First House bill introduced under 19th Congress expands loans to MSMEs – Manila Bulletin

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Leyte 1st District Representative Martin Romualdez introduced the first bill in the 19th Congress, seeking to allocate 10 billion pesos to two state banks to expand their lending capabilities to micro, small and medium enterprises (MSMEs ) to help them recover from the Covid-19 pandemic.

Leyte 1st District Representative Martin Romualdez (MANILA BULLETIN/FILE PHOTO)

Romualdez, a shoo-in for House Speaker, was the primary author of the bill co-authored by presidential son and Ilocos Norte Representative Ferdinand Alexander “Sandro” Marcos, and Representatives Jude Acidre and Yedda Marie K. Romualdez from the Tingog party -list.

House Bill No. 1, “An Act to Provide Unified Initiatives for Government Financial Institutions for Distressed Enterprises for Economic Recovery (GUIDE)”, allocates 7.5 billion pesos to the Land Bank of the Philippines ( LBP) and 2.5 billion pesos to the Development Bank of the Philippines (DBP) or a total of 10 billion pesos to assist affected MSMEs in agriculture, infrastructure, manufacturing and service sectors.

The bill also aims to help “other strategically important enterprises (SICs)” heavily affected by the COVID-19 pandemic.

SICs include businesses in agriculture, construction, education, food production, healthcare, infrastructure, social housing, manufacturing, power and electricity. energy, product distribution, retail, services, tourism and hospitality, transport and logistics, and water and sanitation.

“To this end, government financial institutions are mandated to expand their credit programs to help MSMEs meet their liquidity needs. In particular, the LBP and DBP are mandated to extend their credit and rediscount facilities to relevant MSMEs in the agriculture, infrastructure, manufacturing and service sectors,” the bill states.

Under the terms of the bill, the term MSME “refers to any business activity or enterprise engaged in industry, agribusiness and services, whether a sole proprietorship, a cooperative , partnership or corporation” whose total assets, including loans but excluding real estate, have a value not exceeding 3 million pesos for micro, 3 million pesos at 15 million pesos for small and 15 to 100 million pesos for medium.

The GUIDE bill will also increase DBP’s share capital from 35 billion pesos to 100 billion pesos, which will be divided into one billion shares of 100 pesos each to be fully subscribed by the national government.

The president has the discretionary power to increase the capitalization of the bank on the recommendation of its board of directors and with the agreement of the finance secretary.

The bill also authorizes LBP and DBP to create a special holding company (SHC) “to further reinvigorate” MSMEs and CIS heavily impacted by the pandemic.

This holding company may be open to private sector investment. However, the two state banks will retain the majority stake in the special enterprise until they have recovered their investment.

Expected to be a significant player in the financial sector, the holding company will be authorized to invest or place funds in shares, execute convertible loans or purchase convertible bonds and other securities in SICs and establish subsidiaries.

However, SICs will not be allowed to reduce the number of employees to a certain level determined by the holding company.

They will also be restricted in declaring their dividends and restricted in increasing salaries, severance, retirement and other board benefits.

This ensures that the investments of the holding companies “are properly used and that the SICs are successfully rehabilitated”.

The bill also grants certain tax exemptions to the two state banks and their holding company.

The measure creates a joint congressional oversight committee of five House members and five senators to oversee its implementation.

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