SIXTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
SENATE 
307 
S.B. No. ___ _ 
" " 
Introduced by SENATOR CYNTHIA A. VILLAR 
EXPLANATORY NOTE 
'13 
JUL -~ 119 :'.;3 
"y:t-
The concept of microenterprise was founded by Dr. Mohammad Yunus and 
emerged in the developing world through the Grameen Bank (Bank of the Poor) In the 
country of Bangladesh in 1976, with the fundamental principle that credit is a human 
right. The bank was established with the practice of making small loans to the poor -
predominantly women --to help them obtain economic self-sufficiency. The Grameen 
Bank has been extremely successful, reporting a 97% rate of repayment. 
Much of Asia's vast and growing population forms part of the economy that lies 
outside the regulatory framework of govemments in what is known as the informal 
sector. The informal sector, whether rural or urban, comprises small' scale and 
microenterprises producing and distributing goods and services in unregulated, but 
competitive markets. The enterprises are generally independent, largely family owned, 
employ low levels of skills and technology, and are highly labor intensive. 
In this era of globalization, generating economic growth in developing countries 
while reducing poverty is a primary development challenge. To ensure that the 
contribution of microenterprises to key subsectors and national economy is maximized, 
and that the poor are not left out of market development, microenterprises need access 
to finance, business services, and improved inputs. They also need a conducive 
enabling environment that facilitates rather than inhibits their participation in markets. 
This Bill endeavors to support and work in partnership with qualified institutions, 
to be known as MICRODEVs which will implement a microenterprlse development 
strategy in order to provide general and other entrepreneurial services to the poor with 
the end in view of alleviating poverty and raising the quality of life for all Filipinos. In 
brief, MICRODEVs will provide the poor with the following, among others: access to 
credit Including microfinance, microinsurance, health care and microhousing; business 
development opportunities like 
entrepreneurial skills training; and other human 
development services. 
In view of the foregoing, the passage of this bill is recommended. 


SIXTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES ) 
First Regular Session 
) 
'13 
JIJL -7. 
1\ 9 :')3 
SENATE 
307 
S.B. No. ___ 
...:..-
Introduced by SENATOR CYNTHIA A. VILLAR 
AN ACT 
GOVERNING THE CREATION AND ACCREDITATION OF MICROENTERPRISE 
DEVELOPMENT INSTITUTIONS AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress assembled: 
SECTION 1. Title. - This Act shall be known as the "Microenterprise Development 
Institutions Act of 2013". 
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to pursue a 
program of poverty eradication wherein poor Filipino families shall be encouraged to 
undertake entrepreneurial activities to meet its minimum basic needs including income 
security. In pursuance of this policy, the government shall support and work in 
partnership with qualified institutions in the private sector providing general and other 
entrepreneurial services to the poor. 
SEC. 3. Definition of Terms. - For purposes of implementing this.Act, the following 
definitions shall apply: 
(a) 
MICRODEV Accreditation Center refers to the entity created under Section 7 of 
this Act; 
(b) 
Microenterprise Development Strategy refers to a social reform program to 
empower the poor, manage risks and vulnerabilities and thereby improve their 
asset base and expand access to microfinance services, such as microcredit, 
microinsurance, microsavings, health care and microhousing through a broad 
package of financial, business and human development services and other 
nonfinancial services, including education to enable them to live productive lives; 
(c) 
Microfinance refers to the provision of 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; 
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(d) 
Net Worth refers to the difference between total assets and total liabilities of an 
entity; 
(e) 
Poor refers to individuals and families whose income fall below the poverty 
threshold as defined by the National Economic and Development Authority or 
those who cannot afford in a sustained manner to provide their minimum basic 
needs of food, health care, education, housing and other essential amenities of 
life as defined by Republic Act No. 8425, otherwise known as the "Social Reform 
and Poverty Alleviation Act"; 
(f) 
Regulatory Authorities refer to the entities as designated under Section 9 of this 
Act; and 
(g) 
Social Reform refers to the continuing process of addressing the basic inequities 
in Philippine society through a systematic, unified and coordinated delivery of 
socio-economic programs or packages. 
SEC. 4. Recognition, of Micro-enterprise Development Institutions (MICRODEVs). -
MICRODEVs are hereby recognized as institutions mandated to implement a 
microenterprise development strategy. MICRODEVs shall be operated as nonstock and 
nonprofit corporations in accordance with the Securities and Exchange Commission 
(SEC) rules and regulations and provisions of Title XI (Non-Stock Corporations) of 
Batas Pambansa Big. 68, otherwise known as "The Corporation Code of the 
Philippines". These shall be governed by a Board of Trustees whose members shall not 
receive compensation: Provided, That no part of the net income of MICRODEVs inure 
to the benefit of the members, trustees, directors or officers: Provided, further, 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 
(DOF) upon the recommendation of the Bureau of Internal Revenue (BIR). 
SEC. 5. Powers and Functions of a MICRODEV. -
A MICRODEV shall exercise such 
powers and functions and undertake such activities in accordance with the policies, 
programs and services provided in this Act. It shall: 
(a) 
Provide the poor access to reasonable and affordable credit and related services 
including microfinance, microinsurance, health care and microhousing; 
(b) 
Provide business development opportunities such as leadership training and 
entrepreneurial skills training; and 
(c) 
Provide 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. 
Any accredited MICRODEV 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. 
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For the purpose of implementing this provision, deposit-taking does not include 
taking of funds from current or prospective borrowers for the purpose of equity build-up 
of an individual borrower's own loans. A MICRODEV shall be a net lender at all times, 
wherein net loans mean total loans minus total equity build-up. 
SEC. 6. Capital Requirements. - A MICRODEV shall have a net worth of Twenty million 
pesos (P20,OOO,OOO.OO), or in the case of newly organized MICRODEVs, an initial net 
worth of Ten million pesos (P10,OOO,OOO.OO). 
SEC. 7. Creation and Composition of the Accrediting Entity. - An accrediting entity to be 
known as the MICRODEV Accreditation Center shall be created under the National 
Anti-Poverty Commission (NAPC) to perform the functions provided herein. It shall be 
composed of the following: 
(a) 
The President of the NAPC or designated representative; 
(b) 
The Secretary of the DOF or designated representative; 
(c) 
The Secretary of the Department of Trade and Industry (DTI) or designated 
representative; 
(d) 
The Governor of the Bangko Sentral ng Pilipinas (BSP) or designated 
representative; 
(e) 
The Chairperson of the SEC or designated representative; and 
(f) 
The President of the Microfinance Council of the Philippines (MFCP) or 
designated representative. 
The MICRODEV Accreditation Center shall be assisted by a Secretariat in the 
performance of its functions. Funding for its operation shall be sourced from the two 
percent (2%) tax proceeds from MICRODEVs to be remitted to the People's 
Development Trust Pund established under Republic Act No. 8425, as provided for in 
subparagraph (a) of Section 10 of this Act. 
SEC. 8. Powers and Functions of the Accrediting Entity. -
The MICRODEV 
Accreditation Center established under this Act shall have the following functions and 
responsibilities: 
(a) 
Institute and operate a system of accreditation for MICRODEVs; 
(b) 
Issue certificate of accreditation as a MICRODEV to a nonstock and nonprofit 
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: Provided, further, That no application shall be processed 
for accreditation as a MICRODEV unless the applicant enterprise secures a valid 
registration or license with the government agency that exercises regulatory 
function over such corporation; 
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(c) 
Monitor the performance of MICRODEVs to ensure compliance with the 
provisions of this Act and its implementing rules and regulations; 
(d) 
Suspend or revoke any certificate of accreditation upon determination that a 
MICRODEV no longer meets the criteria for accreditation; 
(e) 
Require regular submission of reports by MICRODEVs; 
(f) 
Collect reasonable accreditation and monitoring fees from a MICRODEV which 
shall be used for the accrediting entity's operational requirements; 
(g) 
Submit an annual report to the President of the Philippines and the concerned 
committees of both Houses of Congress; and 
(h) 
Perform such other functions as may be necessary to accomplish the purposes 
and objectives of this Act. 
SEC. 9. Power of the Regulatory Authorities to Examine MICRODEVs. - The SSP and 
the Insurance Commission, in coordination with the accrediting entities, shall have the 
power to examine the operations of MICRODEVs, solely for the purpose of determining 
that MfCRODEVs are not engaged in unauthorized undertakings or activities which are 
subject to their respective regulations. 
SEC. 10. Taxation of Accredited MICRODEVs. - The taxation of MICRODEVs shall be 
as follows: 
(a) 
The MICRODEVs 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's Development Trust 
Fund established under Republic Act No. 8425. The term "gross income" shall mean 
gross receipts less sales returns, allowances, discounts and other costs of services. 
The term "cost of services" shall mean all 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 of a MICRODEV shall be 
deductible from gross receipts as part of cost of services in arriving at gross income. 
The term gross income l)hall exclude donations; 
(b) 
Donations to the MICRODEV 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 MICRODEV by the accrediting entity under this 
Act shall be sufficient; 
(c) 
Donations to the MICRODEV shall be exempt from donor's tax subject to the 
qualifications of Sect,ion 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 under this Act shall be sufficient; and 
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(d) 
Transactions of the MICROOEV and its clients shall be exempt from 
documentary stamp tax. 
SEC. 11. Implementing Rules and Regulations. -
The NAPC, in coordination with the 
OOF, the SIR, the SSP, the OTI and the MFCP, shall formulate the implementing rules 
and regulations (lRR) of this Act within ninety (90) days after its approval. The IRR shall 
take effect fifteen (15) days after its publication in a newspaper of general circulation in 
the Philippines. 
SEC. 12. Penalty Clause. -
If the SSP or the Insurance Commission finds, pursuant to 
its power under Section 9 of this Act, MICROOEVs engaging in unauthorized 
undertakings or activities, the SSP or the Insurance Commission may impose 
administrative sanctions including, but not limited to, issuance of an order requiring the 
MICROOEV and/or the directors and/or officers concerned to cease and desist from the 
indicated practice or violation, and may further order that immediate action be taken to 
correct the conditions resulting from such violation. The cease and desist order shall be 
immediately effective upon service of such order to the respondents. Further, 
MICROOEVs and/or its directors and/or officers found to be engaged in unauthorized 
undertakings and activities shall be subject to criminal and administrative fines as 
provided for in Sections 36 and 37 of Republic Act No. 7653 or the New Central Sank 
Act, and in case of unauthorized activities regulated by the Insurance Commission, be 
liable under the applicable insurance laws. 
SEC. 13. 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. 
SEC. 14. Repealing. Clause. - All executive orders, rules and regulatidns or parts 
thereof which are contrary to or inconsistent with this Act are hereby repealed, amended 
or modified accordingly. 
SEC. 15. Effectivity Clause. - This Act shall take effect after fifteen (15) days from its 
publication in at least two (2) national newspapers of general circulation. 
Approved, 
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