REPUBLIC OF THE PHILIPPINES Oo 4X
HOUSE oF REPREsENTATIVEs / E-Filed “y\
Quezon City iS RECEIVED
DATE September 6, 2022
NINETEENTH CONGRESS a =a

* TIME 5:51pm
\B,

First Regular Session

HOUSE BILL NO. 4501

EXPLANATORY NOTE

This bill seeks to further promote entrepreneurship by
strengthening, empowering, and enhancing the financing programs for
micro, small and medium enterprises in the country. This bill has
already been approved by the House of Representatives on its 3 and
final reading in the 17 Congress. The bill is being filed on account of its
significance in bolstering micro, small, and medium enterprises (MSMEs)
as integral backbone of our economy.

The State recognizes the indispensable role of the private sector,
encourages private enterprise, and provide incentives to needed
investments (Section 20, Article II, 1987 Constitution). Recognizing the
crucial role of MSMEs, Republic Act No. 6977 was passed to promote,
develop and assist small and medium scale enterprises through the
creation of a small and medium enterprise development council including
the rationalization of government assistance programs and agencies to
small and medium enterprises. Notwithstanding the enactment of
Republic Act 66977 and its subsequent amendments, the lack of access
to financing and allied support mechanisms has continued to hound the
country’s MSMEs thus effectively reducing their capability to an inclusive
economic growth. In an effort to address this financial predicament, this
bill, among others, will provide a mechanism for (a) strengthened access
by MSMEs to the national government’s procurement of goods and
services inclusive of its bureaus, offices, and agencies, (b) guaranteed

system for distressed enterprises, and (c) extended forms of financial
assistance.

EDS



Consistent with the economic agenda of the government, this bill
will help propel the Philippine economy especially in the countryside.

Accordingly, the approval of this bill is earnestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
‘Quezon City

NINETEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 4501

AN ACT
FURTHER PROMOTING ENTREPRENEURSHIP BY STRENGTHENING,
EMPOWERING, AND ENHANCING THE FINANCING PROGRAMS FOR
MICRO, SMALL AND MEDIUM ENTERPRISES, AMENDING FOR THE
PURPOSES REPUBLIC ACT NO. 6977. AS AMENDED, OTHERWISE KNOWN
AS THE “MAGNA CARTA FOR MICRO, SMALL, 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. 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 the rural/agri-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:

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SEC. 2. Section 4 of the same Act, as amended, is hereby further amended
to read as follows:

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

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“[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 TENPERCENT (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 REGISTRATIONS.

“The [Department of Budget and — Management]
GOVERNMENTPROCUREMENT POLICY BOARD (GPPB) shall
FORMULATERULES 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
Congress of the Philippines, through its appropriate committees on a
yearly basis.”

SEC. 3. Section 5 of the same Act, as amended, is hereby further
amended to read as follows:

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

“(¢) 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
Pilpinas, through their national, regional and provincial offices
shall, to the best of their efforts and in the 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.

xxx

SEC. 4. Section 6 of the same Act, as amended is hereby further
amended to read as follows:

“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 (DT!) which shall form part of the
[Medium Term] Philippine Development Plan ({MT]PDP). It shall be
formulated in consultation with the private sector, validated and

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updated semestrally. Such plan shall include a component on a
micro credit financing scheme.”

SEC.5. Section 7 of the same Act as amended, is hereby further amended

to read as follows:

“SEC. 7. Micro Small and Medium Enterprises Development
(MSMED) Council. - 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.

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SEC. 6. Section 7-A of the same Act, as amended, is hereby further
amended to read 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:

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

“(D) THE SECRETARY OF FINANCE;

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“(@] (E) Three representatives from the MSME, [To
represent Luzon, Visayas, and Mindanao with a 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;]

“{() One (1) representative for 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:

“F)

“G)

The Secretary of Science and Technology;

The Governor of the Bangko Sentral ng Pilipinas;
The President of the Land Bank of the Philippines;

The President of the Development Bank of the
Philippines

The Director General of the National Economic and
Development Authority

THE EXECUTIVE DIRECTOR OF
THECOOPERATIVE DEVELOPMENT AUTHORITY;

A REPRESENTATIVE OF A _ NATIONAL
ORGANIZATION REPRESENTING AND
DOMINATED BY MSMEs;

[@] (H) One (1) representative from the labor sector, to be

nominated by accredited labor groups;

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{@)) © 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 (BAP);

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

[()]_ (K) A representative of the University of the Philippines
Institute for Small Scale Industries (UP-ISSI); [and]

[@] (The President of the Credit Information
Corporation|. };

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

“(N) ONE (1) REPRESENTATIVE FROM THE YOUTH
COMMISION.

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

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
Council shall have the following powers, duties and functions:

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“(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:

“Xxx

“(12) Through appropriate government agencies:

xxx

“() 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:

xxx!

“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) Provisions 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

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“©

“@)

guidelines which shall be written in plain language or in the
local dialect, if necessary.

“The Council shall prepare separate compliance
guideline 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 a 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 of issuance.

Conduct of Research on Women Entrepreneurship. The
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.

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.

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.

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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 shalll include the following:

a)

"b)

‘d]

‘el

The Secretary of Trade and Industry;
The Secretary of Finance;

THE PRESIDENT OF THE GOVERNMENT
SERVICESS INSURANCE SYSTEM(GSIS);

THE PRESIDENT OF THE SOCIAL SECURITY
SYSTEM(SSS);

(E) A private sector representative to be appointed by
the President of the PHILIPPINES upon the
recommendation of the MSMED Council;

(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 of the Corporation Code; and

(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.

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“xxx"; and

“)

“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]JANY
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:

[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 p]
Provide 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 personal of other
government financial institutions.]
ANDCOMPENSATION OF EMPLOYEES AND
PERSONNEL OF THE SB CORPORATION, FOR
SUBMISSION To THE GOVERNANCE
COMMISION FOR GOCCs.”

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SEC. 9. Section 11-B of the same Act, as amended, is hereby further
amended, to read as follows:

“SEC 11-B Corporate Structure and Powers. —

“A.

‘B.

a)

ry

The SB Corporation shall:

For this purposes, 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 Commissions,] shall have the
following functions and duties:

Source and adopt development initiative for globally
competitive MSMEs in finance and business
technologies;

[To] [e] Extend all forms of financial assistance,
EXCEPT AND SUBSIDIES, to eligible MSMEs[],
AND NOT TO RETAIL LENDING IN AREAS WHERE
PRIVATE BANKS ARE NOT ABLE TO SERVE,
SUBJECT TO CONSULTATION WITH THE PRIVATE
BANKS; [SB Corporaton 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: ]

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;

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

“(@) 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 FOR
GOCCs ON PERFORMANCE AND FINANCIAL
CONDITION OF THE CORPORATION.

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

SEC. 10. A new subsection is hereby inserted after Section 11-B of the
same Act, as amended, and numbered as Section 11-C to read as follows:

“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

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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, SUBJECTTO 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.”

SEC. 11. Section 12 of the same Act, as amended, is hereby further
amended to read as follows:

“ SEC. 12. Capitalization and Funding of the SB Corporation.- The
SB Corporation shall have an authorized capital stock of Ten Billion
pesos (P 10,000,000,000.00). 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 [a] 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 [a] Small [b]
Business [c] Corporation by virtue of Executive Order No.Series of

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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.

[To allow for capital build-up, SB Corporation shall be given a
five (5) year grace period of 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.”]

SEC. 13. Section 14 of the same Act, as amended, is hereby renumbered
as Section 13, and further amended to read as follows:

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“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. A SEED 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.”

SEC. 14. Section 15 of the same Act, as amended, is hereby renumbered
as Section 14, 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 shalll be:

“(a) actual extension of loans to eligible MSMEs; or

S00; or

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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

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 forgoing
provisions: Provided, further, That the Bangko Sentral
ng Pilipinas, IN CONSULTATION WITH ALL
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 the bank's

reserve requirement[.]: PROVIDED, FINALLY, THAT
THE BANGKO SENTRAL NG PILIPINAS SHALL

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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 system to monitor all 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 mortgaged real property in case of judicial or
extra-judicial foreclosure, as well as avail of

receivership, enforcement and other proceedings,

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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 ad 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. Section 19 of the same Act, as amended, is hereby renumbered
as Section 18, and further amended, to read as follows:

“SEC. [19]18 Penalty Clause. - The BANGKO NG 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 (P500,00.00)]. THE MINIMUM PENALTY FOR
NONCOMPLIANCE IS SET AT FIVE HUNDRED THOUSAND
PESOS (P500,000.00) AND THE MAXIMUM PENALTY FIVE
MILLION PESOS (5,000,000,000.00) 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

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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-
ESTABLISED 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 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 ENTERVENTIONS 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
organization and private sector agencies involved in the promotion of
MSMEs , shall formulate the implementing rules and regulations (IRR)

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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,

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