Republic of the Philippines
HOUSE OF REPRESENTATIVES,

‘Quezon City
SEVENTEENTH CONGRESS
Second Regular Session

6709

House Bill No.

Z EPR >
[la
[> SSRI ER,

Introduced by Representative ARTHUR C. YAP

EXPLANATORY NOTE:

According to the 2015 Poverty Incidence study conducted by the Philippines Statistics Authority,
26.3%" of the Philippine population is living below poverty line - that is 1 out of 4 Filipinos who
cannot meet basic food needs that satisfy the nutritional requirements set by the Food and
Nutrition Research Institute (FNRI) and live a life that they righteously deserve. This calls us to
gear towards better solutions for 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.

In our country, where poverty and inequality are primary problems, the most common type of
social enterprise (SE) is the Social Enterprise with the Marginalized as Primary Stakeholders
(SEMPS). To be considered an SE, the organization is required to have: (1) a social mission, (2)
wealth-creating means, and (3) wealth distribution mechanism. To differ itself from inclusive
businesses, 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 through community development
projects. The communities SEs engage with are also encouraged to gain more responsibility and
can eventually become managers, or even co-owners, of the business.

Some SEs may be considered as MSMEs due to their asset and workforce size. But unlike
MSMEs, SEs operate with a social mission. They engage with the marginalized and make
business decisions that might prioritize their empowerment and the forwarding of their social
mission over profitability. This creates more social impact as they hire people that many MSMEs
would prefer nat to hire, like PWDs, the uneducated, and troubled youth—just to name a few.

Unlike traditional businesses, the financial bottom lines of social enterprises only play a
supporting role to their social bottom lines.Social enterprises have a distributive philosophy
that allow the organization to view wages to the poor as social benefits that need to be
optimized, rather than costs that need to be minimized. This leads to more equitable wealth
distribution in the enterprise.

Because SEs balance both economic and social impact, they need more public and government
support to offset the difficulties of working with marginalized groups. Many countries around
the world—like the United Kingdom, Thailand, South Korea, and many other countries in
Europe— have already recognized social enterprises as a different type of organization to draft
well-tailored policies to hone the sector's development.

While SEs are not yet legally recognized in the Philippines, efforts to promote social enterprise
development on a national level are still ongoing. With the Poverty Reduction Through Social

Tyttne- inca aw nhicontent Inewerhnincidenee amnne-flininnemaictered. 262 firct.comactar 201E mex


Entrepreneurship (PRESENT) Bill, the biggest difficulties of SEs are addressed, and a framework
to ensure the sector's growth, development, and sustainability is suggested. Moreover,
promoting education about the SE sector (which has been key in the development of United
Kingdom's SE ecosystem) is also highlighted in the bill.

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

By establishing a separate governing body, or the Social Enterprise Development Council (SEDC),
SEs in the Philippines will be screened and monitored to ensure that they contribute to the
development of marginalized community in order to access of the incentives provided in the bill.
The SEDC will take charge of monitoring the state of SEs in the Philippines and provide
recommendations on how to make the sector flourish. The SEDC can also assist other
government offices that are interested to include an SE component in their respective poverty
reduction and livelihood projects.

Because SE ecosystems and models from some countries abroad are more sophisticated, the
bill gives social entrepreneurs of foreign nationality the opportunity obtain a Social Enterprise
Visa, which is valid for five years, and to operate here in the Philippines while holding majority
stake of the organization. By doing this, we attract more SE investors and entrepreneurs to
invest money in the Philippines, which will be used for the empowerment and poverty
reduction of the marginalized Filipinos. It will also promote knowledge exchange between the
foreign nationals and local entrepreneurs, which will improve the current existing SE models in
the country. The benefit provided for foreign nationals that operate in the Philippines are
available only if foreign nationals continue to operate an SE as defined in the bill, Failure to
meet this provision will result in the early termination of the Social Enterprise Visa and the
withdrawal of benefits stipulated in the bill, including the ability to operate the organization
with majority stake owned by a foreign national.

The Poverty Reduction Through Social Entrepreneurship Act will ensure the prosperity and
independence of the nation such that more people will be free 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 view of the foregoing, immediate passage of this bill is earnestly sought.

HON, CYAP
tative


Republic of the Philippines
HOUSE OF REPRESENTATIVES.
‘Quezon City

SEVENTEENTH CONGRESS
Second Regular Session
6709

House Bill No. 2

Introduced by Representative ARTHUR C YAP

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 I
GENERAL PROVISIONS

SECTION |. Short Title. ~ This Act shall be known as the “Poverty Reduction Through
Social Entrepreneurship Act.”

SECTION 2. Declaration of Policy. - 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. The State
shall provide social justice in all phases of national development and that the State values
the dignity of every human person and guarantces fall respect for human rights

‘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 forall, 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 forcign
markets

‘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 an inclusive growth strategy that promotes
‘an chvironment 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 achicving their fall growth, and extcnd the assistance
necessary for their advancement. The State shall likewise provide technical and financial
assistance, incentives and other services to enable Social Enterprises to develop into viable
and vital anti-poverty agents, and a strong social entrepreneurship movement that will be
instrumental in reducing poverty in the country

SECTION. 3. Definition of Terms. — As used in this Act
a) A "Social Enterprise” or SE shall refer to a social mission-driven organization that
conducts economic activitics providing goods and services directly related to their
primary mission of improving the well-being of the poor, basic and marginalized
sectors and their living environment. A social enterprise explicitly declares and

Page 1 of 10


b>

them. In addition to reinvesting its surplus or profits back to the enterprise to

sustain the fulfillment of its social mission, a SE also uses it surplus or profits and

‘mobilizes other resources to assist the poor to become partners in SE or value
and governance and to become partners in community, sectoral

and socictal transformation

"Government: Procuring Entity” refers to any branch, department. office, agency.

by

ky

federtar amir chore way var mre genreioe ary ore a
of provide them through market channels to final consumers; they may be
identified by key raw material source. by finished product or final service

interventions, government agencics,
Support institutions and SEs shall more effectively reach and benefit a greater
‘number of poor m poverty reduction programs
"Margioaliscd Sechore” see to paooye of peopl wh ax: sient Gr exiled
by virtue of their physical, psychological, economic, social or cultural

‘circumstance,

“Poor.” as defined by Republic Act 8425, refers to individuals and families whose
income fall below the poverty threshold as defined by the National Economic and
Development Authority and/or cannot afford in a sustained manner to provide their
minimum basic needs of food, health, education, housing and other essential
amenities of life;

“Poverty Reduction” shall mean overcoming the income, resource and capability
deprivation mang ths poo, basic and marginalized sectors,

‘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, rescarch and development, and other similar activities,
“Transactional Services” refer 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, supplicrs, clients and owners. Transactional services may be foe~
based, such as the granting of loans, or non-fee based, such as the extension of

production-related trainings.
“Transformative Services” refer to activities that empower the poor, such as
organizational

Icaming
Sans so fr hoes femme am

"ibis Chain refer to valuc-adding cconomic 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) raw matcrials processing, 2)
inbound distribution or logistics, 3) manufacturing operations, 4) outbound
distribution or logistics, 5) marketing and selling. and 6) after-sales service. These
activities are supported by 6) purchasing or procurement, 7) research and

Create econo, cavisonmental and soa values towards improving the position
Page 2 of 10


and benefits of the poor in the value chain and towards ensuring the viability and
‘sustain ability of the enterprise

(CHAPTER I
POVERTY REDUCTION THROUGH SOCIAL ENTERPRISE

SECTION 4. Social Enterprise (SE); General Concept and Coverage ~ A Social
Enterprise (SE), for purposes of this Act, refers to a Social Enterprise with the
‘Marginalized Sectors as Primary Stakeholders (SEMPS) as the term is defined in Sec, 3
(a) 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 sharcholders, partners or members. SEMPS also include NGOs orother
organizations that engage in wealth-creating activities, the proceeds of which are uscd
exclusively (o sustain the fulfilment of their social mission.

SECTION 5. Eligibility for Benefits and Incentives. To be eligible for the benefits and
incentives provided for in this Act, the SE shall
8) 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;
b) Make a pro-active contribution to resolving social and environmental problems
and generate profit or surplus with duc regard to social and environmental costs;
) Ensure that a substantive part of the wealth created by the enterprise is

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 Act by presenting a workable strategy to achicve financial sustainability over a
reasonable period

SECTION 6. Other Eligibility Provisions. In the case of social enterprises organized as
stock corordons, petmerie ese popes, th lowing sional

requirements shall
a) A social enterprise organized as a stock corporation must not be a branch,

red didsion oft atoais astaas ocean mpuatians ofa sci of

‘such private business enterprise, nor may its policies be determined by a private

‘business enterprise. Provided, that this shall not preclude an SE from accepting,

b) A social enterprise can be 90% owned by a Foreign national and will be exempted
from the required capital provisions stipulated in Section 8 of theForeign
InvestmentsAct (RA 8179) and will be cligible to the benefits stipulated in this act.

©) Social enterprises mostly owned by Forcign nationals will cease to be exempt
from RA $179 and will cease eligible for the provisions stated here once the
npaizton sips minig tthe inom of soil ects stdin te

d) fain ec epee ‘as stock corporations, partnerships or sole
must invest at least 60% of its gross revenucs to sustain the
fulfilment of its social mission and environmental protection and provide
seaaienlicadl eocken bx Re well Gcley of tt emgientend eocor

SECTION 7. Qualifications. - Within nincty (90) days from the date it is first convened,
the Social Enterprise Development Council shall formulate the implementing rules and

Page 3 of 10


regulations for the application and accreditation of enterprises to qualify as SE under this
Act, following the principles of self-regulation, transparency and responsibility.

SECTION 8. Formulation of a Poverty Reduction Through Social Entrepreneurship
(PRESENT) Program —To promote the development of a SE sector with the

anti-poverty

duplication and to improve the effectiveness of program,

¢ People’s participation and empowerment by mobilizing civil society organizations
and social movement groups working with the poor:

a enti el ern it ein asa aero Soo
‘economic sectors and increase self-reliance among,

e Peru = piglenianpesiontionper lpradintins! Peep
‘enhancing the position and benefits of the poor in economic subsectors and value
chains,

f. Gender-sensitivity by ensuring women’s equal rights and access to SE's resources,
and,

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

‘The PRESENT Program shall identify and develop key SEMPS and resource institutions
as partners in strategic economic subsectors that have the potential for growth and where
large numbers of the poor are concentrated. SEMPs shall be developed as vehicles to
censure that the marginalized sectors 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

SECTION 8. Social Enterprise Development Council. To carry out the policy declared
under this Act, a Social Enterprise Development Council (SEDC), hereinafter referred to
as the Council, is hereby created as an agency attached 10 the Department of Trade and
Industry (DTI). It shall be the primary agency tasked to carry out the promotion, growth
and development of SEMPs m the country
The Council shall be composed of the following:
a) Sccretary of Trade and Industry, as chairperson;
b) Secretary of Agriculture, as co-vice chairperson
©) Office of the President
4d) SE sector head representative, as co-vice chairperson;
¢) Secretary of the Interior and Local Government,
f) Secretary of Finance
8) Sccretary of Environment and Natural Resources,
h) Nine (9) representatives from SEMPS, three (3) representatives each from the
main island groupings of Luzon, Visayas, and Mindanao:

SECTION. 9 Powers and Functions. ~ The Council shall have the following powers and
functions:

a) Formulate policies and plans to develop and promote, coordinate, synergize,
integrate, and cnsure compatibility and complementationof policics and programs
forSEs ax well as other anti-poverty reduction initiatives consistent with national
development objectives.

'b) Issue certificate of accreditation upon determination that the criteria set for this
purpose have been fully satisfied: Provided. That the certificate of accreditation
shall be valid only for such period as may be prescribed under the implementing,
rules and regulations of this Act;

c) Oversee the successful implementation of the PRESENT Program and other
government SE programs:

d) Identify and access sources of financing to expand the SE sector,

) Monitor and evaluate the performance of programs and projects for appropriate

Page 4 of 10


1) Call upon any government agency to implement programs and projects identified

atesonr oe supantvs fess 00s sapere ts iopipseantig Ps
PRESENT Program cnunciated under this Act or any development program for
SEs

2) 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,

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

1) Promulgate such rules and regulations and exercise such other powers and
functions as may be necessary to carry out the purposes of this Act, including,
ee eee

d Fico oh oat Race ag Sa SACRacy Mca Sve Grin et
the continued enhancement, growth and development of the SE sector,

k) Propose the concomitantplantilla position and structure for the personnel under it;

» Masago the ote provide Kirby hla fo; iechang coming hn Sec pot

SECTION 10. Designation of Permanent Representatives to the Council. Within 30 days
from the effectivity of this Act, Cabinet-ranked ex-officio members of the Council shall
designate a permanent representative to the council, to attend the meetings of the council
in cases that the Cabinet-ranked ex officio members cannot personally attend such
meetings. The designated permanent representative of any of the Cabinet-ranked members
of the Council must hold a position not lower than a bureau director

SECTION 11. Term and Appointment of SE Sector Representatives. Within 90 days, DTI
as Chaur shall convene members of the Council from the Philippine Government, as
identified in Section 9, who shall in turn, sclect and appoint representatives of SEMPs and
SE-oriented NGOs/cooperatives. Said SE representatives must be screened and pre-
selected by the sector.

Six (6) representatives (two from cach region) shall be appointed for a term of three (3)
years, while another three (3, one per region) 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. Any vacancy in the
SEDC 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. 12. Secretariat. There is hereby created a Secretariat headed by an Executive
Director and two (2) Deputy Directors, and supported by staff, whose composition shall be
determined by the SEDC, to serve as the national, technical and administrative secretariat
of the Council with the member agencies providing additional support staff when the need
arises. The Sccrctanat shall perform the following functions.
a) Provide administrative support to the Council, with the assistance of the National
Economic and Development Authority sccretanat in the formulation of the

PRESENT development programs and plans;
b) Assist the Council in the implementation of the PRESENT development program
and the annual and medium-term

development plan,

) Assist the council in the performance of its accreditation and screening function,
d) Assist the Council in monitoring the PRESENT development programs and the
activities of the various concemed government agencies with respect to SEs;
©) Prepare, collate and integrate all necessary inputs to the Council's yearly report on

the status of SEs in the country;

Page Sof 10


n) SR pec set Ot Coen proms secon of fe
work programs, and
2) Perform other functions that may be assigned and authorized by the Council.

SECTION. 13. Office. —The Council shall have its principal place of business in Metro
Manila and may estabhsh such branches within the Philippines as may be deemed
necessary by the President of the Philippines to carry out the powers and functions of the
Council.

SECTION. 14, National Center for Social Enterprise Development. ~ There shall be
cstablshod a National Cente for Social Eneprine Development (NCSED) under he
Council which shall perform the following functions:
a) Provide SEMPs with capability-traiing and education through the Social
Enercon Copaity Belding end Sessinity Progam crea ser Seton
b) Develop ad entance a research and development systom which sal 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
censure the gencration of the highest possible income for the SEs pursuant to
Section 19 of this Act.

“The NCSED shall be headed by the Executive Director of the Council Secretariat. It shall
‘maintain a multi-sectoral, multi-disciplinary poo! of experts including those from the
academe, practicing professionals, business and industry, youth, women and other
concerned sectors, who shall be screened according to the qualifications set by the
Council.

‘The NCSED shall coordinate with the University of the Philippines Institute for Small
Scale Industries (UP ISS1), the Technical Education and Skills Development
(TESDA), the Technology and Livelihood Resource Center (TLRC), the Department of
‘Transportation (DOT®), Department of Communications, civil society organizations and
other relevant agencics, state universitics and colleges in implementing its programs.

SECTION. 15. Personnel. ~ Subject to the civil service laws, rules and regulations, the
‘Council is authorized to select, appoint, employ and fix the compensation of the officers
and employees of the Secretariat and the NCSED as shall be necessary to carry out its
functions

SECTION. 16. Role of LGUs in SE Development-LGUs shall be encouraged to
incorporate viable SE Development Plans in their local plans and collaborate with SEMPs.

CHAPTER It
DEVELOPMENT OF SOCIAL ENTERPRISES

SECTION 17. SE Capability Building and Sustainability Program; Creation of SE
Development Fund.— ‘There is hereby established a SE Capability Building and
Sustainability Program whose primary objective ts to guarantee the viability and
sustainability of SEMPS through activities that advance, in general, both transformational
services and transactional services. This program shall include training in social
entrepreneurship institutional strengthening, human resource competency
and skills training, business planning and advisory services, upgrading of accounting and

trade fairs and missions, policy advocacy, disaster-resilicncy 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.

Page 6 of 10


For this purpose, there is hereby created andestablished an SE Development Fund (SEDF)
in the initial 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, by itself or through reputable Social Enterprise Service Institutions contracted
for the purpose, and acting under the supervision of the NCSED.

SECTION 18. Social Enterprise Research and Development System. -The Council, in
‘coordination with the NEDA, DOST, and DTI, and other appropriate agencics and research
institutions, stall develo aed enbance a esearch ancl deylopmca! syst that

a) Provides studies on opportunities for poverty reduction and SE development in
Loy craps subnecioc bel oer Kas Ry tae Cousel o War ECE:
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,
©) Equip SEs and support institutions with innovative and sustainable approaches to
improve access of the poor to quality basic social services

SECTION 19. Social Enterprise Marketing Infrastructure Development. ~The Council
shall promote the development and expansion of local and foreign markets for the products
and services of SEMPs, guided by the principles of fair trade. Consistent with this, the
Council shall
a) Establish a SE Marketing Assistance Program (SMAP) that will assist SEMPs
‘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 a 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.

‘The SMIN shall provide information and marketing services related to products of SEMPS
‘leh sal incndo te fllowing:

1

2

3 ic Ps od

a

5

sbi faa Uh oh tational oa evel,

6. Information and from research institutions,
7. regional and local market forecasts, and
8 Resource accounting.
Iv
INCENTIVES AND BENEFITS

SECTION 20, Special Credit Windows. - The Land Bank of the Philippines,
Development Bank of the Philippines and other government financial institutions shall
establish special credit windows that shall provide SEs with risk-based, non-collateralized
Jans for the following purposes
1) Credit line for business development loan or working capital loan to cover the
operational and management expenses of an existing business or income
generating project, including receivable financing or purchase of additional

Page 7 of 10


inventory, soft or intangible investments such as trade fair participation or
acquisition of software or franchise

b) 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 3
plant and building and the improvement thereof.

° ie ne ok ra ee area

‘and marketing.

4) Domestic letr of creditor trust receipt to provide a stand-by credit facility forthe
SE borrower for the purchase of product inputs, equipment,
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

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

SECTION 21. Eligibility for Agriculture and Fisheries Credit. —In addition to the
special credit window provided above, 25% of funds accumulated as Alternative
‘Compliance under Section 6 of RA 10000, otherwise known as "The Agri-Agra Reform
Credit Act of 2009,”, shall be made available for SEs engaged in agriculture and fisheries
activities

SECTION 22. Social Enterprise Guarantee Fund Pool. ~ There shall be established
Social Enterprise Guarantee and Surety Fund (SEGSF) which shall be funded from equity
‘contributions of government financial institutions, The SEGSF shall be administered by
the Philippine Guarantee Corporation (Philguarantce) to enable SEs to access non-
collateralized and other appropriate financing while mitigating the risks involved in SE
sector lending, The SEGSF shall be used to provide 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 for their transactions.

SECTION 23. Utilization of People's Development Trust Fund. ~ The carnings 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 entitics, monitoring and cvaluation
rk laa

strategic management,

b) Schcaciige ox ieg wets Sr SE Aandi a acid Denti
c) Community organizing for SEMPS,

4) SE kgm acai Png roan nbn a an

°) Cea andthe mange sport sic fr SE ah hon
accreditation, documentation, contract review and enforcement, audit
‘operational assessment,

)_ Information dissemination of SE technology and management; and

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

SECTION 24. Tax Exemptions. ~ Without prejudice to existing tax exemption
provisions already applicable to different SEs under other laws, a qualified SEMPS shall
have the following tax
a) SEMPs with a net annual 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 5.2 of this Act
b) VAT and other percentage taxes;
¢) Documentary stamp tax,
d) Capital gains tax on sales or exchanges of real property classified as capital assets
or shares of stock: and

All SEMPs duly certified by the Council, in consultation with the Department of Finance
(DOF) and the Board of Investment (BO!) of the DTI, shall be exempted from the payment

Page 8 of 10


of VAT. tariff and duties for the importation of all types of product inputs, equipment,
machinery, implcments, and spare parts: Provided, That these inputs, equipment,

q and spare parts shall be for the exclusive use of the importing
‘SEMPS and can be shown to be directly related to further improve the value chain
operations of the SEMPS,

For income tax purposes, a reinvestment made by a SEMPS for the expansion of its
socioeconomic projects within the area of its operation shall be tax deductible from the
{gross income

SECTION 25. Preferential Rights. — Without prejudice to preferential rights alrcady
available to specific enterprises or organizations under other laws, qualified SEMPs shall
be accorded a preferential night in the procurement process and in the implementation of

SEMPs shall be given priority and preference in the following procurement processes

8) 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
conterprise 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

Provided, Thatthe 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 $2, paragraph (b) of RA9184 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 docs 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 supplics and equipment. Only in
the event of failure of submission or absence of SE price quotation that at east
three (3) price quotations from other bona fide supplicrs shall be obtained

4) 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 arca of operation of the procuring entity which is duly certified by the
Council as having the capacity to supply the required goods and services.

Registered small enterprises under RA 6977 that qualify as SEMPs under this Act shall,
consistent with Section 4 of RA 9501, be entitled to a share of at least twenty percent
(20%) of total procurement value of goods and services supplied to the government, its
burcaus, offices and agencies anmually

capacity-building grant, and star-up enterprise grant. The SE Council shall formulate the
guidelines for the management and implementation of grant assistance.

SECTION 27.Jnsurance for Social Enterprises. The Insurance Commission shall issue

the necessary rules and regulations and implement mcasurcs to ensure that the insurance

industry shall provide insurance products, both life and non-life, for social enterprises and
their stakeholders among the poor. Furthermore, SEMPS shall be cligible to be licensed

agents or delivery channels for their clients and constituents.

SECTION 28, Social Enterprise Visa for Foreign Nationals. — Forcign Nationals who
choose to operate a social enterprise in the Philippines and provide transactional and

Page 9 of 10


transformational services to a marginalized community in the sectors determined by the
‘Council will be eligible for a five-year Social Enterprise Visa that will allow them to start
and operate the venture. Renewal of the visa is contingent on the progress of the enterprise,
and development programs and services provided by the SE to the community.

SECTION 29. Incentives for Social Investors. ~ Social investors and other institutions
that contribute money or other forms of contribution in the promotion and development of
SEs shall be entitled to the following tax incentives
‘+ Equity investments and donations to an accredited SEMPS shall be fully
deductible from the gross income of the investor or donor
‘© Dividends or other forms of profit shares received from an accredited SEMPS
shall be exempt from income tax.
‘© Donations, grants and contributions to an accredited SE shall be exempt from
donor's tax.

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

SECTION 30. Appropriations.— The amount necessary to implement the provisions of
this act shall be charged against the current year’s appropriation of the Office of the
President. Thereafter, sums as may be necessary for its continued implementation shall be
included in the GAA. The budget requirements of cooperating agencies shall be
incorporated in their respective budgets.

SECTION 31. Penalty Clause. ~The penalty of imprisonment for not less than six (6)
‘months but not more than two (2) years oF a fine of not less than two hundred fifly-
thousand(P250,000) or both imprisonment and fine, at the discretion of the court, shall be
imposed upon any person, corporation, government entity oF 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. Penaltics collected
shall be added to SE Development Fund.

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

SECTION 32. 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) shall be imposed by the BankoSentral ng Pilipinas upon any banking or
lending institution who fails to provide the credit allocations granted to SE in violation of
Section 19 of this Act.

SECTION 33. 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.

Approved.

Page 10 of 10