MAGNA CARTA FOR SMALL ENTERPRISES

Case Overview and Summary

Summary of the Magna Carta for Small Enterprises

Declaration of Policy (Section 2):
- Promote, support, strengthen and encourage growth and development of small and medium enterprises (SMEs)
- Establish support structure and conducive environment for SMEs
- Facilitate access to technology, training, financing, government contracts, and incentives for SMEs
- Promote linkages between large and small enterprises
- Ensure balanced and sustainable development of SMEs

Definition and Eligibility for SMEs (Sections 3 and 4):
- Defines micro, cottage, small, and medium enterprises based on total asset value
- Eligibility criteria: registered, Filipino-owned, engaged in manufacturing/processing, not a subsidiary of large enterprise

Guiding Principles (Section 5):
- Minimal rules and simplified procedures
- Encourage private sector participation
- Coordinate government efforts across agencies
- Decentralize implementation to regional and provincial offices

Small and Medium Enterprise Development (SMED) Council (Sections 6-9):
- Created to promote and coordinate SME development efforts
- Chaired by Secretary of Trade and Industry, with members from various government agencies and private sector
- Powers and functions include policy formulation, coordination, monitoring, and assistance for SMEs
- Bureau of Small and Medium Business Development designated as Council Secretariat

Rationalization of SME Programs and Agencies (Section 10):
- SMED Council to recommend measures to rationalize and integrate government SME programs under a unified framework
- President empowered to establish a SME promotion body under SMED Council

Small Business Guarantee and Finance Corporation (SBGFC) (Sections 11-12):
- Created to provide financing and guarantee loans for SMEs
- Attached to Department of Trade and Industry, under SMED Council supervision
- Initial capital of 1 billion pesos contributed by government financial institutions

Mandatory Credit Allocation for SMEs (Sections 13-14):
- Lending institutions required to set aside portion of loan portfolio for SME credit (5% in first year, increasing to 10% by fifth year)
- Central Bank to formulate rules and monitor compliance, with penalties for non-compliance

Separability Clause, Repealing Clause, and Effectivity (Sections 15-17)