Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill No. 2145

Introduced by Rep. LAWRENCE LEMUEL H. FORTUN

EXPLANATORY NOTE

Article XII Section 1 of the 1987 Constitution states:

“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 for all, especially
the underprivileged.”

Consistent with and in pursuance of the aforementioned provision of the Constitution, this
measure, referred to herein as the Poverty Reduction through Social Entrepreneurship (PRESENT)
Act, seeks to provide a framework for the formulation, establishment, and institutionalization of a
program of poverty reduction through the development of a social enterprise sector with the poor
as primary stakeholders. The social entrepreneurship program will play an essential role in the
transformation of the poor and marginalized into self-reliant sectors through the provision of
goods, services, and opportunities that shall empower them to participate in economic activities.

The bill seeks to realize the foregoing by giving the poor viable avenues to start social
enterprises and/or improve and expand the same through affordable loans, access to funds for
research and development, capacity-building programs, linkage to value chain and market, and
insurance for social enterprises in times of calamities and disasters. These investments and
reinforcements are anticipated to make the poor effective entrepreneurs, suppliers, clients, and/or
owners of social enterprises, and eventually liberate them from poverty in the process.

It is also a declared policy under this bill for the State to ensure the autonomy and
organizational integrity of social enterprises are preserved to truly enable them to/evelop into
viable and vital anti-poverty agents and a strong social entrepreneurship movemeft that shall be
instrumental to a significant reduction of poverty in the country.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

EIGHTEENTH CONGRESS
First Regular Session

House Bill No. _ 2145

Introduced by Rep. LAWRENCE LEMUEL H. FORTUN

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

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

assembled:

CHAPTER I
GENERAL PROVISIONS

SECTION 1. Short Title. - This Act shall be known as the “Poverty Reduction Through

Social Entrepreneurship (PRESENT) Act.”

SECTION 2. Declaration of Policy. - The State shall promote a just and dynamic social

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

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5 order that will ensure the prosperity and independence of the nation and free the people from
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9 — guarantees full respect for human rights.

uu The goals of the national economy are a more equitable distribution of opportunities,
12 income, and wealth; a sustained increase in the amount of goods and services produced by the
13 nation for the benefit of the people; and an expanding productivity as the key to raising the quality
14 of life for all, especially the underprivileged. The State shall promote industrialization and full

15 employment based on sound agricultural development and agrarian reform, through industries that

16 make full and efficient use of human and natural resources, and which are competitive in both
17 domestic and foreign markets. However, the State shall protect Filipino enterprises against unfair

18 foreign competition and trade practices.

20 The State also recognizes the important role of enterprises in the economy as the major

21 agent of development, creating off-arm employment opportunities and providing transitional
22 means for improving the livelihood of the people.

24 Towards this end, the State shall pursue a poverty reduction program that promotes an
25 environment conductive to the development and growth of a vibrant social enterprise sector

26 engaged in poverty reduction, economic and social development. It shall empower the poor as
27 primary stakeholders in social enterprises, establish mechanisms essential to realizing their
28 potential and achieving tier full growth, and extend the assistance necessary for their advancement,

29 The State shall likewise ensure that the provision for technical and financial assistance, incentives
30 and other services are free from any condition that might infringe upon the autonomy or

31 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 instrument in
reducing poverty in the country.

SECTION. 3. Definition of terms. — As used in this A‘

a) Social Enterprise or SE refers to a wealth-creating organization, 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 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
mobilize 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 refers 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 fisher folk, workers in the formal sector and migrant workers,
workers in the informal sector, indigenous peoples and cultural communities, women,
persons with disability, senior citizens, victims of calamities and disasters, youth and
student, children, and urban poor as defined under Republic Act (R.A.) No. 8425,
otherwise known as the “Social Reform and Poverty Alleviation At”;

e) Bottom line shall refers 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;


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2) 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 of specific sectors of society. They include non-government
organizations, socio-civie groups, foundations and people’s organizations;

h) Council shall refer to the SE 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; 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 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;

1) 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 distribyting income;

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

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

Fair trade principles refers 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;

CS)


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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 its administration and operation are carried out
in accordance with its statutes or articles of association rather than fiduciary principles;

q) 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;”

r) 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;

) 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;

y

Microfinance shall refer to the provision of a board range of financial services such as
deposits, loans, payments 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;

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);

y

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 and 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;


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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 of amenities, as defined under
R.A. 8425;

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 (s) 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;

ce) 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;

28) 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, 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 innovate 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;

jj) 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


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employment, but more importantly, by nurturing work and other environments that
create avenues for their participation as productive members of society;
ll) Social Investors are individuals or institutions that choose to put in money to a business
endeavour or activity not principally for financial profit but to fulfil 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) Social value refers to the additional benefit to the community from the government
procurement process over and above the direct purchasing of goods, services and
outcomes, including social; economic and environmental benefits;

00) Transactional roles refers 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;

pp) 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;

qq) 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;

rr) 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;

ss) 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;

tt

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

uu) 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 ~ A 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
cooperative or associations where the poor are the exclusive owners or comprise a majority of the
members. SEPPS may also include NGOs or other organizations that engage in wealth-creating
activities, the proceeds of which are used exclusively to finance the fulfilment of their social
mission.

SECTION 5. Eligibility for Benefits and Incentives. — To be recognized and 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 tom improve the position and benefits derived by the poor
from the SE and the value chain or the economic subsector where the SE is located,
including becoming worker-owners, supplier-owners, supervisor 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;

3)

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

dq)

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;

6

f) ensures that the 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;

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 Enterprise, Barangay Micro Business Enterprises Act and other laws.

8)

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 achieve financial sustainability over a reasonable period of
time.

SECTION 6. Other Eligibility Provisions. In the case of social enterprise organized as
stock corporation, partnerships or sole proprietorships, the following additional requirements shall

apply:

a) A social 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


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a stock corporation, at least sixty percent (60%) of its outstanding capital stocks must
be owned by the Filipino citizens;
b) A social 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 all not
preclude a SE from joining in cooperative or joint-venture activities with other SEs or
foundations practicing CSR.

©) 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 Development Council shall formulate the implementing rules and regulations
for the application and accreditation of enterprise 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 poor with primary
stakeholders, a comprehensive and fully-integrated Poverty Reduction through Social
Entrepreneurship (PRESENT) Program, shall be formulated, guided by the following principles:

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

b)

Rationalization of the 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;

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;

©)

f) Gender-sensitivity by ensuring women’s equal rights and access to SEs resources; and,

Development of sustainable mechanism 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 shall 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. :


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

SECTION 9. 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 to the Department of Trade and Industry (DTI). It
shall be the primary agency task to carry out the promotion, groeth and development of social
enterprises in the country,

The Council shall be composed of the following:
a) Secretary of Trade and Industry, as co-chairperson;
b) SE sector head representative, as co-chairperson;
c) Secretary of Agriculture, as co-vice chairperson;
d) Lead Convenor of the National Anti-Poverty Council (NAPC), as co-vice chairperson;
€) Secretary of Social Welfare and Development;
f) Director-General of the National Economic Development Authority (NEDA);
g) Secretary of Finance;
h) Secretary of the Interior and Local Government;
i) Secretary of Labor and Employment;
j) Secretary of Science and Technology;
k) Secretary of Education;
1) Secretary of Agrarian Reform;
m) Secretary of Health;
n) Secretary of Environment and Natural Resources;
©) Chairperson of the Cooperative Development Authority (CDA);
p) Nine (9) representatives from SEs, three (3) representatives each from the main island
grouping of Luzon, Visayas, and Mindanao;
q) Three (3) representatives from SE service institutions, and
1) Three (3) representatives from SE advocacy groups, as members.

Cabinet-ranked ex officio members of the Council shall designate a permanent
representative in case they fail to attend its meetings. The designated permanent representative of
any of the Cabinet-ranked members of the Council must hold a position not lower than bureau
director.

The SE sector head, 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
chosen by the President from among the nominees submitted by their respective national
organizations to serve in the Council for a term of three (3) years. These representatives must be
conversant in the theory and practice of SE and committed to the policies and programs provided
under this Act.

The Chairperson and members of the Council shall be entitled to a reasonable per diem for
each meeting actually attended at such amount as may be fixed by the Council in accordance with
existing laws, rules and regulations.

The Council shall, from time to time, call upon the participation of any government agency
to attend in is meeting to assists in clarifying issues and finding resolution to problems that concern
their respective offices with respect to the implementation of the PRESENT Program enunciated
under this Act or any development program of SEs.

The Council may create an Executive Committee of seven (7) members elected by its
members from among themselves or their designated permanent representatives, with at least three
(3) members representing the SEs, and with the Council.

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


485,

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

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

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492 c) Identify and access sources of financing for the SE sector in the form of grants for
493 enterprise incubation and start-up and loans for expansion;

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

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

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

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

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509 h) Promulgate such rules and regulates and exercise such other powers and functions as
510 may be necessary to carry out the purposes of this Act; and

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512 i) Perform such other functions as may be necessary for its effective operations and the
513 continued enhancement, growth and development of the SE sector.

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515 SECTION 11. Secretariat. — There is hereby created a Secretariat headed by an Executive

516 Director to serve as the national technical and administrative secretariat of the Council with the
517 member agencies providing additional support staff when the need arises. The Secretariat shall
518 perform the following functions:

519 a) Provide administrative support to the Council, with the assistance of the National Economic
520 and Development Authority secretariat in the formulation of the PRESENT development
521 programs and plans;

522 b) Assist the Council in the implementation of the PRESENT development program and the
523 annual and medium-term development plan; _

524 ) Assist the Council in the accreditation of SEs;

525d) Assist the Council in monitoring the PRESENT development programs and the activities of
526 the various concerned government agencies with respect to SEs;

527 _e) Assist the Council in facilitating funding mechanisms and promoting support programs for
528 SEs.

529) Prepare, collate and integrate all necessary inputs to the Council's yearly report on the status
530 of SEs in the country;

531g) Submit periodic reports to the Council on the progress and accomplishment of its work
532 programs; and

533 _h) Perform other functions that may be assigned and authorized by the Council.

534

535 SECTION 12. Office. - The Council shall have its principal place of business in Metro
536 Manila and may establish such branches within the Philippines as may be deemed necessary by
537 the President of the Philippines to carry out the powers and functions of the Council.

538

539 SECTION 13. National Center for Social Enterprise Development. ~ There shall be
540 _ established a National Center for Social Enterprise Development (NCSED) under the Council
541 which shall perform the following functions:


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a) Provides 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 of this Act.

The NCSED shall be headed by the Executive Director of the Council Secretariat. It shall
maintain a multi-sectoral, multi-disciplinary pool of experts including those from the academe,
practicing professional, 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 ISSI), the Technical Education and Skills Development Authority (TESDA), the
Department of Transportation and Communications (DOTC), civil society organizations other
relevant agencies, state universities and colleges in implementing its programs.

SECTION. 14. 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 15. 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 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 IIL
DEVELOPMENT OF SOCIAL ENTERPRISES

SECTION 16. 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. 17 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;

) the consumer as a responsible member of society and his/her responsibility to develop
critical awareness which is the responsibility to be alert and questioning about the
environmental and social impacts of the goods and services he/she uses: _

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


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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 their business, commerce, or
economics courses.

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 is to guarantee the viability and sustainability of SE through
activities that advance, in general, both transformational services and transactional services. The
NCSED will work with qualified SE intermediaries who will develop the Program and be
responsible for designing and delivering 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 informations 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 a SE. Development Fund (SEDP)
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
local and foreign sources as may be accepted by the Council.

Only the funds of the SEDF shall be used for the purposes provided herein. Any
undisbursed funds for the preceding year shall form part of the disbursable portion of the SEDF in
the following year.

SECTION 18. Social Enterprise Research and Development System — The Council, in
coordination with the NEDA, DOST, DTI, and other appropriate agencies, research institutions,
and intermediaries, 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 services and 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 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 SEs, guided by the principles of fair trade. Consistent with this, the Council shall:


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Establish a 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;

a)

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.

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 following:
a) Supply data;
b) Demand data;
©) Price and Price trends;
d) Product standards;
e) Directory of, but not limited to SEs, traders, key market centers, processors and
business institutions both at the national and local levels;
f) Information and technology generated from research institutions;
g) International, regional and local market forecasts; and
h) Resource accounting data.

CHAPTER IV
INCENTIVES AND BENEFITS

SECTION 20. Special Credit Windows. ~ In addition to the special credit windows
provided for the promotion of microfinance as provided under Section 16 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. -

For a 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 governments notes, securities and other negotiable instruments shall not be deemed compliance
with the foregoing provision.

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 windows for SEs shall bear interest lower than the market rate and shall have
longer terms of payment and waiver of applicable fees.


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SECTION 21. Special Credit Window Purposes. — The special credit window provided

under Section 20 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 an 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;

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 livelihood project requirements of end-
borrowers.

SECTION 22. Eligibility for Agriculture and Fisheries Credit. — At least ten percent
(10%) of the funds created under Section 6 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 23. Social Enterprise Guarantee Fund Pool with Non-Collateral Loans. ~
‘There is 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 (PSCO), 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 SEGFP 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 risk
involved in SE sector lending, facilitating the provisions 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 to the
mechanics and administrative arrangements and issues the implementing guidelines for the fund

pool.


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SECTION 24. 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 preparations, 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 offices, and selected beneficiaries;

°)

Community organizing for SEs;

d)

Enterprise start-up and incubation grants for news SEs;

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

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

g) Information dissemination of SE technology and management; and

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

PDTF.

SECTION 25. Tax Exemptions. ~ An accredited SE shall have the following tax exemptions:
a) The SE with a net income of not more than fifteen million pesos (P15,000,000,000.00)
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 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 accredited by the Council,
in consultation with the Department of Finance (DOF) and the Board of Investments
(BOI) 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
socioeconomic projects within the area of its operation shall be tax deductible from the gross
income.

SECTION 26. Procuring for Social Value. — Social value shall be included in the
eligibility specifications for the procurement of goods and services by government in all its


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branches, departments, agencies, subdivisions, and instrumentalities, including government-
‘owned and controlled corporations and local government units.

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.

SECTION 27. 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 (e)of RA 8424 otherwise known as the “National Internal Revenue Code of
1997” as amended.

b) Donations to an accredited SE shall be exempted 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.

CHAPTER V
APPROPRIATION AND OTHER PROVISIONS

SECTION 28. 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 DTI 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 in the 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 million
pesos (P250,000,000.00); on the fifth year, three hundred million pesos
(P300,000,000.00); and every year thereafter until the tenth year, five hundred million
pesos (P500,000,000.00) annually.

SECTION 29. 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
(25,000.00) 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.


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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 30. 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 Bangko Sentral ng Pilipinas upon any banking or lending
institution who falls to provide the credit allocations granted to SE in violation of Section 19 of
this Act.

SECTION 31. 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 32. Information Dissemination. — The Philippine Information Agency (PIA)
shall, 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 shall 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 33. 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 34. 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 35. 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 favour of SEs and their stakeholders.


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SECTION 36. Congressional Oversight Committee. - There is hereby created s
Congressional Oversight Committee on Social Enterprises composed of the Chairman of the
Senate Committee on Economic Affairs, Trade and Commerce and the Chairman of the House
Committee on Trade and Industry, four (4) members of the Senate and four (4) members of the
House of Representatives. The members from the Senate shall be appointed by the Senate
President from among the members of the Senate Committee on Economic Affairs, Trade and
‘Commerce based on the proportional representation of the parties or coalition therein, the members
from the House of Representatives shall be appointed by the Speaker from among the members of
the House Committee on Trade and Industry based on the proportional representation of the parties
or coalitions therein.

The Oversight Committee, upon review and approval of the Implementing Rules and
Regulations of this Act shall become functus officio and thereafter cease to exist: Provide,
however, that the Council shall submit to the Committee on Economic Affairs, Trade and
Commerce of the Senate and the Committee on Trade and Industry of the House of Representatives
an annual report on the implementation of this Act.

The appropriation for the oversight committee shall be changed to the budget of both
Houses of Congress in the annual General Appropriations Act.

SECTION 37. Social Enterprise Week. — In order to institute continuing awareness on
the importance of SEs as a viable government strategy in pursuing poverty alleviation, the week
of the month when this Act shall been signed into law shall be declared as the “Social Enterprise
Week” and shall be celebrated annually. The Council shall, through the NCSED, be responsible in
organizing activities for the event.

CHAPTER V
FINAL PROVISIONS

SECTION 38. 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 39. Repealing Clause. — All laws, issuances, rules and regulations inconsistent
with any provision of this Act shall be deemed amended, modified, or repealed accordingly.

SECTION 40. Separability Clause. ~ If, for any reason, a provision or part hereof s
declared invalid or unconstitutional, the other provisions not affected thereby shall remain in full
force and effect.

SECTION 41. Effectivity — This Act shall take effect fifteen (15) days after its publication
in any newspaper of general circulation.

Approved,