.-, 
.r. T 
FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
I 
,>.” 
J 26, :‘ : . i 
First Regular Session 
) 
S E N A T E  
COMMITTEE REPORT NO. - 
Submitted by the Committee on Economic Affairs jointly with the Committees 
on Banks, Financial Institutions and Currencies and Finance, on 
SEP 2 6 2007’ 
RE: 
S.B. NO. 
16 4 6 prepared by the Committees 
Recommending its approval in substitution of S.B. Nos. 108, 169, 703, 1380 and 1577 
Sponsor 
: Senator Loren B. Legarda 
M R  PRESIDENT 
The Senate Committee on Economic Affairs jointly with the Committees on 
Banks, Financial Institutions and Currencies, and Finance, to which were referred: 
Senate Bill No. 108, introduced by Senator Roxas, entitled: 
“AN ACT 
TO PROMOTE ENTREPRENEURSHIP BY STRENGTHENING 
DEVELOPMENT AND ASSISTANCE PROGRAMS TO MICRO, SMALL AND 
MEDIUM SCALE ENTERPRISES, AMENDING FOR THE PURPOSE 
REPUBLIC ACT NO. 6977, AS AMENDED, OTHERWISE 
KNOWN AS THE “MAGNA CARTA FOR SMALL ENTERPRISES” 
AND FOR OTHER PURPOSES” 
Senate Bill No. 169, authored by Senator Revilla, Jr., entitzed: 
“AN ACT 
TO PROMOTE ENTREPRENEURSHIP BY STRENGTHENING 
DEVELOPMENT AND ASSISTANCE PROGRAMS TO MICRO, SMALL AND 
MEDIUM SCALE ENTERPRISES, AMENDING FOR THE PURPOSE 
REPUBLIC ACT NO. 6977, AS AMENDED, OTHERWISE KNOWN 
AS THE “MAGNA CARTA FOR SMALL ENTERPRISES” 
AND FOR OTHER PURPOSES” 
Senate Bill No. 703, introduced by Senator Jinggoy Estrada, entitZe& 
“AN ACT 
TO FURTHER PROMOTE ENTREPRENEURSHIP AND SUPPORT THE 
DEVELOPMENT OF SMALL AND MEDIUM ENTERPRISES, 
AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 6977, 
AS AMENDED,OTHERWISE KNOWN AS THE MAGNA 
CARTA FOR SMALL ENTERPRISES” 


Senate Bill No. 1380, authored by Senator Legarda, enfitled: 
“AN ACT 
TO FURTHER PROMOTE ENTREPRENEURSHIP AND THE DEVELOPMENT 
OF SMALL AND MEDIUM ENTERPRISES,AMENDING FOR THE 
PURPOSE REPUBLIC ACT NO. 6977, AS AMENDED, 
OTHERWISE KNOWN AS THE MAGNA 
CARTA FOR SMALL ENTERPRISES” 
And Senate Bill No. 1577, introduced by Senator Villar, entitled: 
“AN ACT 
TO FURTHER PROMOTE ENTREPRENEURSHIP AND THE DEVELOPMENT 
OF SMALL AND MEDIUM SCALE ENTERPRISES,AMENDING FOR 
THE PURPOSE REPUBLIC ACT NO. 6977, AS AMENDED, 
OTHERWISE KNOWN AS THE MAGNA 
CARTA FOR SMALL ENTERPRISES” 
have considered the same and have the honor to re ort them back to the Senate with the 
recommendation that the attached S.B. No. 164 6 , prepared by the Committees, 
entitled: 
“AN ACT 
d 
TO PROMOTE ENTREPRENEURSHIP BY STRENGTHENING DEVELdLENT 
,A,NDASSISTANCE PROGRAMS TO MICRO, SMALL AND MEDIUM SCALE 
ENTERPRISES, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 6977, 
AS AMENDED, OTHERWISE KNOWN AS THE “MAGNA CARTA 
FOR SMALL ENTERPRISES” AND FOR OTHER PURPOSES” 
be approved in substitution of S.B. Nos. 108, 169, 703, 1380, and 1577, with Senators 
Roxas, Revilla, Jr., Estrada, Legarda, and Villar as authors thereof. 
Respectfully submitted: 
ED %”& 
A 
OJ. /h 
N A - 
LORENB. EGARDA 
Chairmdn ‘ 
Chairperson 
Committee on Banks, Financial 
Institutions and Currencies 
Vice Chairman, Committee on Finance 
Committee on Economic Affairs 
Member,Committee on Banks Etc. 
Member, Committee on Finance 
Committee on Finance 
Vice Chairman, Committee on Banks, etc. 
Member, Committee on Economic Affairs 
2 


A 
‘GRINGO” B. HONASAN 
ice Chairman 
on Economic Affairs 
Member, Committee on Finance 
V JOKER P. ARROYO 
Vice Chairman 
Committee on Finance 
MIRIAM DEFENSOR SANTIAGO 
Vice Chairperson 
Committee on Finance 
Member, Committee on Banks 
MEMBERS: 
ALAN PETER “COMPANERO” S. CAYETANO 
Committees, On Economic Affairs, and 
Banks 
/ Economic Affairs, Banks, 
and Finance 
nomic 
Affairs 
and 
Finance 
c__ 
FRANCIS G. ESCUDERO 
Committees on Economic 
Affairs, and Finance 
Committee on Finance 
3 


COMPARERA PIA S. CAYETANO 
Committee on Finance 
I wi-v.' 
GREGORIO B. HONASAN II 
Committee on Finance 
" \  
i\ p 
ANTONIO F. TRILLANES, N 
Committee on Finance 
A 
BENIGN0 
. A  UINOIII 
Committee dn Ecdnomic 
Affairs 
Committee on Economic 
Committees od~anks, 
and Finance 
EX-OFFICIO MEMBERS 
&UILINO 
Q. PIMENTEL, JR. 
. 
Minority Floor Leader 
HON. MANNY VILLAR 
Senate President 
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5Ep 26 p '2 
.>L' 
... 
FOURTEENTH CONGRESS OF THE 
1 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
~
~
~
~
l
WP':.... 
S E N A T E  
Prepared 
jointly by 
the 
Committees 
on Economic 
Affairs, Banks, Financial Institutions and Currencies, and 
Finance, with Senators Roxas, Revilla, 
Jr., 
Estrada, 
Legarda and Villar as authors thereof. 
AN ACT 
TO PROMOTE ENTREPRENEURSHIP BY STRENGTHENING DEVELOPMENT 
AND ASSISTANCE PROGRAMS TO MICRO, SMALL AND MEDIUM SCALE 
ENTERPRISES, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 
6977, AS AMENDED, OTHERWISE KNOWN AS THE "MAGNA CARTA 
FOR SMALL ENTERPRISES" AND FOR OTHER PURPOSES 
Be it enacted by the Senate and House of Representatives of 
the Philippines in Congress assembled: 
Section 1. 
Republic Act No. 6977, as amended, Section 1, 
is further amended to read as follows: 
"Section 1 Title.- 
This Act shall be known as 
the 
Magna 
Carta 
for 
MICRO, 
Small AND 
MEDIUM 
Enterprises (MSME) . " 
SEC. 2. 
Section 2 of the same Act is hereby amended to 
read as follows: 
"Section 2. Declaration of Policy. - Recognizing 
that MICRO, small and medium scale enterprises (MSME) 
have the potential for more employment generation and 
economic growth and therefore can help provide a self- 
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sufficient industrial foundation for the country, it 
is hereby declared the policy of the State to promote, 
support, strengthen and encourage the growth and 
development of [small and medium enterprises] MSME! in 
all productive sectors of the economy particularly 
rural/agri-based enterprises. To this end, the State 
shall undertake to [spur the growth and development of 
small and medium enterprises throughout the country] 
PROMOTE 
ENTREPRENEURSHIP, 
SUPPORT 
ENTREPRENEURS, 
ENCOURAGE THE ESTABLISHMENTS OF MICRO, SMALL AND 
MEDIUM 
ENTERPRISES 
AND 
ENSURE 
THEIR 
CONTINUING 
VIABILITY AND GROWTH and thereby attain countryside 
industrialization BY: 
\\ [a) By assuring, through the establishment of 
adequate support structure, and the creation and 
promotion of an environment conducive to the viability 
of these enterprises, establishment of mechanisms, the 
access and transfer of appropriate technology needed 
by small and medium enterprises;] 
“ [bl A) [By] intensifying and expanding programs 
for training in entrepreneurship and 
for skills 
development for labor; 
“IC] 
BI 
[By] facilitating their access to 
sources of funds; 
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"[d] 
C )  
[By] assuring to them access to a fair 
share of government contracts and related incentives 
and preferences; 
"[el 
D) [By] complementing 
and 
supplementing 
financing programs 
for MICRO, 
small and medium 
enterprises 
and 
doing 
away 
with 
stringent 
and 
burdensome 
collateral 
requirements 
that 
small 
entrepreneurs 
invariably 
find 
extreme 
difficulty 
complying with; 
"[fl 
E) [By1 instituting safeguards for the 
protection and stability of the credit delivery 
system; 
" [gl 
F) [By] raising government efficiency 
and effectiveness in providing assistance to 
MICRO, small and medium enterprises throughout 
the country, at the least cost; 
"[hl 
G )  
[By1 promoting linkages between 
large and small enterprises, and by encouraging 
the establishment of common service facilities; 
"[i] 
H) 
[By1 making the private sector a 
partner in the task of building up MICRO, small 
and medium enterprises through the promotion and 
participation of private voluntary organizations, 
viable industry associations, and cooperatives; 
and 
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“[jl 
1) 
[By] assuring a balanced and 
sustainable development through the establishment 
of a feedback and evaluation mechanism that will 
monitor the economic contributions as well as 
bottlenecks and environmental effects of the 
development of MICRO, 
small and medium [scale] 
enterprises .” 
SEC. 
3. 
Section 3 of the same Act, as amended, is hereby 
further amended to read as follows: 
“Section. 3. 
MICRO, Small and Medium Enterprise 
as Beneficiaries. - 
[ ’Small and medium enterprise’] 
MSME 
shall be defined as 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 
value falling under the following categories: 
Micro 
: 
[less than 
P 1,500,0001 NOT MORE 
THAN P3,000,000 
Small 
[P 1,500,0011 P3,000,001 - 
P 
15,000,000 
Medium 
: 
P 15,000,001 
- 
[P 
60,000,000] P 
100,000,000 
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"The above definitions shall be subject to review 
and adjustment [by the said Council1 motu proprio BY 
THE MSMED COUNCIL UNDER SECTION 6 OF THIS LAW or upon 
recommendation of sectoral organizationis) CONCERNED, 
taking into account inflation and other economic 
indicators. The Council may use [as1 OTHER variables 
[the] SUCH AS number of employees, equity capital and 
asset size. 
"THE 
COUNCIL SHALL ENSURE 
THAT 
NOTWITHSTANDING 
THE PLANS AND PROGRAMS SET FOR MSMEs AS A WHOLE, 
THERE 
SHALL BE SET AND IMPLEMENTED OTHER PLANS AND PROGRAMS 
VARIED AND DISTINCT FROM EACH OTHER, ACCORDING TO THE 
S P E C I F I C  NEEDS 
OF EACH 
SECTOR, 
ENCOURAGING 
MSME 
TO 
GRADUATE FROM ONE CATEGORY TO THE NEXT OR EVEN HIGHER 
CATEGORY. " 
SEC. 
4 .  Section 4 of the same Act, as amended, is hereby 
further amended to read as follows: 
"Section 
4. 
E l i g i b i l i  ty 
for 
Government 
Assistance. - To qualify for assistance, counseling, 
incentives and promotion under this Act, businesses 
falling under the above definition must be; 
"a) duly registered with the appropriate 
agencies as presently provided by law: Provided, 
That in the case of micro enterprises as defined 
herein, as defined herein, registration with the 
office of the municipal or city treasurer shall 
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be 
deemed 
sufficient 
compliance 
with 
this 
requirement : 
"b) one hundred percent (1008) owned [and], 
capitalized by Filipino citizens, [if] WHETHER 
single proprietorship or partnership. If the 
enterprise is a juridical entity, at least sixty 
percent 
(60%) of its capital or outstanding 
stocks must be owned by Filipino citizens. 
"c) a business activity within the major 
sectors 
of 
the 
economy, 
namely; 
industry, 
services, 
including 
the 
practice 
of 
one's 
profession, 
the operation 
of 
tourism-related 
establishments, 
and 
agri-business, which 
for 
purposes of this Act refers to any business 
activity involving the manufacturing, processing, 
and/or 
production 
of 
agricultural 
produce[, 
excluding 
farm 
level 
agriculturalfcrop 
production]; and 
"d) it must not be a branch, subsidiary or 
division of a large-scale enterprise [nor may its 
policies 
be 
determined 
by 
a 
large 
scale 
enterprise or by persons who are not owners or 
employees of the enterprise]. 
"However, 
this 
requirement 
shall 
not 
preclude a [small and medium enterprise] MSME 
from 
accepting 
subcontracts 
[from 
large 
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enterprises or firms] AND ENTERING INTO FRANCHISE 
PARTNERSHIP WITH 
LARGE 
ENTERPRISES OR 
FROM 
joining in cooperative activities with other 
[small and medium enterprises] MSME. 
“Programs of the [financing corporation] 
SMALL BUSINESS CORPORATION (SBC) as provided in 
subsequent 
[Sections 
I 
PROVISIONS of this Act 
shall be exclusively [targeted] DELIVERED AND 
DIRECTED to 
[medium, small, and micro-sized 
enterprises] BONAFIDE MSMEs. 
‘Registered 
MICRO, 
small 
AND 
MEDIUM 
enterprises shall 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: Provided, That prices and quality of 
goods offered by the registered small enterprises 
are competitive. 
”THE DEPARTMENT OF BUDGET AND MANAGEMENT 
SHALL MONITOR 
THE 
COMPLIANCE 
OF 
GOVERNMENT 
AGENCIES ON THE REQUIRED PROCUREMENT FOR MSME AND 
SUBMIT ITS REPORT TO THE MSMED COUNCIL ON A 
SEMESTRAL BASIS AND TO THE CONGRESS OF THE 
PHILIPPINES, THROUGH ITS APPROPRIATE COMMITTEES 
ON A YEARLY BASIS.“ 
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SEC. 
5. 
Section 5 of the same Act is hereby further 
amended to read as follows: 
“Section 5. Guiding Principles. - 
To set the 
pace 
for 
[small 
and 
medium 
enterprise] 
MSME 
development, 
the State shall be 
guided by 
the 
following principles: 
x
x
x
 
“c) Coordination 
of 
government 
efforts. 
Government 
efforts 
shall 
be 
coordinated 
to 
achieve coherence in objectives. All appropriate 
offices, particularly those under the Departments 
of Trade and Industry, Finance, Budget and 
Management , 
Agriculture, 
Agrarian 
Reform, 
Environment and Natural Resources, Labor and 
Employment, Transportation and Communications, 
Public 
Works 
and 
Highways, 
Science 
and 
Technology, INTERIOR 
AND 
Local Government and 
Tourism as well as the National Economic and 
Development 
Authority, 
PHILIPPINE 
INFORMATION 
AGENCY 
and the Bangko Sentral ng Pilipinas, 
through their national, regional and provincial 
offices, shall to the best of their effort and in 
coordination with local government units, provide 
the necessary support and assistance to 
[small 
and medium enterprises] MSMEs. 
x
x
x
 
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SEC. 
6. 
A new section, numbered Section 6 is hereby 
inserted after Section 5 of the same Act, to read as 
follows: 
"Section 6. MICRO, 
SMALL AND LW~DIVM ENTEXPRISES 
DEVELOPMENT 
PLAN 
(MSMEDP). - 
THE 
PRESIDENT 
SHALL 
APPROVE 
A 
THREE-YEAR 
MICRO, 
SMALL 
AND 
MEDIUM 
ENTERPRISES 
DEVELOPMENT 
PLAN 
PREPARED 
BY 
THE 
MICRO, 
SMALL 
AND 
MEDIUM 
ENTERPRISE 
COUNCIL 
THROUGH 
THE 
DEPARTMENT OF TRADE AND INDUSTRY WHICH SHALL FORM PART 
OF THE MEDIUM TERM PHILIPPINE DEVELOPMENT PLAN (MTDP). 
I T  
SHALL 
BE 
FORMULATED 
I N  
CONSULTATION 
WITH 
THE 
PRIVATE SECTOR, VALIDATED AND UPDATED SEMESTRALLY. " 
SEC. 7 .  
Section 6 of the same Act is hereby renumbered as 
Section 7 and further amended to read as follows: 
"Section 
7 [ 6 1 .  
[Creation of A Small and 
Medium Enterprise Development 
Council] MICRO, 
SMALL 
AND MEDIUM ENTERPRISE DEWCLOPMENT 
COUNCIL . - 
THE 
EXISTING 
SMALL 
AND 
MEDIUM 
ENTERPRISE 
DEVELOPMENT 
COUNCIL, 
WHICH WAS CREATED BY REPUBLIC ACT NO. 
6977, 
AS 
AMENDED 
BY 
REPUBLIC 
ACT 
NO. 
8289, 
SHALL 
BE 
STRENGTHENED 
[ T l t o  effectively spur the growth and 
development of [small and medium enterprises] 
MSMEs 
throughout the country, and to carry out the policy 
declared on this Act, [a Small and Medium Enterprise 
Development (SMED) Council is hereby created. ] 
AND 
SHALL NOW 
BE 
KNOWN AS THE 
MICRO, 
SMALL AND MEDIUM 
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ENTERPRISE 
DEVELOPMENT COUNCIL. 
The Council shall be 
attached to the Department of Trade and Industry and 
shall be constituted within sixty (60) days after the 
approval of this Act. 
x x x  
SEC. 
8 .  
Section 7 of the same Act, as amended, is 
hereby renumbered as Section 
7-A, and further amended to read as follows: 
"Section 7-A [ 7 ] .  
Composition. - 
The Council 
shall be headed by the Secretary of Trade and Industry 
as Chairman, and may elect from among themselves a 
Vice-chairman to preside over the Council meetings in 
the absence of the Chairman. The members shall be the 
following: 
"a) Director General of the National Economic 
and Development Authority; 
"b) Secretary of Agriculture; 
"c) 
Secretary of Labor and Employment; 
"d) Secretary of 
Environment and Natural 
Resources; 
"E) 
SECRETARY 
OF 
THE 
INTERIOR 
AND 
LOCAL 
GOVERNMENT; 
"F 
SECRETARY OF THE DEPARTMENT OF FINANCE: 
\\ [ e )  ] 
G) Secretary 
of 
Science 
and 
Technology; 
" [ f )  ] 
H )  
Secretary of 
Tourism; 
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" [ g )  1 
I) The Chairman of the Monetary' 
Board; 
" [h) 
1 
J) Chairman of [Small Business 
Guarantee and Finance Corporation] SMALL BUSINESS 
CORPORATION ; 
"[i)] 
K) Chairman of the MICRO, 
small and 
medium enterprises promotion body which the 
President shall undertake to establish under 
this Act; [and] 
" [j)] L) Three ( 3 )  representatives from the 
private 
sector 
at 
large, 
all 
Filipino 
citizens, to represent Luzon, Visayas and 
Mindanao, ONE REPRESENTATIVE 
FROM THE LABOR 
SECTOR, 
TO BE NOMINATED BY ACCREDITED LABOR 
GROUPS 
and one representative from the 
MICRO, 
small and medium enterprise sector, 
to be appointed by the President; and 
"[k] M) One (1) representative EACH from the 
private 
banking 
sector 
[to 
serve 
alternately among] the Chamber of Thrift 
Banks; the Rural Bankers' Association of the 
Philippines 
(RBAP) ; 
and 
the 
Bankers' 
Association of the Philippines (BAP); 
"ALL MEMBERS OF THE COUNCIL SO APPOINTED, EXCEPT 
FOR THE EX-OFFICIO MEMBERS, 
SHALL SERVE FOR A TERM OF 
THREE (3) YEARS. 
THE PERSON SO APPOINTED TO REPLACE A 
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MEMBER WHO HAS RESIGNED, DIED, OR BEEN REMOVED FOR 
CAUSE SHALL SERVE ONLY FOR THE UNEXPIRED PORTION OF 
THE TERM. 
"EXCEPT THE SECRETARY OF THE DEPARTMENT OF TRADE 
AND 
INDUSTRY, [Clcabinet-rank e x - o f f i c i o  members of 
the Council shall designate an undersecretary or 
assistant secretary, and the chairman of the Monetary 
Board 
or 
his 
representative as 
their 
permanent 
representative in case they fail to attend meetings of 
the Council. 
"The 
private 
sector 
members 
of 
the 
Council 
shall [initially] receive p e r  diem 
of 
[One] TWO thousand pesos (P[1]2,000) per meeting, 
for 
a 
maximum of twenty-four (24) meetings per year, 
which [ p e r  diem 
may be adjusted] AMOUNT SHALL BE 
DETERMINED by the Council: Provided, That THE AMOUNT 
AND any such adjustment shall take effect upon 
approval of the [ President.] MSMED COUNCIL. 
" [The Department of Trade and Industry shall 
allocate Five million pesos (P5,000,000.00) out of its 
savings for the initial operating expenses of the 
Council, after which the Council's budget shall be 
included in the annual appropriation of the Department 
of Trade and Industry.] 
"THE 
COUNCIL SHALL HAVE A SEPARATE ANNUAL 
APPROPRIATION WHICH SHALL BE PROVIDED IN THE GENERAL 
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APROPRIATIONS 
ACT 
STARTING 
IN 
THE 
FISCAL 
YEAR 
IMMEDIATELY FOLLOWING THE APPROVAL OF THIS ACT FOR ITS 
ACTIVITIES AND OPERATIONAL EXPENSES. 
"The Council may [, from time to time, I call upon 
the participation of any NATIONAL OR LOCAL government 
agency [or], association of local government officials 
OR PRIVATE SECTOR ORGANIZATION in its deliberations 
especially 
when 
such 
agency 
OR 
PRIVATE 
SECTOR 
ORGANIZATION is directly or indirectly concerned with 
and/or affecting the growth and development of [small 
and medium enterprises] MSMEs in any particular area 
or manner. 
"The Council may create an Executive Committee 
of five (5) members elected by the Council from among 
themselves 
or 
their 
designated 
permanent 
representatives, with 
at 
least 
two 
(2) members 
representing the private sector, and with authority to 
act for and on behalf of the Council during intervals 
of council meetings, and within the specific authority 
granted by the Council." 
SEC. 
9. 
Section 8 of the same Act, as amended, is 
hereby renumbered as Section 
7-B and further amended to read as follows: 
"SECTION 7-B [81. 
Powers and Functions. - 
25 
The 
[Small and Medium Enterprise Development (SMED)] 
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MSMED Council shall have the following powers, duties 
and functions: 
“a) To help establish the needed environment and 
opportunities 
conducive 
to 
the 
growth 
and 
development of the [small and medium enterprises] 
MSME sector; 
“b) To recommend to the President and the 
Congress a l l  policy matters affecting 
[small and 
medium scale enterprises] 
MSMEs; 
“c) To formulate a comprehensive 
[small and 
medium enterprises] 
MSME 
development plan to be 
integrated into the National Economic and Development 
Authority (NEDA) Development Plans; 
“d) To 
coordinate 
and 
integrate 
various 
government and private sector activities relating to 
[small and medium enterprises] 
MSME development; 
“e) To review existing policies of government 
agencies that would affect the growth and development 
of 
[small and medium enterprises] 
MSMEs 
and 
recommend changes to the President and 
[/or to the] 
Congress THROUGH THE COMMITTEE ON ECONOMIC AFFAIRS OF 
THE 
SENATE 
AND 
THE 
SPECIAL 
COMMI T TE E 
ON 
ENTREPRENEURSIP 
DEVELOPMENT, 
OR 
ANY 
APPROPRIATE 
COMMITTEE 
OF THE 
HOUSE 
OF REPRESENTATIVES, 
whenever 
deemed necessary. 
This shall include efforts to 
simplify rules and regulations, as well as procedural 
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and documentary requirements in the registration, 
financing, and other activities relevant to [small and 
medium enterprises] 
MSMEs; 
"f) To monitor and determine the progress of 
various agencies geared towards the development of the 
sector. 
This 
shall 
include 
overseeing, 
in 
coordination with local government units and the 
Department of 
THE 
INTERIOR AND Local Government as 
well 
as 
private 
sector 
groups/associations, 
the 
developments among 
[small and medium enterprises] 
MSME s 
[particularly the cottage and micro-sized 
firms] ; 
"9) To 
promulgate 
implementing 
guidelines, 
programs, and operating principles as may be deemed 
proper and necessary in the light of government 
policies and objectives of this Act; 
"h) To 
provide 
the 
appropriate 
policy 
and 
coordinative 
framework 
in 
assisting 
relevant 
government agencies, in coordination with 
[ 
the 
National Economic and Development Authority] NEDA and 
the Coordinating Council for the Philippine Assistance 
Program, as may be necessary, in the tapping of local 
and foreign funds for 
[small and medium enterprises] 
MSME 
development; 
"i) To promote 
the 
productivity 
and 
viability of 
[small and medium enterprises] MSMEs by 
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way of directing and/or assisting relevant government 
agencies and institutions at the national, regional 
and provincial levels towards the: 
"1) Provision of business training courses, 
technical training for technicians and skilled 
laborers 
and 
continuing 
skills 
upgrading 
programs; 
"2) Provision of labor-management guidance, 
assistance and improvement of the working 
conditions of employees in 
[small and medium- 
sized firms] MSMEs; 
"3) 
Provision of 
guidance 
and assistance 
regarding product quality/product development 
and product diversification; 
"4) Provision of guidance and assistance for 
the adoption of improved production techniques 
and 
commercialization 
of 
appropriate 
technologies for the product development and 
for increased utilization of indigenous raw 
materials; 
"5) Provision of assistance in marketing and 
distribution of products of 
[small and 
medium enterprises] 
MSMEs 
through 
local 
supply-demand 
information, 
industry 
and 
provincial 
profiles, 
overseas 
marketing 
promotion, domestic market linkaging and the 
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establishment of common service facilities such 
as common and/or cooperative bonded warehouse, 
grains storage, agro-processing and drying 
facilities, ice plants, refrigerated storage, 
cooperative trucking facilities, etc; 
" 6 )  Intensification of assistance and guidance 
to enable greater access to credit through a 
simplified multi-agency financing program: to 
encourage 
development 
of 
other 
modes 
of 
financing such as leasing and venture capital 
activities; 
to 
provide 
effective 
credit 
guarantee 
systems, and encourage the 
formation of credit guarantee associations, 
including setting up of credit records and 
information systems and to decentralize loan 
approval mechanisms: 
"7) Provision of concessional interest rates, 
lower 
financing 
fees, which 
may 
include 
incentives 
for 
prompt 
arrangements tying amortiz 
cash 
flows, 
effective 
government guarantee cover 
borrower's lack of collatera 
credit 
payments, 
tions to business 
substitution 
of 
on loans for the 
"8) Provision of bankruptcy preventive measures 
through the setting up of a mutual relief 
system for distressed enterprises, and the 
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establishment of measures such as insurance 
against extraordinary disasters; 
" 9 
) 
Intensification 
of 
information 
dissemination campaigns and entrepreneurship 
education activities; 
"10) Easier access to and availment of tax 
credits and other tax and duty incentives as 
provided by the Omnibus Investment Code and 
other laws; 
"11) 
Provision 
of 
support 
for 
product 
experimentation and research and development 
activities as well as access to information on 
commercialized technologies; and 
"12) Provision of more infrastructure facilities 
and public utilities to support operations of 
[small and medium enterprises] MSMEs; 
13) ESTABLISH AN MSME ACADEMY WHICH SHALL PROVIDE 
COURSES AND DEVELOPMENT PROGRAMS, TRAINING, 
ADVICE, 
CONSULTATION 
ON 
BUSINESS 
CONCEPTUALIZATION AND FEASIBILITY, FINANCING, 
MANAGEMENT, CAPACITY BUILDING, HUMAN RESOURCES, 
MARI(ETING, 
AND SUCH OTHER SERVICES TO SUPPORT 
THE NEEDS OF MSMES . 
14) ESTABLISH, OPERATE, AND ADMINISTER A SMALL 
BUSINESS INCUBATION PROGRAM IN COORDINATION WITH 
ACADEMIC INSTITUTIONS, DEPARTMENT OF SCIENCE AND 
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TECHNOLOGY AND 
OTHER APPROPRIATE 
GOVERNMENT 
ENTITIES THAT WILL PROVIDE SPACE FOR START-UP 
AND EXPANDING FIRMS, SHARED USE OF EQUIPMENT AND 
WORK AREAS, DAILY MANAGEMENT SUPPORT SERVICES 
ESSENTIAL TO HIGH-QUALITY COMMERCIAL OPERATIONS, 
TECHNICAL ASSISTANCE AND OTHER SERVICES TO 
DEVELOP INNOVATIVE AND DESERVING MSMES. 
15) CONDUCT A NATIONWIDE INFORMATION CAMPAIGN 
WITH THE PHILIPPINE INFORMATION AGENCY THAT 
SHALL INFORM THE PUBLIC OF ALL PROGRAMS AND 
SERVICES, 
GOVERNMENT 
AND 
NON-GOVERNMENT, 
AVAILABLE TO MSMEs. 
16) PROVIDE LOCAL AND INTERNATIONAL NETWORK AND 
LINKAGES FOR MSME DEVELOPMENT: 
17) COMPILE AND INTEGRATE STATISTICAL DATABANK ON 
PHILIPPINE MSMEs : 
18) SET-UP NEW MSME CENTERS AND REVITALIZE 
ALREADY ESTABLISHED MSME CENTERS TO PROVIDE 
MSMEs IN THE REGIONS EASIER ACCESS TO SERVICES 
SUCH AS, BUT NOT LIMITED TO, THE FOLLOWING: 
i. ACCEPT AND ACT ON ALL REGISTRATION 
APPLICATIONS OF MSME; 
ii. STREAMLINE REGISTRATION 
PROCESS AND 
FACILITATE SPEEDY REGISTRATION FOR THE 
ESTABLISHMENT OF BUSINESS ENTERPRISES 
IN THE COUNTRY; 
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iii 
iv . 
PROVIDE ALL INFORMATION AND REFERRAL 
SERVICES IT SHALL DEEM NECESSARY OR 
ESSENTIAL 
TO 
THE 
DEVELOPMENT AND 
PROMOTION OF MSME; 
CONDUCT OTHER PROGRAMS OR PROJECTS FOR 
ENTREPRENEURIAL DEVELOPMENT IN THEIR 
RESPECTIVE AREAS. " 
'j) 
To submit to the President and the Congress 
THROUGH THE SENATE COMMITTEE ON ECONOMIC AFFAIRS AND 
THE SPECIAL COMMITTEE ON ENTREPRENEURSHIP DEVELOPMENT, 
OR ANY 
APPROPRIATE 
COMMITTEE 
OF 
THE 
HOUSE 
OF 
REPRESENTATIVES, a yearly report on the status of 
[small and medium enterprises] 
MSMEs in the country, 
including the progress and impact of 
all relevant 
government policies, programs and legislation as well 
as private sector activities; 
"k) 
To assist in the establishment of modern 
industrial estates outside urban centers; [and] 
"1) Generally, 
to 
exercise 
all 
powers 
and 
functions necessary for the objectives and purposes of 
this Act I .  ] ; AND 
"M) TO APPROVE THE MSMEDP, COORDINATE, MONITOR 
AND ASSESS THE 
IMPLEMENTATION THEREOF, AND WHEN 
NECESSARY, INSTITUTE APPROPRIATE ADJUSTMENTS THEREON 
IN THE LIGHT OF CHANGING CONDITIONS IN BOTH DOMESTIC 
AND INTERNATIONAL ENVIRONMENT. " 
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SEC. 
10. 
Section 9 of the same Act, as amended is hereby 
renumbered as Section 8 and amended to read as follows: 
"SEC. 
8 [9]. Designation of the Bureau of MICRO, 
Small and Medium Business Development as a Council 
Secretariat. - 
The Bureau of MICRO, Small and Medium 
Business Development is hereby designated to act as 
the Council Secretariat and shall have the following 
duties and functions: 
xxx 
SEC. 11. 
Section 1 0  of the same Act, as amended, is 
hereby further amended to read as follows: 
"Section. 10. Rationalization of Existing MICRO, 
Small and 
Medi um 
Enterprise 
Programs 
and 
Agencies. - 
The 
MSMED Council shall conduct 
continuing review 
of government programs for [small 
and medium enterprises] 
MSME s 
and submit to 
Congress and the President a report thereon together 
with its policy recommendations.'' 
[The President is hereby also empowered to 
establish a small and medium enterprise promotion body 
which shall be the principal government agency that 
will formulate, implement, coordinate and monitor all 
non-financing government programs, including fee-based 
services, to support and promote micro, small and 
medium enterprises. It shall be attached to the 
Department of Trade and Industry and shall be under 
Page 21 


the policy, program and administrative supervision of 
the SMED Council. The said office shall receive no 
less than fifty percent (50%) of the assets, and 
budgetary allocations of the agencies for promotion, 
development 
and 
financing 
of 
small 
and 
medium 
enterprises that may be henceforth dissolved and/or 
abolished and absorbed, incorporated and integrated 
into the SMED Council.] 
9 SEC. 
12. Section 11 of the same Act, as amended, is hereby 
10 
further amended t o  read as follows: 
11 
“Section 
11. Creation 
of 
[Small 
Business 
12 
Guarantee and Finance Corpora tion] SMALL BUSINESS 
13 
CORPORATION. 
- 
There is hereby created a body 
14 
corporate to be known as the Small Business Guarantee 
15 
and Finance Corporation, hereinafter referred to as 
16 
the [SBGFC, 1 SMALL BUSINESS CORPORATION (SBC) , which 
17 
shall 
[source and adopt development initiatives for 
18 
globally competitive small and medium enterprises in 
19 
terms of finance, technology, production, management 
20 
and business linkages, and provide, promote, develop 
21 
and widen in both scope and service reach various 
22 
alternative modes of financing for small and medium 
23 
enterprises, including but not limited to, direct and 
24 
indirect project lending, venture capital, financial 
25 
leasing, secondary mortgage and/or rediscounting of 
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loan papers to small businesses, secondary/regional 
stock markets: 
Provided, That 
crop production 
financing shall not be serviced by the Corporation.] 
BE 
CHARGED 
WITH 
THE 
PRIMARY 
RESPONSIBILITY 
OF 
IMPLEMENTING COMPREHENSIVE POLICIES AND PROGRAMS TO 
ASSIST MICRO, SMALL AND MEDIUM ENTERPRISES IN ALL 
AREAS, INCLUDING BUT NOT LIMITED TO FINANCE AND 
INFORMATION SERVICES. 
[The Corporation shall guarantee loans obtained 
by qualified small and medium enterprises, local 
and/or regional associations' small enterprises and 
industries, private voluntary organizations and/or 
cooperatives, under such terms and conditions adopted 
by its Board. It may guarantee loans up to one hundred 
percent 
(100%). It may also provide second level 
guarantee (i.e., reinsurance) on the credit and/or 
investment 
guarantees 
made 
by 
credit 
guarantee 
associations and other institutions in support of 
small entrepreneurs.] 
"[The Corporation shall become liable under its 
guarantees upon proof that the loan has become past 
due under such terms and guidelines adopted by its 
Board and printed on the contract of guarantee.] 
" [The 
Small 
Business 
Guar ant e e 
Finance 
Corporation shall:] 
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"[a) be attached to the Department of Trade 
and Industry and shall be under the policy, 
program and administrative supervision of the 
SMED Counci1;l 
"[b) have its principal place of business in 
Metro Manila and endeavor to have one or more 
branch offices in every province of the country;] 
"[c) 
exercise 
all 
the 
general 
powers 
conferred by law upon corporations under the 
Corporation Code as are incidental or conducive 
to the attainment of the objectives of this Act;] 
'[d) 
have a board of directors upon which 
the powers of the Corporation shall be vested, to 
be composed of nine (9) members including:] 
"1) [ 
three (3) members from the private 
sector 
appointed 
by 
the 
President 
upon 
recommendation of the SMED Council and from among 
whom the Chairman of the Board shall be appointed 
by the President to serve on a full-time basis;] 
''12) 
the Secretary of Trade and Industry or 
his Undersecretary; and] 
" 1 3 )  a representative from each of the five 
(5) government financial institutions mandated in 
this Act to provide the initial capital of the 
Corporation, who 
shall be designated, under 
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guidelines agreed upon by the Board Chairmen of 
said institutions;] 
“[e) 
notwithstanding 
the 
provisions 
of 
Republic Act No. 6758, and Compensation Circular 
No. 10, series of 1989 issued by the Department 
of Budget and Management, the Board of Directors 
of SBGFC shall have the authority to extend to 
the employees and personnel thereof the allowance 
and fringe benefits similar to those extended to 
and currently enjoyed by the employees and 
personnel 
of 
other 
government 
financial 
institutions. 1” 
SEC. 13. 
A new sub-section is inserted after section 11 
of the same Act, as amended, to read as follows: 
“SECTION 
11-A. 
COMPOSITION 
OF 
THE 
BOARD OF 
DIRECTORS AND ITS POWERS - THE 
SBC CORPORATE 
POWERS 
SHALL BE VESTED ON A BOARD OF DIRECTORS COMPOSED OF 
ELEVEN (11) MEMBERS WHICH SHALL INCLUDE THE FOLLOWING: 
”A) 
THE SECRETARY OF TRADE AND INDUSTRY 
“B) THE SECRETARY OF FINANCE 
“C) 
A 
PRIVATE 
SECTOR 
REPRESENTATIVE 
TO 
BE 
APPOINTED BY THE PRESIDENT UPON THE RECOMMENDATION OF 
THE MSMED COUNCIL; 
”D) 
SEVEN (7) REPRESENTATIVES OF THE SBC COMMON 
STOCK 
SHAREHOLDERS 
WHO 
SHALL 
BE 
ELECTED 
BASED 
ON 
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PROPORTIONAL DISTRIBUTION, IN ACCORDANCE WITH SECTION 
24 OF THE CORPORATION CODE; AND 
“E) 
THE PRESIDENT OF THE SBC AS EX-OFFICIO 
MEMBER AND TO SERVE AS VICE CHAIRMAN OF THE BOARD. 
“THE PRESIDENT SHALL APPOINT THE CHAIRMAN OF THE 
BOARD FROM AMONG ITS MEMBERS. 
“ALL MEMBERS OF THE BOARD SO APPOINTED, EXCEPT 
FOR THE EX-OFFICIO MEMBERS, SHALL SERVE FOR A TERM OF 
THREE (3) YEARS WITHOUT REAPPOINTMENT. 
THE PERSON SO 
APPOINTED TO REPLACE A MEMBER WHO HAS RESIGNED, DIED, 
OR BEEN REMOVED FOR CAUSE SHALL SERVE ONLY FOR THE 
UNEXPIRED PORTION OF THE TERM. 
“THE BOARD OF DIRECTORS SHALL HAVE, AMONG OTHERS 
THE FOLLOWING SPECIFIC POWERS AND AUTHORITIES: 
‘A) FORMULATE POLICIES NECESSARY TO CARRY OUT 
EFFECTIVELY THE PROVISIONS OF THIS CHARTER AND TO 
PRESCRIBE, AMEND 
AND 
REPEAL BY-LAWS, RULES AND 
REGULATIONS FOR THE EFFECTIVE OPERATIONS OF THE SMALL 
BUSINESS CORPORATION; 
’B) 
ESTABLISH 
SUCH 
BRANCHES, 
AGENCIES 
AND 
SUBSIDIARIES 
AS 
MAY 
BE 
DEEMED 
NECESSARY 
AND 
CONVENIENT; 
”C) COMPROMISE OR RELEASE, IN WHOLE OR IN PART, 
ANY CLAIM OR LIABILITY WHATSOEVER FOR OR AGAINST THE 
SBC, INCLUDING INTEREST, PENALTIES, FEES AND/OR OTHER 
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CHARGES IN ACCORDANCE TO ITS OWN BY-LAWS AND BANGKO 
SENTRAL NG PILIPINAS 
RULES; 
'D) 
FIX THE FEATURES OF NON-VOTING PREFERRED 
SHARES 
WHICH 
SHALL 
BE 
PRINTED 
ON 
THE 
STOCK 
CERTIFICATES EVIDENCING THE SAME; 
"E) EXERCISE ALL SUCH OTHER POWERS AS MAY BE 
NECESSARY OR INCIDENT= 
TO CARRY OUT THE SMALL 
BUSINESS CORPORATION PURPOSES; 
"F) 
NOTWITHSTANDING THE PROVISIONS OF REPUBLIC 
ACT NO. 6758 AND COMPENSATION CIRCULAR NO. 10, SERIES 
OF 1989 ISSUED BY THE DEPARTMENT OF BUDGET AND 
MANAGEMENT, THE BOARD SHALL HAVE THE AUTHORITY TO 
PROVIDE FOR THE ORGANIZATIONAL STRUCTURE AND STAFFING 
PATTERN OF SBC AND TO EXTEND TO THE EMPLOYEES AND 
PERSONNEL THEREOF SALARIES, ALLOWANCE AND 
FRINGE 
BENEFITS SIMILAR TO THOSE EXTENDED TO AND CURRENTLY 
ENJOYED BY EMPLOYEES AND PERSONNEL OF OTHER GOVERNMENT 
FINANCIAL INSTITUTIONS. 
" 
SEC. 14. 
A 
new sub-section is hereby inserted after 
Section 11 of the same Act, as amended, to read as follows: 
"SECTION 11-B. CORPORATE STRUCTURE AND POWERS. - 
THE SBC SHALL : 
(A) 
BE 
ADMINISTRATIVELY 
ATTACHED 
TO 
THE 
DEPARTMENT OF TRADE AND INDUSTRY AND SHALL BE 
UNDER THE POLICY AND PROGRAM SUPERVISIOW OF THE 
MSMED COUNCIL. 
Page 2 1  


1 
(B) HAVE ITS PRINCIPAL OFFICES IN METRO MANILA 
2 
AND WHENEVER NECESSARY, ESTABLISH BRANCH OFFICE 
3 
IN THE PROVINCES. 
4 
0 
EXERCISE ALL THE GENERAL POWERS EXPRESSLY 
5 
CONFERRED BY LAW UPON CORPORATIONS UNDER THE 
6 
CORPORATION CODE, INCLUDING THOSE POWERS THAT ARE 
7 
INCIDENTAL OR NECESSARY TO THE ATTAINMENT OF THE 
8 
OBJECTIVE OF THIS ACT. 
9 
“FOR THIS PURPOSE, THE SBC MAY AMONG OTHERS, SERVE THE 
10 
FOLLOWING FUNCTIONS AND DUTIES: 
11 
(A) SOURCE AND ADOPT DEVELOPMENT INITIATIVES FOR 
12 
GLOBALLY COMPETITIVE MSME IN FINANCE AND BUSINESS 
13 
TECHNOLOGIES ; 
14 
(B) TO EXTEND ALL FORMS OF FINANCIAL ASSISTANCE 
15 
TO QUALIFIED AND REGISTERED MSME. SBC MAY ALSO 
16 
ENGAGE IN WHOLESALE LENDING. 
THE SBC SHALL BE 
17 
GIVEN TWO (2) YEARS FROM THE EFFECTIVITY OF THIS 
18 
ACT TO COMPLY WITH THIS REQUIREMENT. 
19 
0 GUARANTEE LOANS OBTAINED BY QUALIFIED MSME 
20 
UNDER SUCH TERMS AND CONDITIONS ADOPTED BY THE 
21 
SBC BOARD OF DIRECTORS; 
22 
(D) HOLD, PURCHASE, LEASE OR OTHERWISE ACQUIRE 
23 
AND OWN REAL AND PERSONAL PROPERTY, INTRODUCE 
24 
NECESSARY 
IMPROVEMENTS THEREON AND 
TO SELL, 
25 
MORTGAGE, ENCUMBER OR OTHERWISE DISPOSE OF THE 
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SAME AS MAY BE NECESSARY IN THE NORMAL COURSE OF 
BUSINESS ; 
(E) FORMULATE MEANS AND METHODS OF ACCEPTING 
ALTERNATIVE 
COLLATERALS 
AND 
IMPLEMENTING 
ALTERNATIVE LOAN EVALUATION MODELS; 
(F) APPLY FOR, RECEIVE AND ACCEPT GRANTS AND 
DONATIONS FROM SOURCES WITHIN AND OUTSIDE THE 
COUNTRY; 
(G) HOLD, OWN, PURCHASE, ACQUIRE, SELL, MORTGAGE, 
DISPOSE OR OTHERWISE INVEST OR RE-INVEST IN 
STOCKS, 
BONDS, 
TREASURY 
BILLS, 
DEBENTURES, 
SECURITIES AND SIMILAR FORMS OF INDEBTEDNESS OF 
THE 
GOVERNMENT, 
ITS 
AGENCIES 
AND 
INSTRUMENTALITIES OR ANY GOVERNMENT FINANCIAL 
INSTITUTION; 
SEC. 15. Section 12 of the same Act, as amended, is hereby 
further amended to read as follows: 
"Section 12. Capitalization and Funding OF THE 
SBC. - 
The [Small Business Guarantee and Finance 
Corporation] SBC shall have an authorized capital 
stock 
o f  
1 Five 1 
TEN 
billion 
pesos 
[ (P 
5,000,000,000.00) 
J 
(P10,000,000,000.00). 
The initial 
capital of One billion pesos (Pl, 
000,000,000.00) shall 
be established from a pool of funds to be contributed 
in the form of equity investments in common stock by 
the 
Land 
Bank 
of 
the 
Philippines 
(LBP), [the 
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Philippine National Bank (PNB) , ] the Development Bank 
of the Philippines (DBP), in the amount of Two hundred 
million pesos 
(P200,000,000.00) each. The Social 
Security System 
(SSS) 
and the Government Service 
Insurance System (GSIS) shall also set aside Two 
hundred million pesos (P200,000,000.00) each [to be 
placed in preferred stocks of the SBGFC] FOR THE SBC. 
AUTHORIZED 
CAPITAL STOCK OF THE 
SMALL BUSINESS 
CORPORATION SHALL BE DIVIDED INTO 80,000,000 COMMON 
SHARES AND 20,000,000 PREFERRED SHARES WITH A PAR 
VALUE OF ONE HUNDRED PESOS (P100.00) PER SHARE: 
PROVIDED, 
THAT THE COMMON SHAl?ES 
WHICH HAVE BEEN 
ISSUED, INCLUDING THOSE ISSUED AGAINST THE ASSETS OF 
THE KKK GUARANTY FUND CONSOLIDATED UNDER THE SMALL 
BUSINESS CORPORATION BY VIRTUE OF EXECUTIVE ORDER NO. 
233, SERIES OF 2000 AND EXECUTIVE ORDER NO. 19, SERIES 
OF 2001 AND INCLUDING THOSE ALREADY SUBSCRIBED, SHALL 
FORM PART OF THE CAPITALIZATION OF THE CORPORATION: 
PROVIDED, 
F U R T m R ,  
THAT HOLDERS OF PREFERRED SHARES 
ISSUED UNDER REPUBLIC ACT 6977, AS AMENDED, SHALL HAVE 
THE OPTION TO CONVERT THE SAME INTO COMMON SHARES. 
Additional EQUITY funding shall come from trust 
placements of excess and unused funds of existing 
government 
agencies, 
bilateral 
and 
multilateral 
official development assistance funds, subscriptions 
from government owned or controlled corporations, and 
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investments of private financial institutions and 
corporations [ . ] : PROVIDED, 
THAT ANY INVESTMENT FROM 
THE PRIVATE SECTOR SHALL ONLY BE IN THE FORM OF 
PREFERRED SHARES. 
"TO ALLOW FOR CAPITAL BUILD-UP, SBC 
SHALL BE 
GIVEN A 
FIVE 
(5) 
YEAR GRACE PERIOD ON DIVIDEND 
COMMITMENTS BEGINNING ON THE DATE OF EFFECTIVITY OF 
THIS AMENDMENT. 
THEREAFTER, IT MAY ONLY DECLARE AS 
DIVIDEND NOT MORE THAN 30% OF ITS NET INCOME AND THE 
REST WITHHELD AS RETAINED EARNINGS. " 
SEC. 16. New sections are hereby inserted after Section 12 
of the same Act, as amended, to read as follows: 
"SECTION 13. LIMITED 
SOVEREIGN GUARANTEE FOR 
SMALL BUSINESS CORPORATION. - 
MSME CREDIT GUARANTEE 
OBLIGATIONS CONTRACTED AND INCURRED BY SBC BY VIRTUE 
OF THE PROVISIONS OF THIS ACT, SHALL BE GUARANTEED BY 
THE REPUBLIC OF THE PHILIPPINES, BOTH AS TO PRINCIPAL 
SUMS AND 
INTEREST PAYMENT: 
PROVIDED, 
THAT 
SUCH 
GUARANTEE SHALL NOT EXCEED THREE HUNDRED PERCENT 
(300%) OF THE NET WORTH OF THE CORPORATION. 
"THE REPUBLIC OF THE PHILIPPINES SHALL SUCCEED TO 
ALL THE RIGHTS TO THE COLLATERALS, NOTES OR OTHER 
INSTRUMENTS TO THE EXTENT OF THE PAYMENTS MADE, UNLESS 
THE SUMS SO PAID BY THE REPUBLIC OF THE PHILIPPINES 
SHALL BE REFUNDED BY 
THE 
CORPORATION WITHIN A 
REASONABLE TIME. " 
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"SECTION 14. GUARANTEE lWSERW3 FUND. - THE SMALL 
BUSINESS CORPORATION SHALL SET ASIDE FIVE PERCENT ( 5 % )  
OF ITS ANNUAL NET OPERATING REVENUES BEFORE INTEREST 
AS RESERVE OR SINKING FUND TO ANSWER FOR GUARANTEE 
CALLS. THIS FUND SHALL BE CALLED THE GUARANTEE RESERVE 
FUND (GRF). 
"THE PRIMARY PURPOSE OF THE GRF IS TO ASSURE THE 
LONG-TERM FINANCIAL VIABILITY OF THE GUARANTEE CALLS. 
THE AMOUNT SET ASIDE FOR THE RESERVE FUND SHALL BE 
SUBJECT TO THE CONDUCT OF AN ACTUARIAL STUDY TO 
DETERMINE THE APPROPRIATE REQUIREMENT, BUT IN NO CASE 
SHALL IT BE LOWER THAN 5% OF THE ANNUAL NET OPERATING 
REVENUE OF THE CORPORATION AS PRESCRIBED IN THE ACT.// 
SEC. 17. Section 13 of the same Act, as amended, is hereby 
renumbered as Section 15, and 
further amended to read as 
follows : 
"Section 15 [13]. Mandatory Allocation of Credit 
Resources to MICRO, Small and Medium Enterprises. 
- 
For the period of ten (10) years from the date of the 
effectivity of this AMENDATORY Act, all lending 
institutions as defined under Bangko Sentral ng 
Pilipinas rules, whether public or private, shall set 
aside at least [six] TEN percent [61 (10%) FOR MICRO, 
[and at least two percent (2%) for] small and medium 
enterprises [, 
respectively,] of their total loan 
portfolio based on their balance sheet as of the end 
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of the previous quarter, and make it available for 
[small and medium enterprise] MSME credit as herein 
contemplated. 
"COMPLIANCE OF THIS PROVISION SHALL BE: 
A) 
ACTUAL EXTENSION OF LOANS TO QUALIFIED AND 
REGISTERED 
MICRO, 
SMALL 
AND 
MEDIUM 
ENTERPRISES; OR 
B) 
ACTUAL SUBSCRIPTION OF PREFERRED SHARES OF 
STOCK OF SBC; OR 
c) 
SUBSCRIBE/PURCHASE LIABILITY INSTRUMENTS AS 
MAY BE OFFERED BY SBC. 
"The 
Bangko 
Sentral 
ng 
Pilipinas[, 
in 
consultation 
with 
the 
Council, 1 
MAY 
PRESCRIBE 
ALTERNATIVE 
FORMS 
OF COMPLIANCE 
SUBJECT TO 
THE 
APPROVAL OF THE MSMED COUNCIL. 
FURTHER, THE E3ANGKO 
SENTRAL NG 
P I L I P I N A S  shall formulate rules for the 
effective implementation of this provision: 
Provided, 
That the purchase of government notes, securities and 
other negotiable instruments[, with the exception of 
such instruments as may be offered by the SBGFC which 
do not pay market rates,] shall not be deemed 
compliance with the foregoing provisions: 
Provided, 
further, 
That the Bangko Sentral ng Pilipinas shall 
establish an incentive program to encourage lending to 
[small 
and 
medium] 
MSME 
industries 
beyond 
the 
mandatory credit allocation to said enterprises, such 
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as 
possible 
reduction 
in 
bank’s 
reserve 
requirement. 
“The MSMED Council shall set up the appropriate 
systems to monitor all loan applications of [small and 
medium enterprises] MSMEs in order to account for the 
absorptive capacity of the MICRO, small and medium 
enterprise sector. 
“The Bangko Sentral ng Pilipinas shall 
[require 
lending institutions covered by this Act to] furnish 
to the [Small and Medium Development Council] MSMED 
Council on a quarterly basis [regular] COMPREHENSIVE 
reports 
[on their compliance with the above 
provisions on the mandatory credit allocation for 
small and medium enterprises and expeditiously act on 
the Council’s reports of non-compliance therewith.] ON 
THE BANKS‘ COMPLIANCE, NON-COMPLIANCE AND PENALTIES OF 
THE 
ABOVE 
PROVISIONS 
ON 
THE 
MANDATORY 
CREDIT 
ALLOCATION FOR MSME . “ 
SEC. 18. New sections to be numbered as sections 16 and 17 
are hereby inserted after Section 13 of the same Act, as 
amended, to read as follows: 
“SECTION 16. MICRO, SMALL, 
AND MEDIUM ENTERPRISE 
WEEK. - IN ORDER TO INSTITUTE CONTINUING AWARENESS OF 
THE PRIMACY OF SMALL BUSINESS IN NATION-BUILDING AND 
IN PEOPLE EMPOWERMENT, AND TO CELEBRATE AND ESPOUSE 
THE FIRM COMMITMENT OF THE STATE IN THE PROMOTION, 
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GROWTH AND DEVELOPMENT OF SMALL BUSINESS, THE SECOND 
WEEK OF JULY OF EVERY YEAR SHALL BE DECLARED AS THE 
"MICRO, SMALL, AND MEDIUM 
ENTERPRISE DEVELOPMENT 
WEEK,'. THE MSMED COUNCIL, THE DEPARTMENT OF TRADE AND 
INDUSTRY, AND THE SBC SHALL BE JOINTLY RESPONSIBLE IN 
ORGANIZING ACTIVITIES FOR THE EVENT." 
"SECTION 17. PRESIDENTIAL AWARDS FOR OUTSTANDING 
MSME. - 
PRESIDENTIAL AWARDS FOR OUTSTANDING MSME, 
CONSISTING OF REWARDS IN CASH OR IN KIND SHALL BE 
GRANTED TO ONE HUNDRED PERCENT (100%) FILIPINO-OWNED 
COMPANIES DURING THE MSME DEVELOPMENT WEEK." 
SEC. 19. 
Section 14 of the same Act, as amended, on Penal 
Clause is hereby renumbered as Section 18. 
SEC. 20. A new section is hereby inserted after Section 14 
of the same Act, to read as follows: 
"SECTION 19. I M P L m N T I N G  RULES AND REGULATIONS. 
- THE DEPARTMENT OF TRADE AND INDUSTRY, THROUGH THE 
BUREAU OF MICRO, SMALL AND MEDIUM BUSINESS DEVELOPMENT 
AND IN CONSULTATION WITH OTHER CONCERNED GOVERNMENT 
AGENCIES , NON-GOVERNMENT ORGANIZATIONS AND PRIVATE 
SECTOR INVOLVED IN THE PROMOTION OF MICRO, SMALL AND 
MEDIUM ENTERPRISES, SHALL FORMULATE THE IMPLEMENTING 
RULES AND REGULATIONS (IRR) NECESSARY TO IMPLEMENT THE 
PROVISIONS OF THIS ACT WITHIN NINETY (90) DAYS FROM 
THE APPROVAL OF THIS ACT. THE IRR ISSUED PURSUANT TO 
THIS SECTION SHALL TAKE EFFECT THRITY (30) DAYS AFTER 
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PUBLICATION 
I N  
A 
NATIONAL 
NEWSPAPER 
OF 
GENERAL 
CIRCULATION. " 
SEC. 21. 
Separability Clause. 
- 
The provisions of the 
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. 22. 
Repealing Clause. - All laws, executive orders, 
rules and regulations, or parts thereof, inconsistent 
herewith are hereby repealed or modified accordingly. 
SEC. 23. 
Effectivity Clause. 
- 
This Act shall take 
effect within fifteen (15) days from its publication in at 
least two (2) national newspapers of general circulation. 
Approved, 
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