Days after President Duterte vowed to support local micro, small and medium enterprises (MSMEs), the House Committee on Small Business and Entrepreneurship Development on Monday approved a substitute bill that will further promote and enhance the financing of programs for MSMEs.
Following the passage of the bill at the committee level, Rep. Peter Unabia of Misamis Oriental, panel chairman, underscored the importance of the MSMEs to the country’s economy.
“I will push for the passage of this bill, as MSMEs account for 99.6 percent of the total number of establishments in the country, and they employ 63 percent of the total labor force, and 60 percent of all exporters are MSMEs,” Unabia told the BusinessMirror.
“I will write a letter to the leadership of the lower chamber, urging them to include this in the priority bills. I am hoping that they [lawmakers] will support the passage of this measure, as the President already mentioned it during the recent Abis [Asean Business and Investment Summit],” he added.
The lawmaker said the substitute bill will now be submitted to the plenary for consideration.
During his speech at the Abis and the launch of the Asean Mentors for entrepreneurship Network, Duterte vowed to allocate more funds to support MSMEs in the 2018 national budget.
According to Unabia, one salient provision of the Magna Carta for MSMEs is the mandatory allocation of credit resources for MSMEs, wherein at least 8 percent of the loan portfolio of all lending institutions shall be allocated for micro and small enterprises and at least 2 percent for medium enterprises for a period of 10 years from the date of effectivity of Republic Act (RA) 9501, or the Magna Carta for MSMEs. The mandatory allocation will expire on June 17, 2018.
The substitute bill provides that for another 10 years from the date of the effectivity of the amendatory act, all lending institutions, as defined under the Bangko Sentral ng Pilipinas rules, whether public or private, shall set aside 8 percent for micro and small enterprises and at least 2 percent 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.
Also, under the bill, all eligible MSMEs shall be entitled to a share of at least 10 percent of total procurement value of goods and services supplied to the government, its bureaus, offices and agencies annually.
“For these purposes, the government, its bureaus, offices and agencies shall allocate at least 10 percent of all its procurement opportunities to be contracted out only to eligible MSMEs in accordance with the RA 9184 [Government Procurement Reform Act],” the measure said.
The bill also listed the secretary as a member of the Micro, Small and Medium Enterprises Development (MSMED) Council. It also included as a member of the Board of Directors of Small Business (SB) Corp. the president of the Social Security System.
The executive director of the Cooperative Development Authority and a representative of a national organization representing and dominated by MSMEs, the bill said, shall now be included in the advisory unit of the MSMED Council.
Moreover, the bill added the MSMED Council shall promote the productivity and viability of MSMES in the Department of Trade and Industry’s top priority industries for development by way of directing and/or assisting concerned government agencies and institutions at the national, regional and provincial levels toward the provision of business-training courses, technical training for technicians and skilled laborers and continuing skills-upgrading programs.
The measure said appropriate government agencies shall also provide more infrastructure facilities and public utilities to support operations of MSMEs
It also mandates the setting up of MSME Negosyo Centers and revitalize the already established MSME Negosyo Center in the regions.
“[The center shall] accept and act on all registration applications of MSMEs,” the bill added.
Capital
The measure said the national government, through the Department of Budget and Management (DBM), shall provide additional paid-in capital to the SB Corp. in the amount of at least P3 billion within one year after the enactment of the act and additional equities of P1 billion a year thereafter for the next three years.
It said the SB Corp. shall also have additional capital contribution of P1 billion to be allocated by the DBM from the dividends remitted by the Land Bank of the Philippines and Development Bank of the Philippines.
Also, the measure added the national government shall provide an appropriation of P2 billion for the replenishment on need basis, to set up a guarantee fund as a mechanism for bankruptcy preventive measures and mutual-relief system for distressed enterprises and, in general, guarantee lending by private banks to MSMEs, as insurance against extraordinary disasters pursuant to SB Corp.’s formulation of the implementing rules thereof for the utilization of the guarantee fund and approval of the MSMED Council.
The bill said the Board of Directors of the SB Corp., with the endorsement of the secretary of trade, may recommend an increase on the authorized capital stock and/or additional funding, which may be included in the GAA.
The measure added that the national government, through the DBM, shall provide for the full capitalization of the SB Corp. of P10 billion within the next five years as part of the national strategy for financial inclusion, and to recommend legislation that will further enhance the capitalization of SB Corp.
It said the SB Corp. may only declare as dividend not more than 30 percent of its net income and the rest withheld as retained earnings.
It added a seed amount of P500 million shall be appropriated in the national budget under the annual national budget as venture capital and microfinance trust fund to encourage the setting up of a venture capital and microfinance trust fund for the purpose of promoting business opportunities available to MSME sector.
Under the bill, the SB Corp. shall not be deemed as quasi-banking operations and shall not require a quasi-banking license from the Bangko Sentral ng Pilipinas (BSP).
Penalties
The measure added the BSP shall impose administrative sanctions and other penalties on the lending institutions for noncompliance with the provisions of the act.
Under the bill, the minimum penalty for noncompliance is set at P500,000, and the maximum penalty is set at P5 million, in proportion to the bank’s or other entity’s. A smaller penalty is set at P100,000 for smaller banks’ noncompliance, provided that such an amount is to be adjusted in case of inflation.
“Penalties on noncompliance shall be directed to the development of the MSME sector. Ninety percent of the penalties collected should go to the MSMED Council Fund, while the remaining 10 percent should be given to the BSP to cover for administrative expenses,” the bill said.
It mandates the MSMED Council to submit to Congress 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.
One of the principal authors of the bill, Cagayan De Oro Rep. Maximo B. Rodriguez Jr. said the Duterte administration puts a high priority on the development of MSMEs as the country’s economic backbone and an important means of equitable distribution of the benefits of growth.
He said strengthening the Magna Carta for MSMEs is a necessary policy response to this need.
“The proposal seeks to extend the mandatory lending provision to MSMEs for another 10 years without further extension, and providing for the rules of compliance thereof,” he said.
“It also provides capitalization of SB Corp. and strengthening of its guarantee program and provides for bankruptcy preventive measures in the form of an enterprise-rehabilitation fund for enterprises affected by disasters and other crisis,” Rodriguez added.
The lawmaker added 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.
Another author of the bill, Party-list Rep. Michael Romero of of 1-Pacman said the passage of the bill will create a more effective financial institution better geared to meet the needs at the MSME market.
