Magna Carta Signed for Micro, Small, and Medium Enterprises

Manila Bulletin, May 24, 2008 | Go to article overview

Magna Carta Signed for Micro, Small, and Medium Enterprises


Republic Act 9501, the Magna Carta for Micro, Small, and Medium Enterprises (MSMEs), is one of measures assigned top priority at the recent meeting of the Legislative Executive Development Advisory Council (LEDAC).

The measure amended the 17-year-old Republic Act 6977, the Magna Carta for Small Enterprises, expanding its coverage to include the micro-enterprise sector, and providing better access to credit to start their businesses.

To make MSMEs more viable and competitive, the law provides the mandatory allocation of credit resources of all lending institutions for MSMEs for a period of 10 years.

It requires banks to allocate at least 8 percent of their loan portfolio to micro and small businesses. The present law requires banks to set aside 6 percent of their total loan portfolio to finance small enterprises and 2 percent for medium enterprises.

The new law imposes administrative sanctions and other penalties on lending institutions for non-compliance with the mandatory credit allocation provision.

Senator Loren Legarda hailed the passage of the Magna Carta for MSMEs, saying it would improve the welfare of small businessmen through improved access to financing.

Legarda, principal author of the law, said it would benefit the micro enterprise sector that accounts for 99 percent of total commercial and industrial establishments in the country that employs 69 percent of the labor force.

The new law also gives a new definition to SMSEs, raising the ceiling to qualify as a micro enterprise to assets of not more than R3 million, from the previous threshold of R1.5 million. Micro enterprises, comprise 91.8 percent of the country's business sector, were not originally included as qualified beneficiaries of government assistance in RA 6977.

Small enterprises will be those with total assets of R3 million to not more than R15 million. Medium enterprises are those with total assets of R15 million to not more than R100 million, from the previous threshold amount of R60 million.

The new law also increased the capital stock of the Small Business Corporation, the government financial institution focused on assisting MSMEs, from R5 billion to R10 billion. The SB Corporation plans to release R4.7 billion in loans to MSMEs this year, R1 billion higher than last year.

RA 9501 also provides a more empowered and organized Micro, Small and Medium Enterprise Development Council. The council is assigned to formulate an MSME Development Plan and to integrate various government and private sector initiative to create a healthier and more vibrant SME environment.

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