AN ACT STRENGTHENING NONGOVERNMENT ORGANIZATIONS (NGOs) ENGAGED IN MICROFINANCE OPERATIONS FOR THE POOR

Sixteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand fifteen.

REPUBLIC ACT No. 10693

AN ACT STRENGTHENING NONGOVERNMENT ORGANIZATIONS (NGOs) ENGAGED IN MICROFINANCE OPERATIONS FOR THE POOR

Be it enacted by the Senate and House of Representatives of the Philippine Congress Assembled:

SECTION 1. Short Title. – This Act shall be known as the “Microfinance NGOs Act”.

SECTION 2. Declaration of Policies. – It is hereby declared the policy of the State to pursue a program of poverty eradication wherein poor Filipino families shall be encouraged to undertake entrepreneurial activities to meet their minimum basic needs including income security. Towards this end, the State recognizes the indispensible role of nongovernment organizations (NGOs) in fostering local enterprise development and social entrepreneurship, including the provision of microfinance services to microenterprises. In pursuance of this policy, the State shall support and work in partnership with qualified NGOs in promoting financially inclusive and pro-poor financial and credit policies and mechanisms, such as microfinance and its allied services.

SECTION 3. Definition of Terms. – As used in this Act, the following terms shall mean:

SECTION 4. Scope of Application. – This Act shall apply to NGOs with the primary purpose of implementing a microenterprise development strategy and providing microfinance programs, products and services for the poor. These shall be referred to as “Microfinance NGOs”.

SECTION 5. Core Principles of Microfinance NGOs. – Microfinance NGOs shall conduct its operations in accordance with the basic principles of microfinance which include, but are not limited to, the following:

SECTION 6. Basic Features and Purposes of Microfinance NGOs. – A Microfinance NGO shall have the following features and purposes:

Nothing in this section shall be construed as precluding a Microfinance NGO from performing such services or exercising such powers as may be granted by law or as may be necessary or incidental to its activities as a nonstock, nonprofit NGO.

SECTION 7. Minimum Core Programs and Services. – Microfinance NGOs shall provide at least any of the following programs, products, or services:

SECTION 8. Other Programs and Services. – The following are the other programs and services that Microfinance NGOs may undertake, subject to existing laws and regulations:

SECTION 9. Establishment of the Microfinance NGO Regulatory Council. – The SEC shall establish an accrediting body to be known as the Microfinance NGO Regulatory Council, herein referred to as the “Council”. The Council shall be composed of four (4) permanent members and three (3) members from the Microfinance NGO sector.

The permanent members of the Council shall be composed of the following:

The three (3) representatives from the Microfinance NGO sector shall be chosen by at least majority of the permanent members of the Council from among the nominees of organizations, associations, and alliances of Microfinance NGOs duly registered with the SEC. They shall serve for a term of three (3) years.

Once the full membership of the Council is obtained, all members of the Council are entitled to one (1) vote each in the conduct of its business.

The Council shall be assisted by a secretariat to be lodged in the SEC, which shall coordinate the activities involved in the accreditation process.

SECTION 10. Accreditation of Microfinance Institutions Registered as Nonstock, Nonprofit Corporation. – Microfinance NGOs shall be required to obtain accreditation from the Council as a condition for the availment of the incentives under this Act.

Upon the effectivity of this Act, Microfinance NGOs which are certified by the SEC to have no derogatory information shall be deemed accredited for one (1) year, unless earlier revoked by the Council for good cause after review.

SECTION 11. Functions and Responsibilities of the Microfinance NGO Regulatory Council. – As the accrediting entity, the Council shall have the following functions and responsibilities:

SECTION 12. Financial Performance Management. – Microfinance NGOs shall develop and implement systems, practices, and controls for efficient, effective, and sustainable financial operations through prudent resource management, asset-liability management, liquidity management, and financial information management.

SECTION 13. Social Performance Management. – Microfinance NGOs must have an institutionalized process of translating social mission into practice, which includes setting clear social goals, monitoring progress towards these objectives and using information to improve performance and practice. Social performance information must be integrated into the Microfinance NGO’s work, operational routines, and value system to affect decision-making practices at both operational and strategic levels.

SECTION 14. Financial Performance Standards. – The Council shall establish a set of parameters for assessing the financial performance of Microfinance NGOs such as, but not limited to, portfolio quality, efficiency, sustainability, and outreach.

SECTION 15. Social Performance Standards. – The Council shall establish a set of parameters for assessing the social performance of Microfinance NGOs such as, but not limited to, their social objectives; governance and accountability mechanisms; transparency; product design, services and delivery channels; and ethical treatment of clients.

SECTION 16. Governance Standards. – The Council shall establish the standards and principles of good corporate governance for Microfinance NGOs such as, but not limited to, fairness, management responsibility, respect for rights, corporate integrity, loyalty, compliance with regulations and transparency.

SECTION 17. Initiative of the Concerned Regulatory Authorities to Examine Microfinance NGOs. – The Bangko Sentral ng Pilipinas and the Insurance Commission may request the Council to examine the operations of Microfinance NGOs for the purpose of determining that the Microfinance NGOs are not engaged in unauthorized undertaking or activities which are subject to their respective jurisdictions. In case of a finding by the Council that an accredited Microfinance NGO is engaged in an unauthorized undertaking or activities subject to their said respective regulations, it shall place on probation, suspend or revoke the accreditation of the Microfinance NGO based on such ground, as may be appropriate under the circumstances.

SECTION 18. Access to Government Programs and Projects. – Duly accredited Microfinance NGOs shall be given ready access to related programs and projects of the government. Government agencies and government financial institutions shall develop and make available support programs for Microfinance NGOs operating in areas and sectors with poverty, or affected by or vulnerable to natural disaster or armed conflict. Support programs may include the provision of operational and capacity building grants, low interest loans and guarantee funds.

SECTION 19. Technical Assistance. – Duly accredited Microfinance NGOs are entitled to access any form of technical assistance from the government, donors and other support organizations in facilitating the linkage between the poor households/microenterprises and microfinance institutions, community organizations, and capacity building of the target clientele; social preparation activities, and those that will lead to the broadening and deepening of microfinance services such as development of microfinance products, training in microfinance technologies, and upgrading of performance standards, operating systems and procedures.

SECTION 20. Taxation of Microfinance NGOs. – A duly registered and accredited Microfinance NGO shall pay a two percent (2%) tax based on its gross receipts from microfinance operations in lieu of all national taxes: Provided, That preferential tax treatment shall be accorded only to NGOs whose primary purpose is microfinance and only on their microfinance operations catering to the poor and low-income individuals in alignment with the main goal of this Act to alleviate poverty. The non-microfinance activities of Microfinance NGOs shall be subject to all applicable regular taxes.

Duly registered and accredited Microfinance NGOs, as well as their clients, shall be required to have a Taxpayer Identification Number (TIN): Provided, That this shall be accomplished within a reasonable time as prescribed, by the Council: Provided, further, That the relevant government agencies, in coordination with the Council, shall provide simplified forms and procedures for securing the TIN.

SECTION 21. Appropriations. – The amount necessary to carry out the initial implementation of this Act shall be included in the General Appropriations, Act.

SECTION 22. Implementing Rules and Regulations. – Within ninety (90) days after the effectivity of this Act, the SEC, in coordination with the DTI, the DOF, the DSWD and relevant organizations, shall promulgate, rules and regulations for the implementation of this Act and/or for the public interest or for the protection of Microfinance NGOs accredited or regulated pursuant to the authority granted under this Act, including the requirement of cooperation within and among all Microfinance NGOs and the adoption of appropriate corporate governance principles and practices.

SECTION 23. Separability Clause. – If, for any reason, any provision or part hereof is declared invalid or unconstitutional, the other provisions not affected thereby shall remain in full force and effect.

SECTION 24. Repealing Clause. – All laws, issuances, rules and regulations inconsistent with any provision of this Act shall be deemed amended, modified, or repealed accordingly.

SECTION 25. Effectivity. – This Act shall take effect fifteen (15) days after its publication in any newspaper of general circulation.

Approved,

This Act which is a consolidation of Senate Bill No. 2752 and House Bill No. 5217 was finally passed by the Senate and the House of Representatives on September 14, 2015

Approved: NOV 03 2015

(Sgd.) BENIGNO S. AQUINO III
President of the Philippines