Press Release
October 4, 2007

SENATE APPROVES ON 2ND RDG ROXAS' BILL HELPING SMEs

The Senate has approved on second reading Senator Mar Roxas' bill providing assistance to micro, small and medium enterprises, through amendments to the Magna Carta for Small Enterprises or Republic Act 6977.

"I am confident that with the Senate's approval, and the corresponding action of the House of Representatives, the bill will soon become law and help our MSMEs, who are the backbone of the economy," said Roxas, one of the authors of Senate Bill No. 1646, a substitute bill resulting from committee hearings and floor deliberations in the past month.

"I commend Senator Legarda for working hard to pass the bill prior to adjournment of session," Roxas added.

Micro, small and medium enterprises comprise 99.6% of local businesses and employ 70% of the country's total work force. Roxas however noted how their full potential has yet to be achieved, as they currently contribute only about 30% to the country's economy.

"We want to reward our small enterprises for the hard work they clearly deserve by ensuring their access to credit and support services. This is about giving our Filipino companies the chance to realize their potential," he said.

Virtually the same bill had been filed and passed by the Senate in the 13th Congress, allowing for its quick passage this time around. The bill's salient provisions include:

1. Adjusting the definition of micro, small and medium enterprises in terms of asset size to the following: Micro - below P3 million; Small - P3 to P15 million; and Medium - above P15 million;

2. Mandating the creation of a 6-year MSME Development Plan;

3. Adjusting the structure and functions of the MSME Development Council (MSMEDC) to better respond to the needs of

4. Increasing the authorized capital stock of Small Business Corp. from P5 billion to P10 billion, and putting it under the regulation of the Banko Sentral ng Pilipinas;

5. Increasing the mandatory credit allocation of banks to MSMEs from a total of 8% to a total of 10%.

SB 1646 would require lending institutions to set aside at least 10% of their loan portfolio for micro, small and medium enterprises, up from the present 6% minimum for micro and small enterprises, and 2% for medium enterprises.

But during interpellations yesterday, Roxas manifested that allocating 10% lump-sum to all MSMEs would not be fair, as the tendency would be that credit would go to larger firms, as cost of credit is higher in lending smaller amounts to smaller firms. This could thus leave the micro enterprises out, defeating the bills' purpose.

"The Senate is not bound to stick to a 10% lump sum mandatory credit allocation, because there is an agreement that this is not the best policy instrument and we ought to refine this in bicameral talks," Roxas said.

"The fear we senators share is that the credit would naturally flow to the medium and larger firms, which means that there might not be left of the credit allocation for the smaller firms," he said.

Such amendments, Roxas said, will be introduced after having received additional pertinent information from the Chamber of Thrift Banks, the Bankers Association of the Philippines and other groups.

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