The development of SME in the our present leadership is characterized by two overriding factors. First is a definite policy bias for SMEs which is rooted in the country's recent legislative enactments. Second is a deliberate effort on the part of government to give SMEs a strong and coherent voice that commands the attention of the highest legislative and executive bodies of the nation.
This is the landmark legislation which reflects the current policy to foster a dynamic SME sector, particularly rural and agri-based manufacturing ventures. The law passed by the Philippine Congress in 1991 calls for growing the Filipino entrepreneurial spirit by providing a climate that minimizes regulations while at the same time assuring stable operating rules. This also requires close coordination of the work of government institutions involved in SMEs with those of the private sector so there is coherence in both policy thrusts and implementing action programs.
The Magna Carta created the Small and Medium Enterprise Development Council (SMEDC) and the Small Business Guarantee Finance Corporation (SBGFC) whose task is to widen the scope and reach of alternative finanacing modalities for SMEs, which includes, but is not limited to, direct and indirect project lending, venture capital, financial leasing, secondary mortgage and rediscounting of loan papers to small businesses, excluded in this is the crop production financing.
This law contains a provision of mandatory allocation which requires commercial banks and other financing institutions to set aside a portion of their loanable funds for the exclusive use of small enterprises under a fixed timetable, which will address the long-felt problem of SME access to financing.
This has sets for its goal the increase of incomes, productivity and access to resources among small entrepreneurs, farmers and fisherfolk. A globally competitive small enterprise sector is to serve as the main vehicle to the national goal of improving the quality of life of every Filipino.
This law welcomes private investments - whether local or foreign - into the Philippine economy. The fiscals and other forms of incentives are given to economically desirable projects which are listed in the annual Investment Priority Plan (IPP). The standard incentives under the Code were entitled to SMEs which are engaged in the priority areas of the IPP.
However, an additional incentives were given to those located in so-called "less developed areas". Only those projects under normal conditions are entitled to incentives. But still, expansion projects may qualify for incentives, provided they are:
- Export oriented;
- SMEs that meet a "good performance" criterion;
- Projects using new and superior technology; or
- Projects locating in "less developed areas"
SMEs that are registered with the Board of Investments may also avail of technical and other support services provided by the agency.
This particular legislation recognizes the special role of women in development and supports women entrepreneurs who are engaged in manufacturing, processing, service and trading businesses. Under the program, government financing institutions (GFIs) like Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) are mandated to provide financial assistance to:
- Non-governmental organizations (NGOs) engaged in developing women's enterprise to a limit of P2m, provided the NGO has an operating track record or year;
- Existing women enterprise to the upper limit of P50,000; and
- Potential women entrepreneurs with sufficient training up to a limit of P25,000 each.