Question & AnswerQ&A (Republic Act No. 8289)
A Small and Medium Enterprise is any business activity or enterprise engaged in industry, agribusiness and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of loans but excluding the land where the business is situated, fall under the following asset size ranges: micro - less than P1,500,001; small - P1,500,001 to P15,000,000; medium - P15,000,001 to P60,000,000.
To qualify, businesses must be duly registered (micro enterprises may register with municipal or city treasurer), be 100% Filipino-owned if single proprietorship or partnership, or at least 60% Filipino-owned if juridical entity, operate in major sectors like industry, services, or agribusiness (excluding farm-level production), and not be a branch or controlled by a large-scale enterprise.
The SMED Council is the primary agency responsible for promoting, growing and developing small and medium enterprises by facilitating and coordinating national efforts, helping tap local and foreign funds, and maximizing labor resources usage.
The Council is headed by the Secretary of Trade and Industry and includes: Director General of NEDA; Secretaries of Agriculture, Labor, Environment, Science and Technology, Tourism; Chairman of the Monetary Board; Chairman of the Small Business Guarantee and Finance Corporation; chairman of the SME promotion body; three private sector representatives (Luzon, Visayas, Mindanao); one SME sector representative, and a representative from the private banking sector.
The Bureau acts as the Council Secretariat, preparing SME development plans, coordinating and monitoring SME policies and programs, submitting reports of progress, and performing ad hoc functions as authorized by the Council.
Registered small enterprises are entitled to at least 10% share of the total procurement value of goods and services supplied to the government annually, provided the prices and quality are competitive.
For 10 years from the Act's effectivity, all lending institutions must allocate at least 6% of their total loan portfolio for small enterprises and at least 2% for medium enterprises based on their previous quarter's balance sheet to provide credit to SMEs.
The Bangko Sentral ng Pilipinas shall impose administrative sanctions and a fine of not less than Five hundred thousand pesos (P500,000) on lending institutions that fail to comply with the mandatory credit allocation provisions.
SBGFC sources and adopts development initiatives for SMEs in financing, technology, production, management and linkages. It provides various alternative financing modes, guarantees loans up to 100%, may provide second level guarantees, and becomes liable on guarantees when loans are past due. It is attached to the Department of Trade and Industry and supervised by the SMED Council.
Key principles include a minimal set of rules and simplified procedures to encourage entrepreneurship, active private sector participation, coordinated government efforts across agencies, and decentralization by establishing regional/provincial offices to enhance efficiency.