Law Summary
Declaration of Policy
- Recognizes MSMEs as drivers of employment and economic growth.
- State policy focuses on promoting MSME growth, especially in rural/agri-based enterprises.
- Key measures include:
- Entrepreneurship training and skills development.
- Facilitating access to funds.
- Guaranteeing fair government contract shares.
- Reducing collateral requirements.
- Protecting credit delivery systems.
- Improving government efficiency.
- Encouraging linkages between large and small enterprises.
- Partnering with private sector and organizations.
- Establishing feedback mechanisms to monitor MSME contributions and challenges.
Definition of MSMEs
- MSMEs defined by asset size (exclusive of land):
- Micro: up to P3 million
- Small: P3,000,001 to P15 million
- Medium: P15,000,001 to P100 million
- The MSMED Council may review and adjust these definitions.
- Programs tailored to the specific needs and encourage growth from one MSME category to another.
Eligibility for Government Assistance
- Requirements:
- Must be duly registered; micro enterprises may register with local treasurer.
- At least 100% Filipino ownership for sole proprietors/partnerships; 60% Filipino ownership for juridical entities.
- Business within industry, trade, services, tourism, or agri-business sectors.
- Should not be a branch/subsidiary of a large enterprise, but may subcontract or enter franchise partnerships.
- Benefits include:
- Access to assistance, counseling, incentives.
- Share at least 10% of government procurement annually.
- Fraudulent MSMEs are disqualified and subject to legal liabilities.
Guiding Principles
- Coordination among government agencies including DTI, Finance, Agriculture, and others to support MSMEs.
- Efforts extend across national and local government levels.
MSME Development Plan
- A six-year development plan approved by the President and integrated into the Medium Term Philippine Development Plan.
- Developed by DTI in consultation with private sector, updated biannually.
- Includes microcredit financing components.
MSMED Council
- Strengthened and renamed from previous councils.
- Attached to DTI, constituted within 60 days of Act's approval.
- Composed of key government secretaries, private sector representatives, labor sector, and banking sector.
- Private sector members receive meeting per diem.
- Powers and functions:
- Policy recommendations to President and Congress.
- Coordination of MSME programs among government and private sectors.
- Reviewing and recommending policy adjustments.
- Monitoring progress and implementing MSME development plans.
- Facilitating training, marketing, financing, technology adoption.
- Enhancing access to credit and introducing bankruptcy preventive measures.
- Establishing MSME centers for streamlined services.
- Annual reporting to Congress on MSME status and policy impact.
Bureau of Micro, Small and Medium Enterprise Development
- Designated as Secretariat of MSMED Council.
- Responsible for administrative and coordination duties.
Appropriations
- MSMED Council to have separate annual appropriations approved by DTI.
- May accept private sector contributions.
Rationalization of MSME Programs
- Ongoing review by MSMED Council of all government MSME programs.
- Submission of policy and program recommendations to Congress and the President.
Small Business Corporation (SB Corporation)
- Body corporate created to implement MSME policies and programs.
- Governed by a Board of Directors composed of government officials and private sector representatives.
- Powers include policy formulation, establishing branches, compromising claims, and setting organizational structure.
- Attached administratively to DTI and supervised by MSMED Council.
- Authorized capital stock at P10 billion, funded initially by government financial institutions and SSS/GSIS.
- May accept further private investments as preferred shares.
- Subject to Bangko Sentral ng Pilipinas (BSP) supervision.
- Mandated to extend financial assistance, guarantee loans, and accept grants/donations.
Mandatory Credit Allocation
- Lending institutions must allocate at least 8% of total loan portfolio to micro and small enterprises.
- Compliance counted via actual loans, investment in SB Corporation, wholesale lending, purchase of receivables, etc.
- BSP to monitor compliance and provide reports.
- Lending institutions allowed to participate in foreclosure sales under specific conditions, without acquiring ownership.
Recognition and Monitoring
- Annual MSME Development Week in the second week of July.
- Presidential Awards for outstanding MSMEs.
- Congressional Oversight Committee established for monitoring implementation consisting of key Senate and House members.
Penal Provisions
- Penalties for noncompliance directed largely to MSMED Council Fund for MSME development.
Implementing Rules and Regulations
- DTI, through the Bureau of MSME Development, will issue IRR within 90 days of the Act's approval.
Miscellaneous Provisions
- Separability Clause ensures unaffected provisions remain valid if parts declared unconstitutional.
- Repealing Clause removes inconsistent prior laws or rules.
- Effectivity: 15 days after publication in two national newspapers.