Internal bill boosts lending to MSMEs

House of Representatives

FOUR lawmakers in the House of Representatives have tabled a bill requiring two government financial institutions to expand their loan programs to micro, small, and medium-sized enterprises (MSMEs) affected by the Covid-19 pandemic.

House Bill (HB) 1, or the draft “Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery or Guide Act”, was drafted by Rep. Martin Romualdez (Leyte First District), Rep. Yedda Marie Romualdez (Tingog) , Representative Ferdinand Alexander Marcos (First District of Ilocos Norte) and Representative Jude Acidre (Tingog).

The measure aims to strengthen the capacity of the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) to provide assistance to MSMEs.

The bill defines a micro enterprise as an enterprise whose total assets do not exceed 3 million pesos, a small enterprise whose assets are between 3,000,001 and 15 million pesos and a medium enterprise whose assets are between 3,000,001 and 15 million pesos. are between 15,000,001 and 100 million pesos.

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The DBP will provide loans to Covid-affected MSMEs “engaged in infrastructure, service industry and/or manufacturing activities”. The LBP will provide loan to Covid-affected MSMEs “in the agribusiness value chain”. Under the measure, the two institutions will also provide loans to local government units “subject to applicable rules and regulations”. HB 1 allocates Pula 7.5 billion to LBP and Pula 2.5 billion to DBP for loan purposes.

President Ferdinand “Bongbong” Marcos Jr. had pledged to support MSMEs, citing their important role in job creation.

Prior to his proclamation, the President met with Presidential Entrepreneurship Advisor Jose Maria “Joey” Concepcion 3rd to discuss how to better support small and medium-sized businesses.

Concepcion stressed the need to protect “the sector that generates more than half of the jobs in the country”. The Ministry of Trade and Industry said that in 2020, micro enterprises had the largest share of jobs created at 29.38%, followed by small enterprises at 25.78%.

The bill tabled by the four lawmakers also seeks to increase DBP’s share capital to 100 billion pesos divided into one billion ordinary shares with a nominal value of 100 pesos per share, from 35 billion pesos divided into 350 million ordinary shares with a nominal value of 100 pesos per share.

The two banks will be allowed to invest or enter into a joint venture agreement to form a special holding company (SHC) or joint stock company within six months of the enactment of the law.

Multilateral companies and credit institutions can invest in an SHC.

An SHC will have a Board of Directors consisting of the Secretary of the Ministry of Finance as ex-officio Chairman, the LBP and DBP Chairmen, the Chairman or Chief Executive Officer of the SHC, two independent directors and three directors appointed by the LBP, the DBP, and the private equity investor.

The members of the council elect among themselves the vice-president.

Once SHC’s private shares reach 50% of the total outstanding share capital, it ceases to be a state-owned or state-controlled corporation, and its board members are elected on the basis of shares. with voting rights.

The bill lists the minimum terms that the bill states that the agreement between CHS and the recipient company “must contain”. One of these conditions is that the beneficiary company “must not reduce the number of employees beyond the percentage prescribed by the CSS”. Under the bill, the CHS is authorized to impose additional conditions and provisions “to ensure that the investment will be properly used and ensure the successful rehabilitation of the recipient business”. HB 1 states that within 30 days of the law coming into effect, the Department of Finance, in conjunction with the Bureau of Internal Revenue, the Bangko Sentral ng Pilipinas, the Securities and Exchange Commission, the DBP and the LBP” shall jointly promulgate the rules and regulations necessary for the effective implementation of this Act.”

The bill was introduced in the 18th Congress by then-Representative Junie Cua for Quirino, and passed the House on third and final reading.

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