FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
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SENATE 
S.B. No. 1350 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
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Section 9 Article II of the Constitution provides that the State shall free the 
people from poverty through policies that provide adequate social services, promote 
full employment, a rising standard of living, and an improved quality of life for alL 
Republic Act No. 8425, otherwise known as the "Social Reform and Poverty 
Alleviation Act", points to the institution of the expansion of micro-credit and 
microfinance services as one of the fundamentals in eradicating poverty in the 
country. 
Since 2004, microfinance loans to four million entrepreneurial poor have 
reached P223.98 billion. Such coverage of microfinance services reveals the potential 
of micro~enterprise development institutions in providing opportunities for the poor 
to explore economic undertakings and climb up the social ladder. 
The bill seeks the creation of micro-enterprise development institutions to 
expand, enhance and promote the access of the poor to microfinance services such as 
credit, insurance, savings and health care, enabling them to operate their own 
productive economic opportunities. 
To encourage the expansion of services of the micro-enterprise development 
institutions, the proposed measure provides that they shall be exempted from 
national and local taxes. In lieu of this exemption, they shall be subject to a tax of 2 % 
of their gross income as contribution to the People's Development Trust Fund 
created and established under the "Social Reform and Poverty Alleviation Act". 
Recognizing the enormous contribution of microfinance services in the fight 
against poverty, it is high time that the national government create an enabling 
environment for the promotion, broadening and enhancement of such services to the 
poor population. It is the intent of the measure to institute micro-enterprise 
development to accelerate socio-economic progress. 
In view of the foregoing, the passage of this bill is earnestly sought. 


FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
) 
SENATE 
S.B. No. 1350 
Introduced by Senator Loren Legarda 
AN ACT 
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GOVERNING 
THE 
CREATION AND ACCREDITATION OF MICRO-
ENTERPRISE DEVELOPMENT INSTITUTIONS, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
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Section 1. Title. This Act shall be known and cited as the "Micro-Enterprise 
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Development Institution Act of 2010." 
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Section 2. Declaration of Policy. It is hereby declared the policy of the State 
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to pursue a more focused program of poverty eradication wherein every poor 
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Filipino family shall be empowered to meet its minimum basic needs including 
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income security. 
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In pursuance of this policy, the government shall work in partnership with 
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qualified institutions in the private sector for the poor to have more access to micro-
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finance, micro-insurance, micro-health care, micro-housing, business development, 
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such as leadership training and entrepreneurial skills training, and human 
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development services to help the poor entrepreneurs achieve a level of sustainability 
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and empowerment and adopt measures to promote a spirit of generosity and selfless 
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giving among individuals and institutions that would help support all programs 
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directly involved in poverty eradication. 
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Section 3. Coverage. The Act shall apply to non-stock, non-profit Micro-
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Enterprise Development Institutions whose mission is totally focused on poverty 
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eradication, and are duly accredited by the Securities & Exchange Commission 
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(SEC), as the accrediting entity, and registered with the Bureau of Internal Revenue 
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(BIR). 
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Section 4. Definition of Terms. For purpose of implementing this Act, the 
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following definitions shall apply: 
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a) "Micra-Enterprise Development Institutions (MEDI)" - refers to a non-stock, 
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non-profit corporation organized and operated to provide Micro-Enterprise 
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Development Strategy, as defined in letter (b) hereof, through the broad 
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package of financial and human development services as well as other 
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business development services to the poor to enable them to opera[e their 
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own productive economic activities; provided, no part of the net of income of 
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the MEDI inures to the benefit of any private individual, 
and the 
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administrative expenses of which, on an annual basis, conform with the rules 
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and regulations to be prescribed by the Secretary of Finance, upon 
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recommendation of the Commissioner of Internal Revenue, but in no case to 
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exceed thirty percent (30%) of the total expenses; 
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b) "Micro-Enterprise Development Strategy" -
a social reform program 
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exclusively for the poor to improve the asset base of households and expand 
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the access to micro-finance services, such as micro-credit, micro-insurance, 
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micro-savings and micro-health care for the poor through·the broad package 
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of business development services and other non-financial services as well as 
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to the poor to enable them to operate their own productive economic 
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activities; 
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c) "Poor" - refers to individuals and families whose income fall below the 
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poverty threshold as defined by the National Economic and Development 
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Authority and! or cannot afford in a sustained manner to provide their 
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minimum basic needs of food, health care, education, housing and other 
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essential amenities of life; 
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d) "Social Reform" - refers to the continuing process of addressing the basic 
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inequities in Filipino society through a systematic, unified and coordinated 
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delivery of socia-economic programs or packages; 
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e) "Utilization" by an accredited MEDI - shall refer to: 
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i) 
ii) 
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Any amount in cash or in kind, including administrative expenses, 
paid or utilized by an accredited MEDI to accomplish one or more 
purposes for which it was created or organized; or 
Any amount paid to acquire an asset used, or held for use, directly 
in carrying out one or more purposes for which the accredited 
MEDI was created or organized; or 
Any amount in cash or in kind invested in any poverty eradication 
activity related to the purpose for which it was created or 
organized; or 
Any amount set aside for a specific project which comes within one 
or more purpose or purposes for which the accredited MEDI was 
created, 
provided that the amount will be utilized for specific 
project within a period not to exceed five (5) years, and the project 
is the one which can be better accomplished by setting aside such 
amount than by immediate payments of funds; 
Any amount in cash or kind invested in capital sustaining and 
generating activities, such as but not limited to, government 
securities, endowment funds, 
trust funds, 
money market 
placements, shares of stock and similar instruments: Provided, that 
any income derived from these investments shall be exclusively 
used in activities directly related to one or more purposed for 
which the accredited MEDI was created or organized. 
"Accrediting Entity" - shall refer to the Securities & Exchange 
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Commission (SEC) and the Bureau of Internal Revenue (BIR), the 
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regulatory powers of which shall be defined in the implementing 
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rules and regulations of this Act. 
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Section 5. Form of Organization. A MEDI as defined in Section 4 (a) shall 
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be established as a non-stock non-profit corporation. 
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Section 6. Capital Requirements. A MEDI shall have a fund balance of not 
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less than Fifty Million Pesos (P50,OOO,OOO.OO). 
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Section 7. Supervision and Accreditation. The Accrediting Entity established 
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under this Act shall establish and operationalize a system of accreditation to 
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determine the qualifications of the MEDI. It shall have the following functions and 
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responsibilities: 
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a) Examine, evaluate and accredit the MEDI as a pre-requisite for its registration 
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with the BIR for purposes of tax exemption under this Act. 
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b) . Issue a Certificate of Accreditation to the MEDI upon determination that it 
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meets the criteria for accreditation; Provided, that the Certificate of 
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Accreditation shall be valid for such period as may be prescribed by 
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implementing rules and regulations' 
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c) Review and deny the application of any MEDI, which does not meet the 
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criteria for accreditation. The MEDI shall be notified of the denial of its 
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application, the reasons therefore, and the evaluators' recommendation in 
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order that the MEDI may meet the criteria for accreditation. The procedure 
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for reconsideration of and/or effecting any corrections amendments to the 
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application shall be prOVided in the implementing rules and regulations of 
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this Act. 
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Section 8. Monitoring and Verification of Annual Information Return. The 
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Accrediting Entity shall monitor the MEDls and coordinate to ensure that the 
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proviSions of this Act are complied with. 
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Section 9. Withdrawal of Certificate of Accreditation and Revocation of the 
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Certificate of Registration. - The Accrediting Entity shall have the authority to 
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withdraw the Certificate of Accreditation, which it used to register the MEDI upon a 
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determination that the latter no longer meets the criteria for accreditation under 
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Section 7 of this Act. 
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Se(:tion 10. Exemption from the National and Local Taxes. No taxes, local 
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and national, shall be imposed on MEDIs duly accredited by the Accrediting Entity 
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and registered with the BIR. In lieu thereof, two percent (2%) of the gross income 
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derived by the MEDIs shall be remitted to the National Government. This two 
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percent(2%) tax shall be entirely contributed to the People's Development Trust 
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Fund established under Republic Act No. 8425 otherwise known as the "Social 
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Reform and Poverty Alleviation Act". In addition, borrower of the MEDIs shall not 
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be subject to the documentary stamp tax imposed under Section 179 of the Tax 
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Code, as amended. 
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The term" gross income" means gross receipts less sales returns, allowances, 
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discounts and other costs of services. 
Interest expenses of a MEDI shall be 
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deductible from gross receipts as part of cost of services in arriving at gross income. 
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The term gross income shall exclude donations. 
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Section 11. Deductibility of Donations. Donations to a MEDI shall be fully 
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deductible form the gross income of the donor and shall be exempt from donor's tax 
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imposed under Sec. 98 of the Tax Code. 
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Section 12. Implementing Rules and Regulations. The SEC, in coordination 
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with the EIR, shall formulate the implementing rules and regulations of this Act 
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within sixty (60) days after its approval. Such rules and regulations shall take effect 
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fifteen (1.5) days after their publication in a newspaper of general circulation in the 
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Philippines. 
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Section 13. 
Separability Clause. 
If any provision of this Act or the 
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application thereof to any person or circumstances is held invalid, 
the other 
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provisions of this Act and the application of such provisions to other persons or 
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circumstances shaH not be affected thereby. . 
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Section 14. Repealing Clause. 
All internal revenue issuances, rules and 
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regulations, or parts thereof, which are contrary to or inconsistent with this Act are 
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hereby repealed, amended or modified accordingly. 
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Section 15. Effectivity. This Act shall take effect upon its approval. 
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Approved, 
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