EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

tative Rufus B. Rodriguez _

~ Introduced by Repres¢

House Bill No. 2842

EXPLANATORY NOTE
This bill was approved by the House of Representatives during the 17" Congress.

The Magna Carta for MSMEs first enacted as Republic Act 6977 in 1991, and
‘amended by Republic Act 8289 in 1997 and further amended by Republic Act 9501 in 2008,
grows the current national policy to promote, support, strengthen and encourage the growth
and development of MSMEs.

‘The Duterte Administration puts a high priority on the development of micro, smal!
and medium enterprises (MSMEs) as the country’s economic backbone and an important
means of equitable distribution of the benefits of growth,

The MSME Sector accounts for 62.8% of total jobs generated by all types of
business establishment in 2014. Of the total number of MSMEs, 90.3% are micro
enterprises, 9.3% are small enterprises and 0.4% are medium enterprises.

But despite its importance to the economy, lack of access to financing and related
forms of support continue to be a major handicap to the country's MSMEs.

The strengthening of the Magna Carta for MSMES is a necessary policy response fo this
need. Thus, the proposed amendments to the Magna Carta for MSMEs as offered in this bill
addresses the following:

. extension of mandatory lending provisions to MSMEs for another 10 years
Sithout further extension, and providing for the rules of compliance thereof:

. Capitalization of SB Corporation and strengthening of its guarantee prograrm and

. providing for bankruptcy preventive measures in the form of an enterprise

rehabilitation fund for enterprises affected by disasters and other crisis.

With this proposed legislation, it is expected that the benefits of an expanded Magna
Carta for MSME would significantly impact the sector in line with the economic and societal
priorities and strategies of the administration, and commensurate with the importance of the
Philippine MSME sector.

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

RUFUS B. ROORIGUEZ
ee ree


EIGHTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES,

Introduced by Representative Rufus 8. Rodriguez
2842

House Bill No.
AN ACT

FURTHER PROMOTING ENTREPRENEURSHIP BY STRENGTHENING, EMPOWERING
AND ENHANCING THE FINANCING PROGRAMS FOR MICRO, SMALL AND MEDIUM
ENTERPRISES, AMENDING FOR THE PURPOSE REPUBLIC ACT NO. 6977, AS
AMENDED, OTHERWISE KNOWN AS THE “MAGNA CARTA FOR MICRO, SMALL AND
MEDIUM ENTERPRISES (MSMEs)”

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

SECTION 1. Section 2 of Republic Act No. 6977, as amended, is hereby further
amended to read as follows:

SEC. 2.

“SEC. 2. Declaration of Policy. - Recognizing that MSMEs have the potential
[for] TO GENERATE more employment [generation] and SPUR economic
growth and therefore can help provide a self-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 MSMEs in all
productive sectors ‘of the economy particularly ruraliagri-based,
MANUFACTURING, FINANCE AND SERVICES enterprises. To this end, the
State shall recognize the specific needs of the MSMEs and shall undertake to
promote entrepreneurship, support entrepreneurs, encourage the establishment
of MSMEs and ensure their continuing viability and growth and thereby attain
countryside industrialization by:

Bd

follows:

“SEC. 4. Eligibility for Government Assistance. - To qualify for assistance,
counseling, incentives and promotion under this Act, businesses falling under the
above definition must be:

DG

“{Eligible MSMEs 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.] THE NATIONAL GOVERNMENT, ITS
BUREAUS, OFFICES AND AGENCIES SHALL ALLOCATE AT LEAST TEN
PERCENT (10%) OF ALL ITS PROCUREMENT OPPORTUNITIES FOR
GOODS AND SERVICES TO ELIGIBLE MSMEs IN ACCORDANCE WITH THE
PROVISIONS OF REPUBLIC ACT NO. 9184, OTHERWISE KNOWN AS
THE ‘GOVERNMENT PROCUREMENT REFORM ACT, AND ITS
IMPLEMENTING RULES AND REGULATIONS.

“The [Department of Budget__and Management] GOVERNMENT
PROCUREMENT POLICY BOARD (GPPB) shall FORMULATE RULES FOR
THE EFFECTIVE IMPLEMENTATION OF THIS PROVISION AND monitor the
compliance of government agencies on the required procurement for MSMEs
and submit its report to the MSMED Council on a semestral basis and to the

Section 4 of the same Act, as amended, is hereby further amended to read as


SEC. 3.

Congress of the Philippines, through its appropriate committees on a yearly
basis.”

follows:

SEC. 4.

“SEC. 5. Guiding Principles. — To set the pace for MSME development, the
State shall be guided by the following les:

XXX

“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],
INFORMATION AND COMMUNICATIONS TECHNOLOGY, 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 efforts and in coordination
with local government units, provide the necessary support and assistance to
MSMEs. THE DEPARTMENT OF TRADE AND INDUSTRY SHALL BE THE
LEAD AGENCY THEREFOR.

KK.

follows:

SEC.5. Ser

“SEC. 6. Micro, Small and Medium Enterprises Development Plan
(MSMEDP). - The President shall approve a six-year micro, small and medium
enterprises development plan prepared by the Department of Trade and Industry
(OT!) which shall form part of the [Medium Term] Philippine Development Plan
(IMTJPDP). It shall be formulated in consultation with the private sector, validated
and updated semestrally. Such plan shall include a component on a micro credit
financing scheme.”

follows:

SEC. 6.

“SEC. 7. Micro, Small and Medium Enterprise Development (MSMED)
Couneil. — The existing Small and Medium Enterprise Development Council,
which was created by Republic Act No. 6977, as amended by Republic Act No.
8289 AND REPUBLIC ACT NO. 9501, AND FURTHER AMENDED BY
REPUBLIC ACT NO. 10644, shall be strengthened to effectively spur the growth
and development of MSMEs throughout the country, and to carry out the policy
declared in this Act and shall now be known as the Micro, Small and Medium
Enterprise Development (MSMED) 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.

hae

as follows:

"SEC. 7-A. Composition of the Micro, Small and Medium Enterprises
Development (MSMED) Council. - The members of the Council shall be the
following:

“(a) The Secretary of Trade and Industry as Chair;

“(b) The Secretary of Agriculture:

Section 5 of the same Act, as amended, is hereby further amended to read as

Section 6 of the same Act, as amended, is hereby further amended to read as

n 7 of the same Act, as amended, is hereby further amended to read as

Section 7-A of the same Act, as amended, is hereby further amended to read


“(c) The Secretary of the Interior and Local Government;

*(D) THE SECRETARY OF FINANCE;

“{(d)] (E) Three (3) representatives from the MSME sector, [to represent
Luzon, Visayas and Mindanao, with at least one (1) representative from the
microenterprise sector] TO BE DESIGNATED BY A_ NATIONAL
ORGANIZATION REPRESENTING AND DOMINATED BY MSMEs; AND

“[(e) One (1) representative from the women sector designated by the
Philippine Commission on Women'}

“[(f) One (1) representative from the youth sector designated by the National
Youth Commission; and)

“{(g)] (F) The Chairman of THE Small Business Corporation.

“A. Advisory Unit. — There shall be an Advisory Unit to the Council, which
shall consist of the following:

“(a) The Secretary of Science and Technology;

*(b) The Governor of the Bangko Sentral ng Pilipinas;

*(c) The President of the Land Bank of the Philippines;

*(d) The President of the Development Bank of the Philippines;

“(e) The Director General of the National Economic and Development
Authority;

“(F) THE EXECUTIVE DIRECTOR OF THE COOPERATIVE
DEVELOPMENT AUTHORITY;

*(G)A_ REPRESENTATIVE OF A _ NATIONAL ORGANIZATION
REPRESENTING AND DOMINATED BY MSMEs;

“{(f)] (H) One (1) representative from the labor sector, to be nominated by
accredited labor groups;

“{(g)]_ () A representative from the private banking sector to serve
[alternatively] ALTERNATELY between the chamber of thrift banks, and the
Rural Banker's Association of the Philippines (RBAP)

“{(h)] (J) A representative of the microfinance nongovernment organizations
(NGOs), DESIGNATED BY THE MICROFINANCE NGO REGULATORY
COUNCIL;

*{(i)] (K) A representative of the University of the Philippines-Institute for
‘Small Scale Industries (UP-ISSI), [and]

“{@)] (L) The President of the Credit Information Corporation[.];

“(M)ONE (1) REPRESENTATIVE FROM THE WOMEN SECTOR
DESIGNATED BY THE PHILIPPINE COMMISSION ON WOMEN; AND

*(N) ONE (1) REPRESENTATIVE FROM THE YOUTH SECTOR
DESIGNATED BY THE NATIONAL YOUTH COMMISSION.

“(0) A REPRESENTATIVE FROM NONSTOCK SAVINGS AND LOAN
ASSOCIATIONS DESIGNATED BY THE ALLIANCE OF NON-STOCK
SAVINGS AND LOAN INSTITUTIONS, INC. (ANSLI).

OOK"

SEC. 7 Section 7-B of the same Act, as amended, is hereby further amended to read
as follows:
‘SEC. 7-B. Powers and Functions. - A. The MSMED Council shall have the
following powers, duties and functions:
ard
h) To promote the productivity and viability of MSMEs IN DTI'S TOP
PRIORITY INDUSTRIES FOR DEVELOPMENT by way of directing and/or
assisting relevant government agencies and institutions at the national, regional
and provincial levels towards the:
Bese
"42) Through appropriate government agencies:
XXX


“f) Set-up new MSME NEGOSYO centers and revitalize already established
MSME NEGOSYO centers to provide MSMEs in the regions easier access to
services such as, but not limited to, the following:

KKK”

“B. Additional Functions of the MSMED Council. - THE MSMED Council
shall have the following additional functions:

“(a)Coordinating and Oversight Body for the MSME Negosyo Center. ~ The
MSMED Council, through the DTI, shall act as the coordinating and supervising
body for all the agencies involved in the establishment and operation of the
MSME Negosyo Centers. Further, the MSMED Council shall monitor and assess
the progress of the Negosyo Centers, which shall be included in its annual report
‘submitted to the Congress.

*(b)Provision of a Compliance Guide. - For each rule or group of related
rules issued by any government agency for compliance by MSMEs, the Council
shall publish compliance guidelines which shall be written in plain language or in
the local dialect, if necessary.

“The Council shall prepare separate compliance guides covering groups or
classes of similarly affected MSMEs and shall cooperate with industry
associations to develop and distribute such compliance guides. The publication
of each compliance guide shall include the posting of the guide in an easily
identified location on the website of the agency, and distribution of the guide to
known industry contacts, such as small entities, associations or industry leaders
affected by the rule. The issuing government agency shall publish and
disseminate the compliance rules within ninety (90) days from the date of
issuance.

“(c) Conduct of Research on Women Entrepreneurship. — The Council shall
conduct research to support women entrepreneurship including, but not limited to
entrepreneurial behavior, barriers, participation and cessation rates,
discriminatory practices and contribution to the national economy and growth.

“(d) Policy Formulation on Women Entrepreneurship. - The Council shall
provide policy direction towards recognizing women's propensity in doing
business as well as establish linkages that will enable more ‘opportunities for
women to engage in entrepreneurship.

*(e)Development of Entrepreneurial Education and Training. - The MSMED
Council shall develop, in coordination with the Department of Education, TESDA
and CHED, a course curriculum or training program in entrepreneurship that will
promote entrepreneurial culture and competence. Entrepreneurship shall be
integrated in the curriculum of educational and training institutions in all levels.”

SEC.8. Section 11-A of the same Act, as amended, is hereby further amended to read
as follows:

“SEC. 11-A. Composition of the Board of Directors and its Powers. - The SB
Corporation [corporate
powers shall be vested on] SHALL HAVE a Board of Directors composed of
[eleven (11)] THIRTEEN (13) members which shall include the following:

“a) The Secretary of Trade and Industry;

“b) The Secretary of Finance;

°C) THE PRESIDENT OF THE GOVERNMENT SERVICE INSURANCE
SYSTEM (GSIS);

“D) THE PRESIDENT OF THE SOCIAL SECURITY SYSTEM (SSS):

“[c] E) A private sector representative to be appointed by the President OF
THE PHILIPPINES upon the recommendation of the MSMED Council;

“{d] F) Seven (7) representatives of the SB Corporation common stock
shareholders who shall be elected based on proportional distribution, in
accordance with Section 24 of the Corporation Code, and


SEC. 9,

“fell G) The president of the SB Corporation 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] AND MAY BE
REAPPOINTED TO ANOTHER TERM UNLESS EARLIER REVOKED. IF THE
TERM OF THE INCUMBENT MEMBER HAS EXPIRED, THE MEMBER SHALL
CONTINUE TO FUNCTION IN A HOLDOVER CAPACITY UNTIL A
REPLACEMENT HAS BEEN APPOINTED AND QUALIFIED. [The]ANY 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:

“xxx; and

“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 pJProvide for the
organizational structure, [and] staffing pattern [of SB Corporation and to extend
to the employees and personnel thereof salaries, allowances and fringe benefits
similar to those extended to and currently enjoyed by employees and personnel
of other government financial institutions] AND COMPENSATION OF
EMPLOYEES AND PERSONNEL OF THE SB CORPORATION, FOR
SUBMISSION TO THE GOVERNANCE COMMISSION FOR GOCCs.”

as follows:

“SEC. 11-B. Corporate Structure and Powers. — “A. The SB
Corporation shall:

XX x

“B. For this purpose, the SB Corporation [subject to compliance with the rules
and regulations to be issued by the Bangko Sentral ng Pilipinas (BSP) and the
Securities and Exchange Commission] shall have the following functions and
duties:

“a) Source and adopt development initiatives for globally competitive MSMES
in finance and business technologies;

“b) [To] [e]Extend all forms of financial assistance, EXCEPT GRANTS AND
SUBSIDIES, to eligible MSMEs[], AND NOT TO PRECLUDE RETAIL
LENDING IN AREAS WHERE PRIVATE BANKS ARE NOT ABLE TO SERVE,
SUBJECT TO CONSULTATION WITH THE PRIVATE BANKS; [SB Corporation
may also engage in wholesale lending. The SB Corporation shall be given two
(2) years from the effectivity of this Act to comply with this requirement:]

“c) Guarantee loans obtained by qualified MSMEs under such terms and
conditions adopted by the SB Corporation Board of Directors, AS WELL AS
ESTABLISH A GUARANTEE SYSTEM FOR DISTRESSED ENTERPRISES AS
INSURANCE AGAINST EXTRAORDINARY DISASTERS;

XxX

) Apply for, receive and accept grants and donations from sources within
and outside the country; [and]

*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[.]; AND

“H) SUBMIT AN ANNUAL REPORT TO THE MSMED COUNCIL, THE
CONGRESS OF THE PHILIPPINES AND THE GOVERNANCE COMMISSION

Section 11-B of the same Act, as amended, is hereby further amended, to read


SEC. 10.

FOR GOCCS ON THE PERFORMANCE AND FINANCIAL CONDITION OF
THE CORPORATION.

‘THE SB CORPORATION SHALL BE EXEMPT FROM SECURING PRIOR
BSP AUTHORIZATION FOR ENGAGING IN QUASI-BANKING ACTIVITIES
AND SHALL NOT BE SUBJECT TO BSP SUPERVISION AND REGULATION
FOR SUCH ACTIVITIES.”

amended, and numbered as Section 11-C to read as follows:

SEC. 11.

“SEC. 11-C. STRATEGIC MANAGEMENT OF THE SB CORPORATION. —
THE BOARD OF THE SB CORPORATION, THROUGH ITS CHAIRMAN,
SHALL BE FULLY RESPONSIBLE AND ACCOUNTABLE FOR THE
PERFORMANCE OF THE CORPORATION'S MANDATE. TO ENSURE THIS,
THE BOARD SHALL BE CONSTITUTED AS A MANAGING BOARD, LED BY
ITS CHAIRMAN, TO CONCEPTUALIZE THE STRATEGIC PLANS AND
POLICIES OF THE CORPORATION.

“THE SB CORPORATION SHALL ADOPT A BALANCED SCORECARD
APPROACH, SUBJECT TO THE REVIEW AND APPROVAL OF THE
GOVERNANCE COMMISSION FOR GOCCs, IN ITS STRATEGIC
MANAGEMENT TO ENABLE IT TO MANAGE ITS FINANCIAL
PERFORMANCE WHILE PURSUING THEIR PUBLIC POLICY OBJECTIVES
OF SUPPORTING MICRO, SMALL AND MEDIUM ENTERPRISES
DEVELOPMENT.”

follows:

“SEC. 12. Capitalization and Funding of the SB Corporation. - The SB
Corporation shall_have an authorized capital stock of Ten billion pesos
(P10,000,000,000.00). The initial capital of One billion pesos
(P1,000,000,000.00) 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 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 for the SB
Corporation. Authorized capital stock of the [s]Small [b]Business [c]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 shares which have been issued, including those issued against
the assets of the KKK Guaranty Fund consolidated under the [s]Small
[b]Business [c]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,
further, That holders of preferred shares issued under Republic Act No. 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 THE NATIONAL GOVERNMENT THROUGH THE
DEPARTMENT OF BUDGET AND MANAGEMENT (DBM), and investments of
private financial institutions and corporations: Provided, finally, That any
investment from the private sector shall only be in the form of preferred shares.

“THE NATIONAL GOVERNMENT SHALL PROVIDE FOR THE FULL
CAPITALIZATION OF THE SB CORPORATION WITHIN A PERIOD OF FIVE
(5) YEARS FROM THE APPROVAL OF THIS ACT.

‘A new subsection is hereby inserted after Section 11-B of the same Act, as

Section 12 of the same Act, as amended, is hereby further amended to read as


SEC, 13.

“[To allow for capital build-up, SB Corporation shall be given a five (5) year
grace period on dividend commitments beginning on the date of effectivity of this
amendment. Thereafter, it] THE SB CORPORATION may [only] declare as
dividend not more than thirty percent (30%) of its net income and the rest
withheld as retained earnings.”

SEC. 12.Section 13 of the same Act, as amended, is hereby deleted.

*[SEC. 13. The SB Corporation shall be subject to the supervision and
examination of the Bangko Sentral ng Pilipinas taking into consideration its
developmental objectives.”]

and further amended to read as follows:

SEC. 14.

“SEC. [14]13. Venture Capital and Micro Finance Trust Fund. - The SB
Corporation may set aside an amount of money to encourage the setting up of a
venture capital and micro finance trust fund for the purpose of promoting
business opportunities available to MSME sector. The Venture Capital Fund shall
be used mainly for venture capital finance especially in technology-oriented
industries. The micro finance trust fund shall be used to provide collateral-free
fixed and working capital loans to micro and small enterprises run by those
‘emerging out of poverty. ASEED AMOUNT OF AT LEAST TEN PERCENT
(10%) OF THE ADDITIONAL EQUITY CONTRIBUTION OF THE NATIONAL
GOVERNMENT TO THE CAPITALIZATION OF THE SMALL BUSINESS
CORPORATION BUT NOT MORE THAN FIVE HUNDRED MILLION PESOS
(P500,000,000.00) SHALL BE SET ASIDE TO FUND THE VENTURE CAPITAL
AND MICRO FINANCE TRUST FUND.”

and further amended to read as follows:

"SEC. [15]14. Mandatory Allocation of Credit Resources to Micro, Small and
Medium Enterprises. —For the period of ANOTHER 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 eight percent (8%) for micro and small enterprises and at least two percent
(2%) for medium enterprises of their total loan portfolio based on their balance
sheet as of the end of the previous quarter, and make it available for MSME
credit as herein contemplated.

“Compliance of this provision shall be:

*a) actual extension of loans to eligible MSMEs; or

“XXX; oF

“f) subscribe/purchase of liability instruments as may be offered by the SB
Corporation. THE SAME SHALL NOT BE DEEMED AS QUASI-BANKING
OPERATIONS, AND SHALL NOT REQUIRE A QUASI-BANKING LICENSE
FROM THE BSP; OR

“(G) LOANS TO MSME VALUE CHAIN ACTORS WHO ALLOW MSMEs
TO PARTICIPATE IN ORGANIZED OR FORMAL VALUE CHAINS. VALUE
CHAIN ACTORS INCLUDE, AMONG OTHERS, TRADERS, SUPPLIERS,
PROCESSORS, AGGREGATORS WHO CONDUCT LINKED SEQUENCE OF
VALUE ADDING ACTIVITIES INVOLVED IN BRINGING A PRODUCT TO
FINAL CONSUMERS.

“The Bangko Sentral ng Pilipinas, IN CONSULTATION WITH THE MSMED
COUNCIL AND THE SECRETARY OF TRADE AND INDUSTRY, shall
formulate rules for the effective implementation of this provision: Provided, That
the purchase of government notes, securities and other negotiable instruments
shall not be deemed compliance with the foregoing provisions: Provided, further,
That the Bangko Sentral ng Pilipinas, IN CONSULTATION WITH ALL

Section 14 of the same Act, as amended, is hereby renumbered as Section 13,

Section 15 of the same Act, as amended, is hereby renumbered as Section 14,


STAKEHOLDERS, shall establish [an] A MEANINGFUL incentive [program]
SYSTEM to encourage [lending to micro, small and medium industries beyond
the mandatory credit allocation to said enterprises,] COMPLIANCE WITH THIS
PROVISION, such as possible reduction in bank's reserve requirement{]:

ALIGN ITS REGULATIONS ON THE PENALTIES FOR BANKS AND OTHER
ENTITIES, FOR NONCOMPLIANCE WITH THE PROVISION FOR
MANDATORY LENDING.

“The MSMED Council shall set up the appropriate systems to monitor alll loan

applications of MSMEs in order to account for the absorptive capacity of the
MSME sector. EACH LENDING INSTITUTION SHALL DESIGNATE A CHIEF
COMPLIANCE OFFICER WHO WILL PREPARE AND SIGN THE REPORT ON
COMPLIANCE AND NONCOMPLIANCE WITH THE MANDATORY CREDIT
ALLOCATION, FOR SUBMISSION TO THE BANGKO SENTRAL NG
PILIPINAS, The Bangko Sentral ng Pilipinas shall furnish to the MSMED Council
on a quarterly basis comprehensive reports on the banks’ compliance[,] AND
noncompliance [and penalties of] WITH the above provisions on the mandatory
credit allocation for MSMEs[], AND SHALL SUBMIT AN ANNUAL REPORT,
SIGNED BY AN OFFICER WITH THE RANK OF AT LEAST A MANAGING
DIRECTOR, ON THE AMOUNTS OF THE PENALTIES FOR
NONCOMPLIANCE WITH THE MANDATORY LENDING PROVISION OF THIS
ACT.
‘Lending institutions which are not qualified to acquire or hold lands of the
public domain in the Philippines shall be permitted to bid and take part in sales of
morigaged real property in case of judicial or extra-judicial foreclosure, as well as
avail of receivership, enforcement and other proceedings, solely upon default of
a borrower, and for a period not exceeding five (5) years from actual possession:
Provided, That in no event shall title to the property be transferred to such
lending institution. If the lending institution is the winning bidder, it may, during
said five (5) year period, transfer its rights to a qualified Philippine national.
without prejudice to a borrower's rights under applicable laws.”

SEC. 15. Sections 16, 17 and 18 of the same Act, as amended, are hereby renumbered

as Sections 15, 16 and 17, respectively, to read as follows:
“SEC. [16]15. Micro, Small, and Medium Enterprise Week. - x x x."
“SEC. [17]16. Presidential Awards for Outstanding MSME. ~ x x x."
“SEC. [18]17. Congressional Oversight Committee. — x x x."

SEC. 16.
and further amended, to read as follows:

“SEC. [19]18, Penalty Clause. - The BANGKO SENTRAL NG PILIPINAS
shall impose administrative sanctions and other penalties on the lending
institutions for nonf-Jcompliance with THE provisions of this Act [including a fine
of not less than Five hundred thousand pesos (P500,000.00)]. THE MINIMUM
PENALTY FOR NONCOMPLIANCE IS SET AT FIVE HUNDRED THOUSAND
PESOS (P500,000.00) AND THE MAXIMUM PENALTY FIVE MILLION PESOS
(P5,000,000.00), IN PROPORTION TO THE BANK'S OR OTHER ENTITY'S
LEVEL OF COMPLIANCE: PROVIDED, THAT A SMALLER PENALTY IS SET
AT ONE HUNDRED THOUSAND PESOS (P100,000.00) FOR SMALLER
BANKS' NONCOMPLIANCE. AS USED IN THIS ACT, SMALL BANKS SHALL
BE DEFINED AS BANKS WITH CAPITALIZATION OF NOT MORE THAN FIVE
HUNDRED MILLION PESOS (P500,000,000.00): PROVIDED, FURTHER,
THAT THE DEFINITION OF SMALL BANKS SHALL BE REGULARLY
REVIEWED BY THE MSMED COUNCIL: PROVIDED, FINALLY, THAT THE
AFOREMENTIONED PENALTIES SHALL NOT BE IMPOSED ON NEWLY-

Section 19 of the same Act, as amended, is hereby renumbered as Section 18,


10

ESTABLISHED DOMESTIC AND FOREIGN BANKS WITHIN ONE (1) YEAR
FROM THE DATE THEY COMMENCED THEIR OPERATIONS.

“Penalties on noncompliance shall be directed to the development of the
MSME sector. Ninety percent (90%) of the penalties collected should go to the
MSMED Council Fund, while the remaining ten percent (10%) should be given to
the BSP to cover for administrative expenses.

“THE MSMED COUNCIL SHALL SUBMIT TO THE CONGRESS OF THE
PHILIPPINES AN ANNUAL REPORT ON THE STATUS OF THE PENALTIES
REMITTED AND HOW THE SAME WERE USED OR ARE BEING USED IN
RELATION TO THE IMPLEMENTATION OF SERVICES TO MSMES
IN THE AREAS OF CAPACITY BUILDING, TECHNOLOGY INFORMATION,
COLLECTION AND DISSEMINATION, AND OTHER INTERVENTIONS FOR
MSME DEVELOPMENT, GROWTH AND SUSTAINABILITY.”

SEC. 17. _ Implementing Rules and Regulations (IRR). — The Department of Trade and
industry, through the Bureau of Micro, Small and Medium Business Development and in
consultation with the Bangko Sentral ng Pilipinas and other concerned government
agencies, nongovernment organizations and private sector agencies involved in, the
promotion of MSMEs, 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: Provided, That the IRR shall be reviewed yearly: Provided, further, That the IRR
shall be approved by the MSMED Council. The IRR issued pursuant to this section shall take
effect thirty (30) days after its publication in a national newspaper of general circulation.

SEC. 18. 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 this Act
not otherwise affected shall remain in full force and effect.

SEC. 19. Repealing Clause. — All laws, executive orders, rules and regulations, or parts
thereof inconsistent herewith are hereby repealed or modified accordingly.

SEC.20. Effectivity. — This Act shall take effect within fifteen (15) days from its
publication in the Official Gazette or in a newspaper of general circulation.

Approved,