as workers,
suppliers, clients and owners. Transactional services may be fee-based, such as the granting
of loans, or non-fee based, such as the extension of production-related trainings;

qq) Transformational services pertain to activities that empower the poor, such as
leadership formation and organizational development, asset build-up and providing education
and experiential learning opportunities, to become conscious change agents for themselves,
for their communities, sectors and society as a whole;

11) Underemployment shall mean an economic position where an employed person's
desire to have additional hours of work in his/her present job or to have an additional job, or
to have a new job with longer working hours is not met;

ss) Unemployment shall mean an economic situation where persons who are 15
years old and over as of their last birthday and are 1) without work or have no job or business,
2) available for work and willing to take up work in paid employment or self-employment, 3)
seeking work and had taken specific steps to look for a job or establish a business but failed
to; and

tt) Value chain refers to value-adding economic activities that an enterprise is
interlinked with in the process of producing goods and/or services to serve its chosen market.
A value chain typically consists of: 1) inbound distribution or logistics, 2) manufacturing
operations, 3) outbound distribution or logistics, 4) marketing and selling, and 5) after-sales
service. These activities are supported by 6) purchasing or procurement, 7) research and
development, 8) human resource development, and 9) organizational development. A SE that
understands and manages its value chain improves its capability to create economic,
environmental and social values towards improving the position and benefits of the poor in the
value chain and towards ensuring the viability and sustainability of the enterprise.


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CHAPTER II
POVERTY REDUCTION THROUGH SOCIAL ENTERPRISES

SECTION 4. Social Enterprise (SE) General Concept and Coverage ~ An SE, for
purposes of this Act, refers to a Social Enterprise with the Poor as Primary Stakeholders as
the term is defined in Sec. 3a of this Act. It may be collectively owned by the poor in the form
of cooperatives, associations or other legal form, where the poor are the exclusive owners or
comprise a majority of the shareholders, partners, or members. SEPPS may also include
NGOs or other organizations that engage in wealth-creating activities, the proceeds of which
are used exclusively to sustain the fulfilment of their social mission.

SECTION 5. Eligibility for Benefits and Incentives. - To be recognized and be
eligible for the benefits and incentives provided for in this Act, the SE shall:

a) provide or facilitate the provision of a combination of transactional and/or
transformational services to improve the position and benefits derived by the poor
from the SE and the value chain or economic subsector where the SE is located,
including becoming worker-owners, supplier-owners, supervisors and managers,
active members and leaders in governing bodies of the SE or its allied organizations;

b) _ invest a substantive part of its surplus, profits or mobilize other resources to
assist the poor to become partners in SE or value chain management/governance
and/or to become partners in community, sectoral and societal transformation;

c) make a pro-active contribution to resolving social and environmental problems
and generate profit or surplus with due regard to social and environmental costs;

d) employ any of the following development strategies in the pursuit of its social
mission: 1) empowerment strategy; 2) social inclusion strategy; 3) intermediation
strategy; and, resource mobilization strategy;

) _be engaged in an economic activity within the sectors of agriculture and
fisheries, industry and services which, for purposes of this Act, shall refer to an
activity in any of the economic subsectors;

f) ensure that a substantive part of the wealth created by the enterprise is
distributed to the poor in the form of services, dividends and other forms of benefits,
and payments and incentives for products or services rendered consistent with the
principles of fair trade;

9) __be duly registered with the appropriate agencies as provided under the
Corporation Code or the Cooperative Code of the Philippines, Magna Carta for
Micro, Small and Medium Enterprises, Barangay Micro Business Enterprises Act
and other laws.

Financial sustainability shall not be a prerequisite for the availment of incentives and
benefits under this Act: Provided, That social enterprises that have not achieved financial
sustainability may be eligible to avail of the services, assistance and incentives set forth in this

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‘Act by presenting a workable strategy to achieve financial sustainability over a reasonable
period of time.

SECTION 6. Other Eligibility Provisions. in the case of social enterprises organized
‘as stock corporations, partnerships or sole proprietorships, the following additional
requirements shall apply:

a. Associal enterprise, if organized as a sole proprietorship or partnership, must be
‘one hundred percent (100%) owned and capitalized by Filipino citizens. If the enterprise is a
stock corporation, at least sixty percent (60%) of its outstanding capital stocks must be owned
by Filipino citizens;

b.  Asocial enterprise must not be organized as a branch, subsidiary or division of
a private business enterprise, regardless of the size of such private business enterprise, nor
may its policies be determined by a private business enterprise: Provided, That this shall not
preclude a SE from accepting subcontracts from large private business enterprises or firms or
from joining in cooperative or joint-venture activities with other SEs or foundations practicing
CSR

c. A social enterprise organized as stock corporations, partnerships or sole
proprietorships, must invest at least 60% of its gross revenues to sustain the fulfilment of its
social mission or to provide transformational services for the poor.

SECTION 7. Qualifications. — Within ninety (90) days from the effectivity of this Act,
the Social Enterprise-MSMED Council shall formulate the implementing rules and regulations
for the application and accreditation of enterprises to qualify as SE under this Act, following
the principles of self-regulation, transparency and responsibilty.

SECTION 8. Formulation of a Poverty Reduction through Social
Entrepreneurship (PRESENT) Program. — To promote the development of an SE sector
with the poor as primary stakeholders, a comprehensive and fully-integrated Poverty
Reduction through Social Entrepreneurship (PRESENT) Program shall be formulated, guided
by the following principles:

a) Incorporation of the PRESENT Program in the government's poverty reduction
drive as a major sustainable and comprehensive strategy;

b) Rationalization of poverty reduction programs by streamlining and coordinating
the various anti-poverty programs of the government to reduce inefficiency and duplication
and to improve the effectiveness of each program;

©) People's participation and empowerment by mobilizing civil society organizations
and social movement groups working with the poor;

d) Promoting sustainable programs that reduce inequality in incomes across
economic sectors and increase self-reliance among the poor;


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e) Enabling SEs to overcome constraints and to take advantage of opportunities for
enhancing the position and benefits of the poor in economic subsectors and value chains;

Oy Gender-sensitivity by ensuring women's equal rights and access to SE's
resources; and,

9) Development of sustainable mechanisms for the provision of quality and
accessible social services to the poor.

The planning framework of the PRESENT Program and its planning process shall
‘ensure that the poor are engaged as primary stakeholders. It shall add value and complement
‘ecosystem-based, area-based, community-based and other tools and processes in local
‘economic development by promoting and utilizing the economic subsector as a strategic unit
of analysis and planning SE development interventions.

The PRESENT Program shalll identify and develop key SEs and resource institutions
as partners in strategic economic subsectors that have the potential for growth and where
large numbers of the poor are concentrated. SEs shall be developed as vehicles to ensure
that the poor benefit the most from sustainable subsector development.

PRESENT medium-term and annual development plans shall be formulated in
synchrony with the medium-term development plan of the national government.

SECTION9. Social Enterprise-MSMED Council. - To carry out the policies
declared under this Act, the MSMED Council will be renamed as the Social Enterprise MSMED
Council hereinafter referred to as the Council. It shall be the primary agency tasked to carry
out the promotion, growth and development of social enterprises in the country.

The Council shall be expanded to accommodate the following:

a) Nine (9) representatives from SEs, three (3) representatives each from the
main island groupings of Luzon, Visayas, and Mindanao;

b) Three (3) representatives from SE service institutions; and

°) Three (3) representatives from SE advocacy groups, as members.

The representatives of the SEs from the main island groupings of Luzon, Visayas, and
Mindanao, the SE service institutions, and the SE advocacy groups shall be screened and
pre-selected by the sector. These representatives must be conversant in the theory and
practice of SE and committed to the policies and programs provided under this Act.

Six (6) representatives (two from each island group) shall be appointed for a term of
three (3) years, while another three (3, one per island group) representatives shall be
appointed with a term of two (2) years. No person shall be appointed to serve as an SE
representative in the SEDC for more than a period of two (2) terms or more than six years.

These representatives must be conversant in the theory and practice of SE and
committed to the policies and programs provided under this Act.

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Any vacancy in the Council representation arising from the death, incapacity,
resignation, or termination of the term of an appointed SE representative shall be filled up
within 90 days from the occurrence of the said vacancy. All nominations to the vacancy shall
be submitted within 60 days from the occurrence of such. In the case of a vacancy arising
from death, incapacity or resignation, the representative appointed to the vacancy shall serve
only for the remaining period of the term for the vacated office.

SECTION 10. Powers and Functions. - The SE Representatives of the Council shall
have the following powers and functions:

a) Formulate policies, plans, programs and projects to develop and promote SEs
as a tool for poverty reduction consistent with national development objectives;

b) Oversee the successful implementation of the PRESENT Program and other
SE programs;

©) _ Identify and access sources of financing to expand the SE sector;

d) Monitor and evaluate the performance of programs and projects for appropriate
incentives;

) Call upon any government agency to carry out and implement programs and
projects identified by the Council;

f) Call upon people's organizations, non-government organizations, the academe
and other sectors to provide advice on matters pertaining to SEs and conduct of transactional
and transformational services to farmers, producers, workers, consumers and other
stakeholders;

9) Submit annual and other periodic reports to the President and the Congress of
the Philippines through the Congressional Oversight Committee;

h) —_ Promulgate such rules and regulations and exercise such other powers and
functions as may be necessary to carry out the purposes of this Act; and
i) Perform such other functions as may be necessary for its effective operations

and the continued enhancement, growth and development of the SE sector.

SECTION. 12. National Center for Social Enterprise Development. - There shall
be established a National Center for Social Enterprise Development (NCSED) under the
Couneil which shall perform the following functions:

a) — Provide SEs with capability-training and education through the Social
Enterprise Capability Building and Sustainability Program created under Section 16 of this Act;

b) Develop and enhance a research and development system which shall equip
every SE with innovative and sustainable approaches that ensures improvement in the access
to basic social services by the poor pursuant to Section 18 of this Act; and

) Manage a Social Enterprise Marketing Assistance Program (SMAP) that will
ensure the generation of the highest possible income for the SEs pursuant to Section 19 of
this Act.

‘The NCSED shall be headed by one of the SE representatives to the Council. It shall
maintain a multi-sectoral, multi-disciplinary pool of experts including those from the academe,
practicing professionals, business and industry, youth, women and other concemed sectors,
who shall be screened according to the qualifications set by the Council.

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SECTION. 13. Role of LGUs in SE Development. - Pursuant to the relevant
provisions of R.A. No. 7160, otherwise known as the Local Government Code, the LGUs shall
be primarily responsible for the development of SEs and the implementation and enforcement
of the relevant provisions of this Act within their respective jurisdictions with the end in view of
reducing poverty therein. The LGUs are hereby mandated to include in their respective local
development plans certain policies and programs geared toward the development of SEs in
their jurisdiction.

LGUs with viable SE development plan as incorporated in their respective local
development plans are entitled to avail of the SE Development Fund created under the
immediately succeeding section for the purpose of initiating and facilitating the development
and sustainability of SEs in their own jurisdiction: Provided, That no LGU shall establish and
operate its own SE.

CHAPTER Ill
DEVELOPMENT OF SOCIAL ENTERPRISES

SECTION 14. SE Capability Building and Sustainability Program; Creation of SE
Development Fund. - There is hereby established an SE Capability Building and
Sustainability Program, the primary objective of which is to guarantee the viability and
sustainability of SEs through activities that advance, in general, both transformational services
and transactional services. This program shall include training in social entrepreneurship
development, institutional strengthening, human resource competency and skills training,
business planning and advisory services, upgrading of accounting and auditing systems,
technical assistance for the installation or improvement of management information systems,
technology intervention, technology incubation/commercialization, market studies, and
product development competitiveness, business matching activities, trade fairs and missions,
policy advocacy, disaster-resiliency and other related activities.

The SE Capability Building and Sustainability Program shall likewise include the
establishment of an insurance system for SEs affected by natural calamities, in line with the
National Framework Strategy on Climate Change 2010-2022, as provided for under RA 9729
or the Climate Change Act of 2009 and RA 10121 or the Philippine Disaster Risk Reduction
‘and Management Act of 2010.

For this purpose, there is hereby created and established an SE Development Fund
(SEDF) in the amount of Three Billion Pesos (P3,000,000,000.00) to be administered by the
Council with an endowment from the earnings of the Philippine Amusement and Gaming
Corporation (PAGCOR), in addition to appropriations by Congress, voluntary contributions,
grants, gifts from both local and foreign sources as may be accepted by the Council. Capability
building projects approved by the Council shall be implemented by the NCSED.

Only the fruits of the SEDF shall be used for the purposes provided herein. Any

undisbursed fruits for the preceding year shall form part of the disbursable portion of the SEDF
in the following year.

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SECTION 15. Social Enterprise Research and Development System. - The
Council, in coordination with the NEDA, DOST, and DTI, and other appropriate agencies and
research institutions, shall develop and enhance a research and development system that:

a) provides studies on opportunities for poverty reduction and SE development in
key economic subsectors and other inputs for the Council to undertake strategic planning for
its PRESENT Program;

b) equip SEs and support institutions with technologies that are appropriate for
‘enhancing the participation and benefits of the poor in various economic subsectors; and,

©) equip SEs and support institutions with innovative and sustainable approaches to
improve access of the poor to quality basic social services.

SECTION 16. Social Enterprise Marketing Infrastructure Development. - The
Council shall promote the development and expansion of local and foreign markets for the
products and services of SEs, guided by the principles of fair trade. Consistent with this, the
Council shall:

a) establish an SE Marketing Assistance Program (SMAP) that will assist SEs match
supply with demand in both domestic and foreign markets, as well as promote SE products
and services through tri-media, trade fairs and trade missions;

b) develop, install and sustain an SE market information system with the assistance
of the DTI and DOTC which shall be called the SE Marketing Information Network (SMIN).

The SMIN shall be set up from the level of the municipal and provincial LGUs, the
regional and up to the Council level within one (1) year from the approval of this Act, taking
into account existing information networks such as the internet and using a dedicated website
for the purpose, to ensure linkage of the SEs with the government and its various departments,
agencies, bureaus and instrumentalities, the local and domestic markets, as well as research
institutions. The Council shall provide technical assistance in setting up the SMIN at the local
and regional levels.

All government departments, agencies, bureaus, research institutions, as well as the
LGUs shall consolidate and continuously update all relevant information and data that would
be of use to SEs on a periodic basis and make such data available in a dedicated website on
the internet.

The SMIN shall provide information and marketing services related to products of SEs
which shall include the followin,

1 Supply data;
2 Demand data;

3 Price and Price trends;

4. Product standards;

5 Directory of, but not limited to SEs, traders, key market centers, processors

and_ business institutions both at the national and local levels;

6 Information and technology generated from research institutions;
7. International, regional and local market forecasts; and
8. Resource accounting data.

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CHAPTER IV
INCENTIVES AND BENEFITS

SECTION 17. Special Credit Windows. - In addition to the special credit windows
provided for the promotion of microfinance as provided under Section 16 of RA 8425, the Land
Bank of the Philippines, Development Bank of the Philippines, Philippine Postal Bank, and Al
Amanah Bank, are hereby mandated to set aside at least eight percent (8%) of their total loan
portfolio based on their balance sheet in the end of the preceding quarter, and open a special
credit window for SEs.

Fora period of ten (10) years from the date of the effectivity of this Act, all other lending
institutions as defined under the Central Bank Act or the General Banking Act, as amended,
whether public or private, shall likewise set aside at least eight percent (8%) of their total loan
portfolio based on their balance sheet as of the end of the previous quarter and make the
same available for SEs through a special credit window. The BSP, in consultation with the
Council, shall formulate the rules for the effective implementation of this provision: Provided,
That the purchase of government notes, securities and other negotiable instruments shall not
be deemed compliance with the foregoing provision

The BSP shall establish an incentive program to encourage lending to SEs beyond the
mandatory credit allocation such as possible reduction in bank's reserve requirement.

The Council shall establish a system to monitor all loan applications of SEs in order to
account for the absorptive capacity of the SE sector. The BSP shall require lending institutions
covered by this Act to furnish the Council on a quarterly basis a regular report on their
respective compliance with the above provisions on the mandatory credit allocations for SEs
and shall act immediately on the Council's reports of non-compliance therewith.

The special credit window for SEs shall bear interest lower than the market rate and
shall have longer terms of payment and waiver of applicable fees

SECTION 18. Special Credit Window Purposes. - The special credit window
provided under Section 19 of this Act shall be intended for the following purposes:

a) Organizational developmental loan or capacity-building loan for the conduct of
social preparation activities or the conduct of capability-building and training or professional
development of the board, management and staff of the SE for social entrepreneurship, such
as business planning and advisory services, technology intervention, incubation, market
studies, and product development;

b) Credit line for business development loan or working capital loan to cover the
operational and management expenses of a start-up or existing business or income
generating project, including receivable financing or purchase of additional inventory, soft or
intangible investments such as trade fair participation or acquisition of software or franchise
development packages;

©) _ Fixed assets financing to cover acquisition of fixed assets like machineries and
equipment, motor vehicle, or acquisition of lot for project site or construction of a plant and
building and the improvement thereof;

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d) Value chain financing to cover any of the value chain activities such as
production, processing and marketing;

) Domestic letter of credit or trust receipt to provide a stand-by credit facility for
the SE borrower for the purchase of product inputs, equipment, machinery, implements, and
spare parts, whereby payment of which is guaranteed and to be made to the seller by the
lending institution, provided all documents conform with the terms and conditions of the credit;
and

f) Revolving Credit Line for re-lending to finance the livelinood project
requirements of end-borrowers,

SECTION 19. Eligibility for Agriculture and Fisheries Credit. — At least ten percent
(10%) of the funds created under Section 6 of RA 10000, otherwise known as "The Agri-Agra
Reform Credit Act of 2009," mandated to be set aside by all banking institutions, whether
government or private, for agriculture and fisheries credit, shall be made available for SEs
engaged in agriculture and fisheries activities.

SECTION 20. Social Enterprise Guarantee Fund Pool with Non-Collateral Loans.
= Thereis hereby created a Social Enterprise Guarantee Fund Pool (SEGFP) which shall
be comprised of the five percent (5%) of the preceding year budget surplus of the government-
owned and controlled corporations and government financial institutions including the
PAGCOR, the Philippine Charity Sweepstakes Office (PCSO), the Social Security System
(SSS), the Government Service Insurance System (GSIS), the National Power Corporation
and the Philippine National Oil Company (PNOC), as contribution to the SGFP in accordance
with relevant laws, charters and by-laws, in addition to voluntary contributions, grants and gifts
from both local and foreign sources as may be accepted by the Council.

The SEGFP shall be administered by the Council and shall be used to mitigate the
risks involved in SE sector lending, facilitating the provision of credit therefor. The fund shall
be placed in trust with the Land Bank of the Philippines for the purpose of providing guarantee
cover to participating financial institutions and other parties in extending financing to SEs:
Provided, That the fund may also be used to cover the performance bond of SEs in
government procurement

The Council, in coordination with the Land Bank of the Philippines, shall draw up the
mechanics and administrative arrangements and issue the implementing guidelines for the
fund pool.

SECTION 21. Utilization of People's Development Trust Fund. - The earnings of
the People's Development Trust Fund (PDTF) declared under Section 11 of RA 8425 may be
utilized and accessed by the NSCED or accredited SE for the following purposes:

a) Consultancy and training services for SEs and their beneficiaries on the
establishment of the necessary support services such as financial preparation, fund sourcing,
operation of credit and savings entities, monitoring and evaluation including training on
marketing, financial, human resource, operational and strategic management;

b) Scholarships or training grants for SE staff and officers, and selected
beneficiaries;

©) Community organizing for SEs;

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d) SE development and capability building programs, feasibility studies and
researches;

e) __Legal and other management support services for SEs such as registration or
accreditation, documentation, contract review and enforcement, audit and operational
assessment;

f) __ Information dissemination of SE technology and management; and

9) Other activities to support SEs as approved by the designated agency
administering the PDTF.

SECTION 22. Tax Exemptions. - An accredited SE shall have the following tax
‘exemptions:

a) An SE with a net income of not more than Fifteen million pesos (P15,000,000.00)
shall be exempt from all national, city, provincial, municipal or barangay taxes of whatever
name and nature: Provided, That such net income shall be allocated for transformational
services and other activities of the SE as provided under Section 5.g of this Act;

b) Documentary stamp tax;

) Capital gain tax on sales or exchanges of real property classified as capital
assets or shares of stock; and

d) For five (5) years after the effectivity of this Act, all SEs duly certified by the
Council, in consultation with the Department of Finance (DOF) and the Board of Investment
(BOl) of the DTI, shall be exempted from the payment of tariff and duties for the importation
of all types of product inputs, equipment, machinery, implements, and spare parts: Provided,
That these inputs, equipment, machinery, implements, and spare parts shall be for the
exclusive use of the importing SEs and can be shown to be directly related to further improve
the value chain operations of the SEs.

The Council shall, in consultation with the DOF and the BOI, within ninety (90) days
from the effectivity of this Act, formulate the implementing rules and regulations governing the
importation of the inputs, equipment, machinery, and implements for use by the SEs.

For income tax purposes, a reinvestment made by a SE for the expansion of its socio-
economic projects within its area of operations shall be tax deductible from the gross income.

SECTION 23. Preferential Rights. - Social enterprises shall be accorded a
preferential right in the procurement process and in the implementation of procurement
contracts by the government in all its branches, departments, agencies, subdivisions, and
instrumentalities, including in the government-owned and controlled corporations and local
government units.

SEs shall be given priority and preference in the following procurement process

a) Direct contracting as provided under Section 50 of RA 9184, otherwise known as
the “Government Procurement Reform Act," may be resorted to if the contracting party selling
the goods and services required by the procuring entity is a social enterprise as certified by
the Council

b) Shopping as provided under Section 52, paragraph (a) of RA 9184 may be
resorted to when there is an unforeseen contingency requiring immediate purchase: Provided,

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That the procurement of the goods and services shall be first obtained from the social
enterprise within the area of operation of the procuring entity which is duly certified by the
Council as having the capacity to supply the required goods and services: Provided, further,
That the amount shall not exceed One hundred thousand pesos (P100,000.00)

Shopping as provided in Section 52, paragraph (b) of RA 9184 may be resorted in the
procurement of ordinary or regular office supplies and equipment not available in the
Procurement Service involving an amount not exceeding Two hundred fifty thousand pesos
(P250,000.00): Provided, That the Procurement does not result in splitting of contracts:
Provided, further, That a price quotations shall be first obtained from a social enterprise as
certified by the Council as having the capacity to furnish or provide the required office supplies
and equipment. Only in the event of failure of submission or absence of SE price quotation
that at least three (3) price quotations from other bona fide suppliers shall be obtained.

©) Negotiated procurement as provided under Section 53 of RA 9184 may be allowed
when the goods or services subject of the procurement may be obtained from a SE within the
area of operation of the procuring entity which is duly certified by the Council as having the
capacity to supply the required goods and services.

Only in the event that no procurement is perfected by way of direct contracting,
shopping, or negotiated procurement due to the absence of SEs within the area of operation
of the procuring entity or the lack of interest or capacity to supply on the part of existing SEs,
shall the procuring entity through its bids and awards committee issue an invitation to bid.

A procuring entity, when applicable, shall have at least one member representing SEs.

Registered small enterprises under RA 6977 that qualify as SE under this Act shall,
consistent with Section 4 of RA 9501, be entitled to a share of at least ten percent (10%) of
total procurement value of goods and services supplied to the government, its bureaus, offices
and agencies annually.

The Council shall, in coordination with the Department of Budget and Management
(DBM) and the Department of the Interior and Local Government (DILG), issue the rules and
regulations that shall implement the preferential right accorded to SEs under this section
including the limitations and restrictions in its application.

SECTION 24. Incentives for Social Investors. — Social investors and other
institutions that contribute money or other forms of donation in the promotion and development
of SEs shall be entitled to the following tax incentives:

a) Equity investments and donations to an accredited SE shall be fully deductible from
the gross income of the investor or donor subject to the conditions of Section 34 paragraph
(©) of RA 8424 otherwise known as the “National Internal Revenue Code of 1997,” as
amended.

b) Donations to an accredited SE shall be exempt from donor's tax subject to the
qualifications of Section 101 of RA 8424, as amended.

For the purpose of availing of the tax incentives under this Section, the accreditation of
the recipient SE by the Council shall be a sufficient evidence for qualification as a social
investor under this Act.

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CHAPTER V
APPROPRIATIONS AND OTHER PROVISIONS

SECTION 25. Appropriations. - To carry out the provisions of this Act, the following
amounts are appropriated as follows:

a) The sum of One hundred million pesos (P100,000,000.00) is hereby
appropriated as the initial operating fund which sum shall be sourced from the President's
Contingent Fund and voluntary contributions, grants and gifts from both local and foreign
sources as may be accepted by the Council. In the subsequent years, the Council shall have
a separate annual appropriation under the DT! which shall be included in the annual General
Appropriations Act starting in the fiscal year immediately following the approval of this Act.

b) The aggregate sum of Three billion pesos (P3,000,000,000.00) for ten (10)
years is hereby appropriated for the establishment of the SEDF from the share of the national
government in the earnings of the PAGCOR and from voluntary contributions, grants and gifts
from both local and foreign sources as may be accepted by the Council, in the following
‘manner: on the first year, One hundred million pesos (P100,000,000.00); on the second year,
‘One hundred fifty million pesos (P150,000,000.00); on the third year, Two hundred million
pesos (P200,000,000.00); on the fourth year, Two hundred fifty milion pesos
(P250,000,000.00); on the fifth year, Three hundred milion pesos (P300,000,000.00); and
every year thereafter until the tenth year, Five hundred milion pesos (P500,000,000.00)
annually

SECTION 26. Penalty Clause. — The penalty of imprisonment for not less than six (6)
months but not more than two (2) years or a fine of not less than Twenty-five thousand pesos
(P25,000.00) but not more than Fifty thousand pesos (P50,000.00), or both imprisonment and
fine, at the discretion of the court, shall be imposed upon any person, corporation, government
entity or agency who, intentionally or by gross negligence, fails to provide the benefits, rights
and incentives granted to SEs in violation of this Act, or perform any act in violation of its
provisions.

If the violation is committed by the SE or a government agency, the members, officers,
directors or trustees thereof who are directly involved shall be held liable therefor.

If the violation is committed by the employees and agents who acted in gross violation
of the provisions of this Act, the officers, directors or trustees, or incorporators of the SE shall
be jointly and severally liable with the offending employees, agents, and the enterprise.

If the offender is a public official or employee, the offender shall, upon conviction, suffer
the accessory penalty of absolute disqualification,

SECTION 27. Non-Compliance with the Mandatory Allocation of Credit
Resources. — Administrative sanctions including a fine of not less than Five hundred thousand
pesos (P500,000.00) shalll be imposed by the Bangko Sentral ng Pilipinas upon any banking
or lending institution which fails to provide the mandated credit allocations to SEs stipulated
in Section 17 of this Act.

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SECTION 28. Non-Impairment Clause. - Nothing in this Act shall be construed to
diminish, impair, or repeal the rights granted to marginalized sectors under existing laws.

SECTION 29. Information Dissemination. - The Philippine Information Agency (PIA)
shalll, in coordination with the Council, the DTI, DA, and the DILG, ensure the proper and
adequate information dissemination of the contents and benefits of this Act to the general
Public especially to its intended beneficiaries.

Within sixty days (60) after its effectivity, the Council shall distribute copies of this Act
to every department, agency, subdivision, and instrumentality of the government, including
government-owned and controlled corporations, regional and provincial offices, and local
governments.

All duly accredited SEs shalll be given one (1) copy of this Act at cost. Thereafter, every
newly accredited SE shall be issued a copy of this Act together with the rules and regulations
promulgated pursuant to this Act.

SECTION 30. PRESENT Program in Government. — All agencies of the government
implementing a poverty alleviation program shall, in coordination with the Council and within
a period of five (5) years but in no case longer than ten (10) years from the approval of this
Act, incorporate the PRESENT Program in their respective poverty alleviation programs as a
tool for poverty reduction.

The Council shall, in coordination with the various government agencies with poverty
alleviation programs, prepare the appropriate beneficiaries thereof and organize them into full-
fledged SEs under the contemplation of this Act

Within a period of five (5) years, the Council shall facilitate the development and
dissemination of tools, and invest in the development of the capability of SEs to plan, monitor
and evaluate their social and financial performance and outcomes. The Council shall evolve
socially acceptable benchmarks for evaluating the performance of SEs and incorporate them
to effectively develop and regulate the sector

SECTION 31. Social Entrepreneurship Education in Schools. - Toward strategically
developing the nation's human resource capability in social entrepreneurship, the DepEd and
the CHED shall cause the integration of SE content and inclusion of SE courses in the curricula
at all levels, especially in the secondary and tertiary levels. This shall be part of the SE
Capability Building and Sustainability Program stated in Sec. 14 of this Act.

A continuing social entrepreneurship education program for out-of-school youth and
adults shall likewise be developed and undertaken.

The social entrepreneurship education program for primary and secondary education
shall include information regarding:
a) _ social issues and civic ways of addressing them
b) the producer as a steward of natural resources
c) __ the consumer as a responsible member of society and his responsibility
to develop critical awareness which is the responsibility to be alert and

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questioning about the environmental and social impacts of the goods and
services he/she uses;

1.) social concern which is the responsibilty to be aware of the impact of his
consumption to society, especially the disadvantaged; and

©.2 ) environmental awareness which is the responsibility to understand the
environmental consequences of his use of natural resources, consumption,
recognizing his individual and social responsibility to conserve natural
resources for future generations,

All higher learning institutions and vocational schools are mandated to include a
subject on social entrepreneurship in their social studies program or in their business,
commerce, or economics courses.

SECTION 32. Applicability of Other Laws. — The Labor Code and all other labor laws,
the Social Security Act, the Medical Care Act, other social legislations, and all other laws and
executive orders that govern the relationship between the employer and the employee shall
apply to SE and its employees and that all employees covered under this Act shall be entitled
to the same benefits given to any regular employee such as social security and healthcare
benefits

SECTION 33. interpretation and Construction. — In case of doubt in the meaning of
any provision of this Act or in the rules and regulations promulgated pursuant to this Act, it
shall be resolved in favor of SEs and their stakeholders.

CHAPTER VI
FINAL PROVISIONS

SECTION 34. Implementing Rules and Regulations. — Within ninety (90) days from
the effectivity of this Act, the Secretary of Trade and Industry shall, in consultation and
coordination with the concerned government agencies and sector, promulgate the necessary
rules and regulations for the effective implementation of this Act.

SECTION 35. Separability Clause. - If any provision or part of this Act is declared
invalid or unconstitutional, the remaining parts or provisions not affected shall remain in full
force and effect.

SECTION 36. Repealing Clause. — For purposes of this Act, Section 11 of RA 8425
and Sections 50, 52 and 53 of RA 9184 which are inconsistent with this Act are hereby deemed
amended. All other laws, executive orders, presidential decrees, rules and regulation or parts
thereof inconsistent with any provisions of this Act are hereby repealed, amended or modified
accordingly.

SECTION 37. Effectivity. - This Act shall take effect fifteen (15) days afer its
publication in the Official Gazette or in two (2) national newspapers of general circulation.

Approved,

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