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

HOUSE OF REPRESENTATIVES
4351

H.B. No.

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

AN ACT
INSTITUTING REFORMS TO FURTHER PROTECT AND DEVELOP MICRO,
SMALL AND MEDIUM ENTERPRISES, AMENDING FOR THE PURPOSE
EXECUTIVE ORDER NO. 81, OTHERWISE KNOWN AS “THE 1986 REVISED
CHARTER OF THE DEVELOPMENT BANK OF THE PHILIPPINES,” AS
AMENDED

EXPLANATORY NOTE

The Philippine Micro, Small and Medium Enterprise (MSME) sector is a critical
driver of the country’s economic growth’. The 2017 MSME Data from the Department of
Trade and Industry reveals that some 99.56% of the 924,721 establishments in the country
belong to the MSME Sector. During the same year, the MSMEs generated some 4,922,251
jobs, which is about 62.9% of the total jobs generated in the country. Some 35.7% of all
value of goods and service produced in the country came from MSMEs’.

Despite its pivotal role in the economic well-being of millions of Filipinos, several
factors constrain the performance of MSMES like high cost of doing business, access to
financing and markets, and low productivity and efficiency. With limited resources and
capabilities, many MSMEs are not adequately equipped to respond to the challenges and
opportunities posed by domestic and international markets.

‘The task of priming stronger and more competitive MSMEs rests on collaborative
efforts between the government and the business sector. Apart from creating a favorable

* national Econom and Development Author. (201) Pllppine Development Plan 2011-2016 Pasig iy: National Economic and Development
‘authorty

2 Department of Trade and industry. (2017). 2017 MSME Statistics. Acessed on 14 May 2019 from hiis://woew dao ph/dhiVinde.pho/2014-08-
(02:03-40-26/news soom/179-workshop on-marketaccese-for MSMe-set


business environment and providing linkages to local and foreign markets, the government
must be able to make business financing accessible to MSMEs. The Philippine Institute for
Development Studies noted that financing obstacles is one of the four most serious problems
that hamper business growth’. The MSME Development Plan 20111-2016 also observed that a
ion of available
financing options in the Philippines, which include the lack of credit information among
MSMEs, and the tendency of the banking industry to prioritize larger corporate borrowers
due to higher gains, lower credit risk, higher repayment rates, and collateral availability’. To
develop a MSME sector capable of contributing to the country’s economic and social
development, it is imperative that the government enact measures to enable MSMEs to
bolster their productivity and empower them to be more responsive to rising economic

number of issues restrict the capacity of MSMEs to maximize the utili

exigencies.

‘As the government premier development bank, the Development Bank of the
Philippines (DBP) is in the best position to close this financing gap. In 2017, the bank
registered a comprehensive income of almost six billion pesos with a development loan
portfolio worth P184.06 billion’. However, only 88.2 billion or 47.92% of this amount were
‘extended to MSME’s under the DBP Sustainable Enterprises for Economic Development and
the Sustainable Agribusiness Financing Programs®.

‘Thus, this bill seeks to amend the Charter of the DBP, mandating it to devote eighty
percent (80%) of its loan portfolio to programs, projects and initiatives of the MSMEs and
local government units (LGUs). It reinforces the original purpose of the bank, which
recognizes “a clear role for direct government participation in the banking system through a
government development bank, particularly in servicing the medium and long-term
requirements of agriculture, and small and medium scale industry, export development, and
the government sector’.” Such intervention is also in line with the idea of financial inclusion,
a principle that promotes “universal access at a reasonable cost to a wide range of financial

* Ada, RM. (2012 February). Sul and Medium Enterprises’ (SMES) Acces to Finance: Philipines. Discussion Pope Sres No, 2012.05. Makati
Philippine isiute or
“ MsMED Counel. (2016), Micro, Small and Medhum Enterprise Development Plan 2017-2022. Maka! Cy: OT-Bureau of Miro, Small and Mes
Enterprise Development.

‘hapae te mine iso oseaber9h ova Cel mabe realy fees nen Carre Comes on of
the Pilppines

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services for everyone needing them, provided by a diversity of sound and sustainable
institutions®.”

This bill serves two noble purposes: to protect the critical economic drivers of today
and to sustain our economic growth in the future. In yi

7 gay bia ag of this
Ye

VILMA SANTOS-RECTO

bill is earnestly sought.

"Her Royal Highness Princess Mii ofthe Netherlands. (2011) Financial ncsion: A Role for Each of Us. n The 2011 Maile Financ Series
‘evelopment Report (pp. 33-35). Geneva: Word Economic Forum

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EIGHTEENTH CONGRESS OF THE )

REPUBLIC OF THE PHILIPPINES, )
First Regular Session )
HOUSE OF REPRESENTATIVES
H.B.No._ 4351

Introduced by Rep. Vilma Santos-Recto
6" District of Batangas

AN ACT
INSTITUTING REFORMS TO FURTHER PROTECT AND DEVELOP MICRO,
SMALL AND MEDIUM ENTERPRISES, AMENDING FOR THE PURPOSE
EXECUTIVE ORDER NO. 81, OTHERWISE KNOWN AS “THE 1986 REVISED
CHARTER OF THE DEVELOPMENT BANK OF THE PHILIPPINES,” AS
AMENDED

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

Section 1. Section 2 of Executive Order No. 81, otherwise known as “The 1986
Revised Charter of the Development Bank of the Philippines,” as amended, is hereby further
amended to read as follows:

“Sec. 2. Name, Purpose and Domicile. The Development Bank of the
Philippines, hereinafter called the Bank, operating under the provisions of
Republic Act No. 85, as amended, shall henceforth operate under the
provisions of this 1986 Revised Charter. The Bank shall be a body corporate
and shall exist for a period of fifty years.

“The primary purpose of the Bank shall be to provide banking services
principally to service the medium and long term needs of agricultural and
industrial enterprises, particularly in the countryside and preferably for
MICRO, small and medium scale enterprises; Provided, however, that the
pursuit of these objectives shall be undertaken within the context of
financially viable and stable banking institutions; Provided, further, that the
Bank shall continue to be classified as a development bank; Provided, finally,
that unless otherwise provided herein, the Bank may perform all other
functions ofa UNIVERSAL [th#i8] bank.


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“The Bank's principal office and place of business shall be in the
National Capital Region, also known as Metro Manila. It may open and
maintain branches, agencies or other offices at such places in the Philippines
as its Board of Directors may deem advisable, with the prior approval of the
Monetary Board of the [CentralBank—of—the—Philippines] BANGKO
SENTRALNG PILIPINAS.”
Sec. 2, Section 3 of Executive Order No. 81, as amended, is hereby further amended
to read as follows:
“Sec. 3. Corporate Powers. The Development Bank of the Philippines
shall have the power:
“XXX;
(b) To grant loans for the establishment, development and expansion of
any agricultural or industrial enterprise AND TO LOCAL
GOVERNMENT UNITS (LGUS): PROVIDED, THAT THE TOTAL
AMOUNT OF LOANS GRANTED FOR PROGRAMS AND
PROJECTS OTHER THAN THOSE UNDERTAKEN BY MICRO,
SMALL, AND MEDIUM ENTERPRISES AND LGUS SHALL NOT
EXCEED TWENTY PERCENT (20%) OF THE BANK’S TOTAL
LOAN PORTFOLIO;
“Xxx.”
Sec. 3. Validity of Existing Contracts, Agreements and Obligations. — Nothing in this
Act, shall affect the validity or legality of any right, duty, or obligation created by or in
respect of the Bank by virtue of its loan operations prior to this Act. Any receivables
pertaining to loans granted prior to this Act, which might be affected by this Act, shall be
valid and enforceable upon the terms and conditions under which the loans were made,
including the pledge of collateral against which they were issued, and all loans made and
security or collateral therefore held by the bank shall remain enforceable according to the
terms unless they may be lawfully terminated in accordance with this Act, nor shall this Act
supersede the operation of any law protecting or preserving vested contractual rights or be
construed to change the terms of any legal contract between the bank and any third party or to
impose any new conditions thereon, or to dispense with any condition expressed or
authorized in any such contract entered into and taking effect prior to this Act.
Sec. 4. Transition Period. ~ The Development Bank of the Philippines (DBP) shall
have a period of ten (10) years from the effectivity of this Act to restructure its loan portfolio.

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The transition milestones shall be identified in the Implementing Rules and Regulations to be
promulgated pursuant to Section 5 of this Act.

Sec. 5. Implementing Rules and Regulations. ~ Within ninety (90) days from
effectivity of this Act, the Department of Finance (DOF) shall, in coordination with the DBP,
promulgate the rules and regulations to effectively implement the provisions of this Act.

Sec. 6. Separability Clause. — If, for any reason, any provision of this Act or any part
thereof shall be held unconstitutional and invalid, the other parts or provisions of this Act,
which are not affected thereby, shall remain in full force and effect.

Sec. 7. Repealing Clause. ~ All laws, decrees, orders, rules and regulations or parts
thereof inconsistent with any of the provisions of this Act are hereby repealed, amended or
modified accordingly.

Sec. 8. Effectivity. — This Act shall take effect fifteen (15) days after its complete
publication in at least two (2) newspapers of general circulation or in the Official Gazette.

Approved,