QuestionsQuestions (Republic Act No. 9501)
RA 9501 aims to promote entrepreneurship by strengthening development and assistance programs for micro, small, and medium enterprises (MSMEs). Its policy is to recognize MSMEs’ potential for employment generation and economic growth and to ensure their viability and growth through measures such as training, access to funds, fair government procurement share, reduced collateral burdens, safeguards for credit delivery, and stronger government efficiency and linkages among enterprises.
MSMEs are defined as enterprises engaged in industry, agribusiness and/or services (including single proprietorships, cooperatives, partnerships, and corporations) whose total assets are: micro—up to PHP 3,000,000; small—PHP 3,000,001 to 15,000,000; medium—PHP 15,000,001 to 1,000,000,000. The definition excludes the land where the office/plant/equipment are situated and includes assets inclusive of those arising from loans.
The MSMED Council may review and adjust the definitions, taking into account inflation and other economic indicators. It may also use other variables such as number of employees, equity capital, and asset size.
Eligible MSMEs must (1) be duly registered with appropriate agencies (for micro enterprises, registration with the municipal/city treasurer suffices); (2) be 100% owned/capitalized by Filipino citizens (for juridical entities, at least 60% of capital/stock must be Filipino-owned); (3) operate in major sectors (industry, trade/services including practice of profession, tourism-related establishments, and agri-business involving manufacturing/processing/production of agricultural produce); and (4) not be a branch/subsidiary/division of a large-scale enterprise. Fraud/misrepresentation disqualifies a beneficiary immediately.
Yes. RA 9501 clarifies that the “not a branch/subsidiary/division of a large enterprise” requirement does not preclude MSMEs from accepting subcontracts and entering into franchise partnerships with large enterprises or joining cooperative activities with other MSMEs.
Eligible MSMEs are entitled to at least 10% of the total procurement value of goods and services supplied to the Government and its bureaus/offices/agencies annually. The Department of Budget and Management (DBM) monitors compliance and submits reports to the MSMED Council semiannually and to Congress annually.
The MSMEDP is a six-year plan prepared by DTI, approved by the President, and forming part of the Medium-Term Philippine Development Plan (MTPDP). It must be formulated in consultation with the private sector and validated/updated semestrally. It must include a micro credit financing scheme component.
The existing SME Development Council is strengthened and renamed the MSMED Council. It is attached to the Department of Trade and Industry (DTI) and must be constituted within 60 days after the approval of the Act.
The Secretary of Trade and Industry is the Chairman. Members include ex officio officials: Secretary of Agriculture, Secretary of the Interior and Local Government, Secretary of Science and Technology, Secretary of Tourism, and Chairman of SB Corporation; plus private sector representatives—three (3) from the MSME sector representing Luzon/Visayas/Mindanao; one from labor sector nominated by accredited labor groups; and one from the private banking sector alternating among specified banking associations.
The MSMED Council helps create an enabling environment, recommends policies to the President and Congress, coordinates government and private sector activities, reviews government policies affecting MSMEs (including simplifying rules), monitors progress and assists LGUs/private groups, and provides a coordinative policy framework for tapping local/foreign funds. It directs/assists agencies on training, product development, marketing linkages, simplified financing/credit guarantee systems and decentralized approval, concessional interest and collateral alternatives, bankruptcy preventive measures, information/entrepreneurship education, tax incentives (as applicable), R&D support, infrastructure/common service facilities, incubation programs, statistical databanks, and MSME centers/streamlined registration.
The Bureau of Small and Medium Business Development is designated as the Council Secretariat and is renamed the Bureau of Micro, Small and Medium Enterprise Development (BMSMED). It is tasked to support the Council’s functions (as stated in the Act for Section 8 duties and functions).
RA 9501 creates the SB Corporation as a body corporate tasked with implementing comprehensive policies and programs to assist MSMEs in areas including finance and information services, training, and marketing.
The Board has 11 members: the Secretary of Trade and Industry, the Secretary of Finance, a private sector representative appointed by the President upon MSMED Council recommendation, seven SB Corporation common stock shareholder representatives elected proportionally, and the SB Corporation President as ex officio member and Vice Chairman. Powers include formulating policies, prescribing/amending/repealing bylaws/rules, establishing branches/agencies/subsidiaries, compromising or releasing claims, fixing features on non-voting preferred shares, exercising powers incidental to corporate purposes, and setting staffing structure and compensation within stated constraints.
Authorized capital stock is PHP 10,000,000,000. Initial capital is contributed via equity investment in common stock by LBP (PHP 200,000,000), DBP (PHP 200,000,000), and SSS and GSIS (PHP 200,000,000 each). Authorized stock includes 80,000,000 common shares and 20,000,000 preferred shares at PHP 100 par value. SB Corporation is given a five-year grace period on dividend commitments, after which it may declare dividends of not more than 30% of net income and retain the rest.
For ten (10) years from the effectivity of the amendatory Act, all lending institutions (public or private) must set aside at least 8% of their total loan portfolio (based on the balance sheet as of the end of the previous quarter) for micro and small enterprises and make it available for MSME credit. Compliance may be through actual extension of loans, subscription of preferred shares in SB Corporation, wholesale lending for on-lending, purchase/discount of MSME receivables, qualifying loans to traders (consistent with eligibility rules), or subscription/purchase of liability instruments offered by SB Corporation.
RA 9501 declares the second week of July as the “Micro, Small, and Medium Enterprise Development Week.” The MSMED Council, the Department of Trade and Industry, and the SB Corporation jointly organize activities.
RA 9501 creates the Congressional Oversight Committee on Micro, Small and Medium Enterprise Development (COC-MSMED) composed of Senate/House leadership and selected committee chairpersons and members, tasked to set guidelines for monitoring and adopt internal rules; its secretariat is drawn from existing Senate/House committee personnel. For penalties on noncompliance, the Act provides that penalties collected should go 90% to the MSMED Council Fund and 10% to the BSP for administrative expenses.