Press Release
September 9, 2019

Zubiri: Extend credit to MSMEs to keep them globally competitive

Senator Migz Zubiri has filed a bill seeking to redefine and extend the mandatory credit allocation and coverage of the country's medium, small and micro-enterprises (MSMEs).

"According to data from the Department of Trade and Industry-Bureau of Small and Medium Enterprise Development, there are 946,721 establishments in the Philippines based on the Philippine Statistics Authority's Annual List of Establishments, of which 99.56 percent are MSMEs," Zubiri, said.

Despite their contribution, Zubiri said, various challenges continue to hinder the growth and competitiveness of MSMEs. Lack of access to financing, sustainable markets and training to acquire the needed mindset and skills to ultimately grow and sustain a business are just a few of the constraints faced by MSMEs.

Senate Bill No. 110 proposes to amend Section 3 of Republic Act No. 6977, as amended, or the "Magna Carta for Small Enterprises," which defines MSMEs as any business activity or enterprise whose total assets are not more than P3 million for micro; P3.001 million - P15 million for small; and P15.001 million - P100 million for medium enterprises.

"This bill proposes to redefine the coverage of micro enterprises, extend the mandatory lending provisions to MSMEs, and increase the penalties for noncompliance by banks and lending institutions," Zubiri said.

Under the proposed bill, micro businesses are those with total assets not more than P5 million while small businesses are those with total assets from P5.001 million to P15 million. The total assets for medium enterprises must remain at P15.001 million to P100 million.

The proposed measure also amends Section 13 of the same Act, which directs all lending institutions to set aside at least six percent (6%) for small and micro enterprises, respectively, and at least two percent (2%) 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.

The measure, if approved, shall mandate all lending institutions to set aside at least ten percent (10%) 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 for a period of ten (10) years, provided that no more than two percent (2%) of the mandatory allocation shall be made available to medium enterprises.

The measure also proposes to penalize any bank or lending institution found to violate the mandatory lending provisions under the bill with a fine of not less than P500,000 but not more than P5 million for larger banks, and a fine of not less than P100,000 in the case of smaller banks.

"It is hoped that with these amendments the MSMEs will gain better access to financing to make them truly dynamic, resilient and globally competitive," Zubiri said.

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