President Gloria Macapagal-Arroyo of the Philippines recently signed Republic Act (RA) 9501, an amendment to RA 6977, the “Magna Carta for Small and Medium Enterprises” (SMEs) into law. The amendment was necessitated by the fact that the original “Magna Carta” signed in 1991, did not distinguish micro-enterprises and that its provision (section 13) for all private and public lending institutions to help finance SMEs expired in 2007.
The new law, RA 9501, amends RA 6977 to include micro-enterprises as defined as businesses with no more than the equivalent of USD 69,005 in total assets. The amendment also redefined small enterprises as businesses with between the equivalents of USD 69,005 and USD 345,025 in total assets. Medium-sized enterprises were distinguished as businesses with between the equivalents of USD 345,025 and USD 2.3 million. Additionally, where the mandatory allocation to SME’s that had expired in 2007 required only 6 percent of total loan portfolio of lending institutions to be directed toward financing small enterprises, RA 9501 raised the allocation requirement to 8 percent, and added micro-enterprises as recipients. In both the original law and the amendment, medium-sized enterprises would be allocated 2 percent.
The Filipino government’s involvement with microfinance is reflected in President Arroyo’s previous focus on the field, as reported here by MicroCapital. The aim of the new amendment is not only to increase employment, but also to encourage investments and foreign exchange. As 91.8 percent of the Filipino business sector is comprised of micro-enterprises, the government has decided to honor the country by displaying all of its micro, small and medium-sized enterprise products during the countries upcoming Independence Day. Instead of highlighting the military, the government has themed its 110th Independence Day around government programs for the poor, especially its entrepreneurs.
By Sarah Knapp, Research Assistant
Additional Resources:
Magna Carta for Small and Medium Enterprises
Press Release: Filipino Government, House of Representatives (Phillippines), Independence Day 2008, Sun Star (Phillippines)
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