NINETEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES )
First Regular Session )
HOUSE OF REPRESENTATIVES
H. B. No. 283 7

Introduced by Representative Ralph G. Recto

AN ACT
INSTITUTING REFORMS TO FURTHER PROTECT AND DEVELOP MICRO,
SMALL AND MEDIUM ENTERPRISES, AMENDING FOR THE PURPOSE
EXECUTIVE ORDER NO. 81, OTHERWISE KNOWN AS “THE 1986 REVISED
CHARTER OF THE DEVELOPMENT BANK OF THE PHILIPPINES,” AS
AMENDED

EXPLANATORY NOTE

The Philippine Micro, Small and Medium Enterprise (MSME) sector is a critical
driver of the country’s economic growth. The 2020 MSME Data from the Department
of Trade and Industry reveals that some 99.51% of the 957,620 establishments in the
country belong to the MSME Sector. During the same year, the MSMEs generated
some 5,380,815 jobs, which is about 63% of the total jobs generated in the country.
Some 36% of all value of goods and service produced in the country come from
MSMEs,

Despite its pivotal role in the economic well-being of millions of Filipinos, several
factors constrain the performance of MSMEs like high cost of doing business, access
to financing and markets, and tow productivity and efficiency. With limited resources
and capabilities, many MSMEs are not adequately equipped to respond to the
challenges and opportunities posed by domestic and international markets.

The task of priming stronger and more competitive MSMEs rests on
collaborative efforts between the government and the business sector. Apart from
creating a favorable business environment and providing linkages to local and foreign



markets, the government must be able to make business financing accessible to
MSMEs. The Philippine Institute for Development Studies noted that financing
obstacles is one of the four most serious problems that hamper business growth. The
MSME Development Plan 2017-2022 also observed that a number of issues restrict the
capacity of MSMEs to maximize the utilization of available financing options in the
Philippines, which include the lack of credit information among MSMEs, and the
tendency of the banking industry to prioritize larger corporate borrowers due to higher
gains, lower credit risk, higher repayment rates, and collateral availability. To develop
an MSME sector capable of contributing to the country’s economic and social
development, it is imperative that the government enact measures to enable MSMEs
to bolster their productivity and empower them to be more responsive to rising
economic exigencies.

As the government premier development bank, the Development Bank of the
Philippines (DBP) is in the best position to close this financing gap. In 2020, the bank
registered a comprehensive income of P4.81 billion with a loan portfolio worth P466.80
billion. However, the bank only registered 6.15 billion worth of outstanding principal
balance under its lending programs geared towards MSMEs such as the Sustainable
Enterprises for Economic Development, Sustainable Agribusiness Financing, Expanded
Rice Credit Assistance, and DA-ACPC-DBP BuyANIhan Credit Programs.

Thus, this bill seeks to amend the Charter of the DBP, mandating it to devote
eighty percent (80%) of its loan portfolio to programs, projects and initiatives of the
MSMEs and local government units (LGUs). It reinforces the original purpose of the
bank, which recognizes a clear role for direct government participation in the banking
system through a government development bank, particularly in servicing the
medium- and long-term requirements of agriculture, and small and medium scale
industry, export development, and the government sector.” Such intervention is also
in line with the idea of financial inclusion, a principle that promotes “universal access
at a reasonable cost to a wide.range of financial services for everyone needing them,
provided by a diversity of sound and sustainable institutions.”



This bill serves two noble purposes: to protect the critical economic drivers of
today, and to sustain our economic growth in the future. In view of the foregoing,
approval of this bill is earnestly sought.

fndg


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16

NINETEENTH CONGRESS OF THE
REPUBLIC OF THE PHILIPPINES
First Regular Session

HOUSE OF REPRESENTATIVES

,. 2837

H.B. No.

Introduced by Representative Ralph G. Recto

AN ACT
INSTITUTING REFORMS TO FURTHER PROTECT AND DEVELOP MICRO,
SMALL AND MEDIUM ENTERPRISES, AMENDING FOR THE PURPOSE
EXECUTIVE ORDER NO. 81, OTHERWISE KNOWN AS “THE 1986 REVISED
CHARTER OF THE DEVELOPMENT BANK OF THE PHILIPPINES,” AS
AMENDED

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

Section 1. Section 2 of Executive Order No. 81, otherwise known as “The 1986
Revised Charter of the Development Bank of the Philippines,” as amended, is hereby
further amended to read as follows:

“Sec, 2. Name, Purpose and Domicile. The Development Bank of
the Philippines, hereinafter called the Bank, operating under the
provisions of Republic Act No. 85, as amended, shall henceforth operate
under the provisions of this 1986 Revised Charter. The Bank shall be a
body corporate and shall exist for a period of fifty years,

“The primary purpose of the Bank shall be to provide banking
services principally to service the medium and long term needs of
agricultural and industrial enterprises, particularly in the countryside and
preferably for MICRO, small and medium scale enterprises; Provided,
however, that the pursuit of these objectives shall be undertaken within
the context of financially viable and stable banking institutions;
Provided, further, that the Bank shall continue to be classified as a
development bank; Provided, finally, that unless otherwise provided


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herein, the Bank may perform all other functions of a UNIVERSAL
[thrift] bank.

“The Bank's principal office and piace of business shall be in the
National Capital Region, also known as Metro Manila. It may open and
maintain branches, agencies or other offices at such places in the
Philippines as its Board of Directors may deem advisable, with the prior
approval of the Monetary Board of the [Gentral-Bank-of-the-Philippines)
BANGKO SENTRAL NG PILIPINAS."
Sec. 2. Section 3 of Executive Order No. 81, as amended, is hereby further

amended to read as follows:

“Sec. 3. Corporate Powers. The Development Bank of the
Philippines shall have the power:

KX;

(b) To grant loans for the establishment, development and
expansion of any agricultural or industrial enterprise AND TO LOCAL
GOVERNMENT UNITS (LGUs): PROVIDED, THAT THE TOTAL
AMOUNT OF LOANS GRANTED FOR PROGRAMS AND
PROJECTS OTHER THAN THOSE UNDERTAKEN BY MICRO,
SMALL, AND MEDIUM ENTERPRISES AND LGUS SHALL NOT
EXCEED TWENTY PERCENT (20%) OF THE BANK'S TOTAL
LOAN PORTFOLIO;

"Xx.

Sec. 3. Validity of Existing Contracts, Agreements and Obligations, ~ Nothing in
this Act, shall affect the validity or legality of any right, duty, or obligation created by
or in respect of the Bank by virtue of its loan operations prior to this Act. Any
receivables pertaining to loans granted prior to this Act, which might be affected by
this Act, shall be valid and enforceable upon the terms and conditions under which
the loans were made, including the pledge of collateral against which they were
issued, and all loans made and security or collateral therefore held by the bank shall
remain enforceable according to the terms unless they may be lawfully terminated in
accordance with this Act, nor shall this Act supersede the operation of any law

protecting or preserving vested contractual rights or be construed to change the terms


of any legal contract between the bank and any third party or to impose any new
conditions thereon, or to dispense with any condition expressed or authorized in any
such contract entered into and taking effect prior to this Act.

Sec. 4. Transition Period. ~ The Development Bank of the Philippines (DBP)
shall have a period of ten (10) years from the effectivity of this Act to restructure its
loan portfolio. The transition milestones shall be identified in the Implementing Rules
and Regulations to be promulgated pursuant to Section 5 of this Act.

Sec. 5. Implementing Rules and Regulations. - Within ninety (90) days from
effectivity of this Act, the Department of Finance (DOF) shall, in coordination with the
DBP, promulgate the rules and regulations to effectively implement the provisions of
this Act.

Sec. 6. Separability Clause. ~ If, for any reason, any provision of this Act or any
part thereof shall be held unconstitutional and invalid, the other parts or provisions of
this Act, which are not affected thereby, shall remain in full force and effect.

Sec, 7. Repealing Clause. - All laws, decrees, orders, rules and regulations or
parts thereof inconsistent with any of the provisions of this Act are hereby repealed,
amended or modified accordingly.

Sec. 8. Effectivity, ~ This Act shall take effect fifteen (15) days after its complete
publication in at least two (2) newspapers of general circulation or in the Official
Gazette.

Approved,