EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES,

Introduced by Representative Rufus B. Rodriguez

House Bill No. 4878

EXPLANATORY NOTE

Until the present, the hindrance that most Filipinos face in putting up their own
businesses is not only the lack of capital, but even the lack of access to financing
opportunities,

This is why it is very important to promote our MSMEs and give them access to
capital. Data shows that as of 2017, there are 924,721 business enterprises operating in the
Philippines. Of these, 99.56% (816,920,677) are MSMEs, while only 0,44% (4,044) are large
enterprises. Of the total number of MSMEs, 89.59% (828,436) are micro enterprises, 9.56%
(88,412) are small enterprises, and 0.41% (3,829) are medium enterprises. MSMEs also
generated a total of 4,922,251 jobs in 2017 versus 2,909,838 for large enterprises.

Despite this, MSMEs are not provided enough assistance by the goverment. Thus,
this measure, among others, provides for a program 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 very close to prevailing bank rates;

(4) The lenders have a pragmatic collection mechanism; and

(5) The mode of payment is on a daily or weekly basis

In view of the foregoing, immediate approval of this bill is earnestly requested

Y/ Yh

RUFUS B. RODRIGUEZ



EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriquez

4878
House Bill ‘No.

AN ACT
INSTITUTIONALIZING — DEVELOPMENT, ASSISTANCE AND MICROFINANCE
PROGRAMS FOR LIVELIHOODS, ESTABLISHING AND PROMOTING ANTI-POVERTY
AND INCLUSIVE GROWTH POLICIES WHICH ARE SUPPORTIVE OF MICRO, SMALL,
AND MEDIUM ENTERPRISES (MSMEs), ALLOCATING FUNDS THEREFOR, AND FOR
OTHER PURPOSES

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

Section 1. Short Title. This Act shall be known as the “Puhunan, Tulungan,
Kaunlaran (PTK) Act.”

Section 2. Declaration of Policy. It shall be the policy of the State to promote
genuine inclusive growth and alleviate poverty.

It is likewise the policy of the State to promote a just and dynamic social order that
shall ensure prosperity, promote full employment, a rising standard of living and an improved
quality of life for all. In pursuit of this, the State shall endeavour to develop a program that
will ensure that all of its citizens are equipped with or can readily access the necessary

The 1987 Constitution provides that all sectors of the economy and alll regions of the
country shall be given optimum opportunity to develop. Private enterprises, including
corporations, cooperatives, and similar collective organizations, shall be encouraged to
broaden the base of their ownership.

Access to finance and technical support shall be the core policy of this Act. To
operationalize this policy, it shall be ensured that: (a) The process for obtaining micro-
financing, grants and technical support in the Philippines shall be simple and practical; (b)
The loan proceeds shall be exclusively used for capital; and (c) Interests shall not be
unconscionable and not higher than prevailing bank rates.

Section 3. PTK Five-Star Program. The Department of Trade and Industry (DT!), in
coordination with the Department of Interior and Local Government (DILG), Department of
Agriculture (DA), Department of Science and Technology (DOST), Department of Tourism
(007), National Economic and Development Authority (NEDA), and the Technical Education
and Skills Development Authority (TESDA) shall develop a comprehensive program for the
development of micro, small and medium enterprises (MSMEs) in all regions of the country
The goal of the program is to protect the capital of small proprietors, ensure the success of
their MSMEs, and transform these MSMEs into five-star businesses by providing them with
assistance and the necessary resournes in order to heln their businesses flourish.

The DTI shall be guided by the following principles in the development of the PTK
Five-Star Program:

a. The Program shall be national in scope but shall be tailored to fit the business
environment, market demands and available resources of each administrative
region;


b. Ine DiI snail create a registry for ali MSWVES per reyion Laseu Un wen size
category (j.e., micro, small or medium) and business area (ie., agriculture,
livestock, fisheries, food processing, fabric and clothing, eco-tourism activities,
Pottery and handicrafts, furniture and hardwood, information and technology,
etc);

c. Each region shall choose a maximum of five (5) priority business areas to
develop in order to reap the benefits of efficiency and specialization;

d. As much as possible, each region shall be encouraged to choose a diversified
Priority business portfolio in order to hedge for risks brought about by natural
calamities and changing market demands;

e. To facilitate the implementation of this Act, each region shall establish a
Proprietor’s guild for each of their priority business areas;

{Free technical and administrative support, including, but not limited to, product
development, skills and leadership training, packaging and design, quality
conuvi, market promotion, client oF supplier Matching, and fi

Planning, shall be made available to MSMEs falling under the five (5) priority
business areas in their respective regions,

9. Every year, the five (5) top-performing enterprises per size and category in each
region shalll receive a Five-Star award and shalll be eligible for grants, not less
than ten percent (10%) of their current capital, to be used solely for further
business capitalization;

h. Every medium-sized enterprise that evolves into a large enterprise through the
help of the PTK Five-Star Program shall likewise be eligible for a one-time grant
of Twenty Five Thousand Pesos (P25,000) to be used solely for further business
capitalization;

i. There shall be a mandatory review of the PTK Five-Star program every three (3)
years in order to ensure that the program meets the present market demands

Section 4. PTK Loan Program. In addition to the PTK Five-Star Program, the DTI,
in consultation with the National Anti-Poverty Commission (NAPC) and the Bangko Sentral
ng Pilipinas (BSP) shall develop a loan program catering exclusively to micro-enterprises in
need of capital, whether or not they fall under the priority business areas of their respective
regions.

The DTI shall be guided by the following principles in the development of the loan

a. The loans shall be extended only to borrowers who have satisfied the
requirements under this Act;

b. Each loan shall_not exceed Ten Thousand Pesos (P10,000) for first time
borrowers; Thirty Thousand Pesos (P30,000) for second time borrowers; and Two
Hundred and Fifty Thousand Pesos (P250,000) for those borrowing for a third
time or oftener, Provided, that the latter shall be borrowers in good standing. The
DTI is hereby authorized to.amend these amounts, after the mandatory review
Provided in this Act, in order to meet present market demands:

¢. Collateral shall not be required from borrowers;


d. Loan proceeds shall be exclusively used for capital;

e. The period for repayment shall be mutually agreed upon by the borrower and the
lender; Provided, that such repayment period shall be at least three (3) months
for a first time borrower; at least six (6) months for a second time borrower, and
at least one (1) year for those borrowing for a third time or oftener;

f. Delivery of the program shall be through partner lenders which are cooperatives
and/or associations that are registered with the Cooperative Development
Authority (CDA), or the Securities and Exchange Commission (SEC), and the
DTI. In the absence of such participating partner lenders in the area, government

dedicated to the promotion of inclusive growth and anti-poverty objectives, are
mandated to implement the program;

g. The lenders shall have a collection mechanism, whereby payments are made on
a weekly or monthly basis. It shall be the duty of the lender to collect the loan
principal, together with the interest, from the borrower;

h. Government lenders shall not profit from the microfinance program. Neither shall
they be entitled to interest proceeds, the amounts of which shall be devoted to a
fund for the development of MSMEs. Participating partner lenders shall be
entitled to a reasonable amount of the proceeds of the interest collected by them,
as may be determined in rules and regulations promulgated in implementation of
this Act,

i, Priority shall be given to MSMEs falling under the priority business areas of their
respective regions and to MSMEs with innovative businesses; and

j. There shall be a mandatory review of the loan proaram every three (3) years in
order to ensure that the loan program meets the present market

In the pursuit of inclusive growth and poverty alleviation, pertinent rules and
regulations promulgated in the implementation of this Act shall provide for the details,
conditionalities, and other schemes in the operationalization of the program, such as, but not
limited to, penalty rates upon default and the dispensation of the proceeds from the loan

program.

Section 5. Eligibility for Loan Program. To qualify for the loan program under this
Act, the borrower must be

a. Atleast eighteen (18) years of age;

b. Amember in good standing of the duly-registered cooperative or association, or a
resident of the local government unit (LGU), from which he/she intends to avail of
the loan;

¢. Willing to state under oath the facts establishing the foregoing;

d. Comprehensive feasibility study of the business proposal; and

e. Has attended a DTI-accredited livelihood seminar, as evidenced by a certificate
of participation, and possesses credit-worthiness, as likewise proven by a
certificate issued by the DT! for that purpose.

Section 6. Registration of Cooperatives and Associations. The DTI shall keep a
registry of all participating cooperatives and associations for monitoring and record keeping
Purposes. Cooperatives and associations which are eligible to participate in Programs
Provided for in this Act must register to be included in the database.


Section 7. Local Government Unit Participation. Any law, executive order,
department order, ordinance and the like, to the contrary notwithstanding, local goverment
units, through the local sanggunian lefined in Government Code, are
hereby authorized to provide a loan program in cooperation with the cooperatives/

IS) id PoUpICS! OFyaile.

assvcalione, noryorerwiaiilas Ligeti
assistance to MSMEs within their jurisdiction,

Provided, that in cities or municipalities where there are no such cooperatives/
associations, the local government unit shall, within one year from the effectivity of this Act,
require the municipal/city social welfare and development office or the local trade and
industry office or livelihood development office in the city or municipal government
concerned, to develop and implement a loan program consistent with the provisions of this
Act, under the supervision of the DTI.

Provided, further, that each participating LGU must prepare a comprehensive
feasibility study for the development of a loan program. Each LGU must fund, from its
intemal revenue allotment, at least Five Million Pesos (P5,000,000), where possible and
practicable, or Thirty Percent (30%) of the total funding cost related to small business
improvement, agricultural improvement, institutional advancement and consumer protection,
whichever is higher. Likewise, for this purpose, the LGU shall maintain a separate and
dedicated office which shall be responsible for the over-all implementation of the program in
the locality.

Section 8. Matching Fund. Participating cooperatives or associations, and LGUs
with loan programs are hereby authorized to accept donations from the private sector in
‘order to augment the available funds for the loan program.

In order to promote private sector participation in promotins

inclusive growth and

sector to an LGU shall be matched with a corresponding amount by the recipient LGU;
Provided that, donations of more than Five Million Pesos (P5,000,000) shall be matched by
the national government for the LGU. In any case, should the LGU concerned be financially
incapable of matching a donation, the national government shall augment the internal
revenue allotment of such LGU for this purpose.

Section 9. Incentives for Private Support. Any person or corporate entity may
donate funds, equipment, materials or services for the improvement of the PTK Five-Star
and/or PTK loan program. Such donations shall be done through a memorandum of
agreement between the cooperative or association, LGU, and the donor. The agreement
shall expressly state the value of the donated funds, materials, or services

All income, legacies, gifts, and donations for the benefit of the program shall be
exempt from the payment of all forms of taxes, fees, assessments, and other charges of the
government, its branches, and subdivisions. Subject to the issuance of the appropriate
revenue regulations by the Bureau of Internal Revenue, the value of the donation shall also
be deductible as an expense in the determination of the taxable income of any donor.

Section 10. Funding. The total amount of One Hundred Twenty Five Billion Pesos
(P125,000,000,000) for the next five years upon implementation of this Act or Twenty Five
Billion Pesos (P25,000,000,000) per year for the next five years upon implementation of this
Aci, shall be appropriated for the initiai implementation of the P1K Five-star Program and
t TK Loan Program. Said amount shail at all times be divided equitably among each
administrative region of the country. Thereafter, such sums as may be necessary shall be
included in the General Appropriations Act.

In addition, the amount of Five Hundred Million Pesos (P500,000,000) is hereby
appropriated as a Special Development Fund to generally support the initial implementation
of this Act.

The funds shall be held in trust by the DTI in collaboration with the Development
Bank of the Philippines (DBP), Land Bank of the Philippines (LBP) and other govemment



financial institutions. The DT! may likewise allocate a portion of the funds to the People's
Development Trust Fund (PDTF) under Republic Act No. 8425, provided that the funds to be
allocated to the PDTF shall be used solely for microfinance-related organizing activities.

Section. 11. Primary Implementing Government Agency. The DTI shall be the
lead agency, which shall ensure the implementation of this Act.

Section 12. Role of Government Financial institutions. All government financial
institutions (GFls) shall set aside funding for microfinance operations to complement the
purposes of this Act. Participating government financial institutions shall include the DBP.
LBP, and other GFis.

Section 13. PTK Task Force. There shall be a PTK Task Force in charge of
coordinating with banks and financial institutions on their existing programs on
microfinancing. This shall be consolidated and submitted to DTI to be taken into
consideration for the PTK Loan Program

Section 14. Reports. The DTI Secretary shall submit to the President of the
Philippines, the President of the Senate and the Speaker of the House of Representatives,
an annual accomplishment report on projects covered in this Act, detailing the amount of
appropriations released by end of the calendar year, the extent of the work accomplished,
further work to be done, and any recommendations for additional appropriations or charges
thereof.

Section 15. Full Financial Disclosure, Accountability and Transparency. The
DTI, as lead agency of the program, and the LGU concerned shall quarterly publish, print,
and disseminate at no cost to the public and in an accessible form, in conjunction with
Republic Act No. 9485, otherwise known as the “Anti-Red Tape Act of 2007”, and through
their websites, timely, true, accurate, and updated key information relating to the program
Likewise, they shall endeavor to translate key information and present them in popular form
and means.

Section 16. Implementing Rules and Regulations. The DTI, in consultation with
relevant government agencies, shall prepare such rules and regulations for the proper and
effective implementation of this Act, within sixty (60) days from the date of publication. The
DTI shall publish such rules and regulations once a week for two (2) consecutive weeks in
two newspapers of general circulation

Si 47. a @. if any provisio

unconstitutional, the same shall not affect the validity and effectivity of the other provisions
hereof,

Section 18. Repealing Clause. All laws, decrees, orders, issuances or portion
thereof, which are inconsistent with the provisions of this Act are hereby repealed or
modified accordingly.

Section 19. Effectivity - This Act shall take effect fifteen (15) days after its
Publication in two (2) newspapers of general circulation.

Approved,