President Gloria Macapagal Arroyo signed into law the  Magna Carta for Micro, Small and Medium Enterprises (MSMEs) today at the  Malacanang Palace.  The Magna Carta  for MSMEs is among the Administration’s priority bill in support of its economic agenda.

            Enacted in 1991, the Magna Carta for SMEs served as a policy backbone for promoting the development of the SME sector. A major feature of the amended law is the expansion of SB Corporation’s coverage to include the micro-enterprise sector.

            Accordingly the definition of micro, small, and medium businesses are also adjusted. Enterprises with total assets of not more than P3 million, from the previous threshold amount of P1.5 million are now classified as micro-enterprises. Small enterprises are those with total assets of not more than P15 million. Medium enterprises are those with total assets of not more than P100 million, from the previous threshold amount of P60 million.

            Another key provision in the bill is the mandatory allocation of credit resources of all lending institutions for MSMEs. The bill requires lending institutions to allocate atleast 8% of their loan portfolio to micro and small businesses. At present, the law requires banks to set aside only 6% of their total loan portfolios to finance small enterprises and 2%  for medium enterprises.

“The mandatory lending provision  of the Magna Carta is an affirmative action in favor of SMEs, who are normally given low priority by banks and other sources of formal credit due to its perceived risk and cost concerns”, SB Corporation Chairman and CEO Virgilio R. Angelo explained.

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