FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES —)
First Regular Session

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House BillNo. 3868
EXPLANATORY NOTE

Micro financing is the provision of financial services to low-income clients
or solidarity lending groups including consumers and the self-employed, who
traditionally lack access to banking and related services.

These activities are aimed towards poor or low-income families in order for
them to be able to have access to funds that they could use to start a business or
improve their lives.

As of 2009, there are an estimated 2.7 million active borrowers in the
Philippines from around 110 micro financing institutions (MFIS). These MFls,
particularly those in Mindanao, are usually established by religious persons or
organizations for the sole purpose of helping out the poor. The Board of Trustees
of these MFls in Mindanao do not receive any part of the money involved and all
profits, if any, are reinvested for the benefit of the borrowers. These MFIs are
definitely helpful and provide opportunities to the low-income families which do
not have access to banks and other money lending institutions because of,
among others, a high interest rate.

As such, we must provide these MFls with certain benefits that would help
them in their goal of eradicating poverty in the country.

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

MAXIMO B. RODRIGUEZ, JR.


FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
FIRST REGULAR SESSION )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No._ 3863

AN ACT
GOVERNING THE CREATION AND ACCREDITATION OF MICRO
ENTERPRISE DEVELOPMENT INSTITUTIONS, AND FOR OTHER PUPOSES.

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

Section 1. Title. - This Act shall be known and cited as the “Micro-Enterprise
Development Institutions Act of 2010.”

Section 2. Declaration of Policy. - It is hereby declared the policy of the State to
pursue a more focused program of poverty eradication wherein every poor
Filipino family shall be empowered to meet its minimum basic needs including
income security.

In pursuance of this policy, the goverment shall work with qualified
institutions in the private sector for the poor have more access to micro-finance,
micro-insurance, care, micro-housing, business development such as leadership
training and entrepreneurial skills training, and human development services to
help the poor achieve a level of sustainability and empowerment and adopt
measures to promote a spirit of generosity and selfless giving among individuals
and institutions that would help support all programs directly involved in poverty
eradication

Section 3. Coverage. — The scope of coverage of this Act shall apply to non-
stock and non-profit micro-enterprise development institutions duly qualified and
accredited as provided herein

Section 4. Definition of Terms. — For purposes of implementing this Act, the
following definitions shall apply

a) Micro-Enterprise Development Institution (MEDI) refers to a non-stock

and non-profit corporation organized to implement a micro-enterprise

development strategy, as defined in letter (b) hereof: Provided, that the

administrative expenses shall in no case exceed thirty percent (30%)

of the total expenses within a taxable year: Provided, finally that the


administrative expenses shall conform with the rules and regulations to
be prescribed by the Department of Finance upon the recommendation
of the Bureau of Internal Revenue.

Micro-Enterprise Development Strategy refers to a social reform
program to empower the poor to manage risks and vulnerabilities and
thereby improve their asset base and expand access to micro-finance
services, such as micro-credit, micro-insurance, micro-savings, health
care and micro-housing through a broad package of financial, business
and human development services and other non-financial services,
including education to enable them to live a productive life.

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

Social Reform refers to the continuing process of addressing the basic
inequities in Filipino society through a systematic, unified and
coordinated delivery of socio-economic programs or packages.

Micro Finance refers to the provision of the a broad range of financial
services exclusively for the poor to improve the asset base of
households and expand their access to savings and enable them to
raise their income levels and living standards.

f) Accrediting Entity refers to the entity as designated under Section * of
this Act.

Fund balance refers to the difference between total assets and total
liabilities of the required capitalization for registration as MEDI.

b)

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d)

e)

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Section . Form of Organization. - A MEDI defined in Section 4 (a) hereof shall
be established as a non-stock and non-profit corporation in accordance with the
Securities and Exchange Commission (SEC) rules and regulations. It shall be
governed by a Board of Trustees who shall no compensation

Section 6. Capital Requirements. A MEDI shall have a fund balance of Twenty
Million Pesos (Php 20,000,000.00), or in the case of newly organized MEDIs, an
initial fund of Ten Million pesos (Php 10,000,000.00).

Section 7. Powers and Functions of the MEDI. - The MEDI shall exercise such
powers and functions and undertake such activities in accordance with the
policies, programs and services provided in this Act.

The MEDI may likewise engage in all poverty eradication activities as
allowed for non-stock and non-profit corporations under Batas Pambansa Bilang
68 otherwise known as “The Corporation Code” and other relevant laws and
issuances.

The accredited MEDI shall not undertake deposit taking activities,
engage in the insurance business and carry out fund management activities


without the necessary licenses and authority from the relevant regulatory
agencies.

For the purpose of implementing this provision, deposit taking does not
include taking of funds from current or prospective borrowers for the purpose of
equality build-up of an individual borrower's own loans

Section 8. Accrediting Entity. — The National Anti-Poverty Commission (NAPC_
in consultation with the Department of Finance (DOF), Department of Trade and
Industry (DTI), Bangko Sentral ng Pilipinas (BSP) and other concerned agencies
and institutions, public and private, shall establish an appropriate accrediting
entity to perform the functions provided under this Act.

The accrediting entity shall be assisted by a Secretariat in the
performance of its functions.

Section 9. Powers and Functions of the Accrediting Entity. - The accrediting
entity established under this Act shall have the following functions and
responsibilities:

a) Institute and operationalize a system of accreditation for MEDIs;

b) Issue Certificate of Accreditation as a MEDI to a non-stock and non-
profit corporation applicant: 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.

No application shall be processed for accreditation as a MEDI
unless it secured a valid registration or license with the government
agency that exercises regulatory function over such corporation;
Monitor the performance of the MEDIs to ensure compliance with the
provisions of this Act and its implementing rules and regulations;
Suspend or revoke any certificate of accreditation upon determination
that a MEDI no longer meets the criteria for accreditation;

) Require regular submission of reports by MEDIs;

f) Collect reasonable accreditation and monitoring fees from MEDI which
shall be used for the accrediting entity's operational requirements;

Submit an annual to the President of the Philippines and the

concerned committees of Congress; and

Perform such other functions as may be necessary to accomplish the

purposes and objectives of this Act.

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Section 10. Taxation of Accredited MEDIs. — The taxation of MEDIs shall be as
follows:

a) The MEDIs shall pay two percent (2%) of the gross income in lieu of all
national and local taxes which shall be remitted to the National
Government. The tax proceeds shall form part of the disbursable
portion of the People Development Trust Fund established under
Republic Act No. 8425 otherwise known as the “Social Reform and
Poverty Alleviation Act.”


The term “gross income” means gross receipts less sales returns,
allowances, discounts and other costs of services. The term “cost of
services” shall mean alll direct costs and expenses necessarily incurred
to provide the services required by the customers and clients including
salaries and employee benefits of personnel, consultants and
specialists directly rendering the service and cost of facilities directly
utilized in providing the service and cost of supplies. Interest expenses
on borrowings for lending services in arriving at gross income. The
term gross income shall exclude donations.

b) Donations to the MEDI shall be fully deductible from the gross income
of the donor subject to the conditions of Section 34 (c) of Republic Act
No. 8424, as amended, otherwise known as the National Internal
Revenue Code of 1997: Provided, however, that the accreditation of
the MEDI by the accrediting entity under this Act shall be sufficient.

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Donations to the MEDI shall be exempt from donor's tax subject to the
qualifications of Section 101 of Republic Act No. 8424, as amended,
otherwise known as the National Internal Revenue Code of 1997:
Provided, that for purposes of utilization, accreditation granted this Act
shall be sufficient.

d

The transaction of the MEDI and its clients shall be exempt from
documentary stamp tax.

Section 11. Implementing Rules and Regulations. - The NAPC, in coordination
with the DOF, BIR, BSP, DTI and other concerned government agencies and
Non-Government Organizations (NGOs), shall formulate the implementing Rules
and Regulations of this Act within ninety (90) days after its approval and shall
take effect fifteen (15) days after its publication in a newspaper of general
circulation in the Philippines.

Section 12. Separability Clause. — The provisions of this Act are hereby declared
to be separable. If any provision of this Act shall be held unconstitutional, the
remainder of the Act not otherwise affected shall remain in full force and effect.

Section 13. Repealing Clause. — All executive orders, rules and regulations, or

parts thereof, which are contrary to or inconsistent with this Act are hereby
repealed, amended or modified accordingly.

Section 14 Effectivity. - This Act shall take effect after fifteen (15) days from its
Publication in at least two (2) national newspapers of general circulation

Approved,