QuestionsQuestions (Republic Act No. 8289)
RA 8289 amended Republic Act No. 6977 (the “Magna Carta for Small Enterprises”). Its purpose is to strengthen the promotion, development, and assistance to small and medium scale enterprises by revising specific provisions of RA 6977.
A qualifying SME is any business activity/enterprise in industry, agribusiness and/or services (single proprietorship, cooperative, partnership, or corporation) whose total assets (inclusive of assets arising from loans, but exclusive of the land where the office/plant/equipment are located) fall within the micro/small/medium asset categories.
Micro: less than P1,500,001; Small: P1,500,001 to P15,000,000; Medium: P15,000,001 to P60,000,000.
The SMED Council may review and adjust the definitions motu proprio or upon recommendation of sectoral organizations, taking into account inflation and other economic indicators. Variables may include number of employees, equity capital, and assets size.
To qualify: (1) duly registered with appropriate agencies (for micro enterprises, registration with the municipal/city treasurer suffices); (2) ownership/capital rules favor Filipino ownership (100% for sole proprietorship/partnership; at least 60% for juridical entities); (3) business activity must fall within major sectors (industry, services including practice of one’s profession, tourism-related establishments, and agri-business limited to manufacturing/processing/production of agricultural produce excluding farm level crop production); and (4) it must not be a branch/subsidiary/division of a large enterprise or controlled in policy by a large enterprise or by non-owner/non-employee persons.
No. The requirement does not preclude SMEs from accepting subcontracts from large enterprises or from joining cooperative activities with other SMEs.
Programs of the financing corporation are exclusively targeted to medium, small, and micro-sized enterprises.
Registered small enterprises are entitled to at least a 10% share of the total procurement value of goods and services supplied to the government (bureaus/offices/agencies) annually, provided prices and quality are competitive.
Key principles include: minimal rules and simplified procedures/requirements (minimum regulation); role and encouragement of the private sector (including simplified procedures and localized incentives); coordination of government efforts across relevant departments and agencies with local government units; and decentralization through establishing regional/provincial offices and delegating authority for decisions, accreditation, and complaint resolution.
RA 8289 provides for the creation of the SMED Council attached to the Department of Trade and Industry, to be constituted within 60 days after approval. The Council is the primary agency responsible for promotion, growth, and development of SMEs through facilitating and coordinating national efforts.
The Council is chaired by the Secretary of Trade and Industry and includes cabinet-level ex officio members (e.g., NEDA Director General, Secretaries of Agriculture, Labor and Employment, Environment and Natural Resources, Science and Technology, Tourism, Chairman of the Monetary Board), the Chairman of the Small Business Guarantee and Finance Corporation, the Chairman of the SME promotion body to be established by the President, three private sector representatives (Luzon/Visayas/Mindanao) plus one SME sector representative appointed by the President, and a private banking sector representative serving alternately among relevant banking associations/chamber.
Private sector Council members initially receive per diem of P1,000 per meeting for a maximum of 24 meetings per year, with possible adjustments by the Council subject to Presidential approval.
It is designated as Council Secretariat and must: prepare annual and medium-term SME development plans (in coordination with LGUs/associations) for Council approval; coordinate position papers and background materials; assist in coordinating/monitoring SME policies and programs; compile the Council’s yearly status report; submit periodic progress reports; and perform ad hoc functions authorized by the Council.
The President may establish a promotion body as the principal government agency for formulating, implementing, coordinating, and monitoring all non-financing programs (including fee-based services) to support and promote micro, small, and medium enterprises. It is attached to the Department of Trade and Industry and under the administrative supervision of the SMED Council.
SBGFC guarantees loans of qualified SMEs and related entities/modes of financing, may guarantee up to 100%, and may provide second-level guarantees (reinsurance) on credit/investment guarantees by other institutions. However, crop production financing is not serviced by the Corporation.
For 10 years from effectivity, lending institutions must set aside at least 6% (for small and medium enterprises overall) and at least 2% (for small and medium enterprises respectively as stated in the text) of total loan portfolio based on balance sheet as of the end of the previous quarter, and make it available for SME credit. BSP must formulate rules and monitor compliance through quarterly reporting.
The Bangko Sentral ng Pilipinas (BSP) shall impose administrative sanctions and other penalties for non-compliance, including a fine of not less than P500,000.