Poverty Reduction Through Social Entrepreneurship (Present) Act

TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session 25 JUL 14 AIO:32 SENATE RECOVELT S. No. — Introduced by Senator Jinggoy Ejercito Estrada AN ACT INSTITUTIONALIZING THE POVERTY REDUCTION THROUGH SOCIAL ENTREPRENEURSHIP (PRESENT) PROGRAM AND PROMOTING SOCIAL ENTERPRISES WITH THE POOR AS PRIMARY STAKEHOLDERS EXPLANATORY NOTE Social enterprises are defined by the Asian Development Bank (ADB) as "financially sustainable enterprises that intentionally generate positive or social impact". They operate like any other businesses but their ultimate goal is not to earn profit but to address social problems such as poverty, unemployment, hunger, poor health and environmental degradation. They utilize a positive approach towards achieving their goals by involving the stakeholders, particularly the poor, in the operations and production of the enterprise as workers, suppliers, clients and/or owners. Apart from this, they usually use indigenous materials and human capital skills in the production of their goods and services. In the Philippines, there are more than 160,000 social enterprises in the year 2019 and 70% of them are micro, small and medium enterprises. If their capacities and potentials will be effectively maximized, they will undoubtedly become powerful instruments to allow our people to be productive, self-sustaining and empowered. In fact, the British Council and the Philippine Social Enterprise Network (PhilSEN), with the support of the European Union (EU) and the United Nations Economic and

Social Commission for Asia and the Pacific (ESCAP) published a study entitled, "Reaching the Farthest First: The State of Social Enterprise in the Philippines" wherein they presented the following findings: • Social enterprises are empowering women through employment and leadership of social enterprises; • Young people are becoming active in the sector particularly in the newer startups; • Social enterprises are creating new pathways to better livelihoods and supporting inclusive growth; • Of the 34% growth in jobs in the Philippine economy, it is estimated that 5% come from social enterprises; • In terms of sectors, social enterprises are mostly in agriculture. This support is welcome and critical to alleviate the conditions of our farmers, producers and cooperatives. Some sectors have very little representation such as fisheries, energy, housing and justice and rehabilitation; • Social enterprise activity in the Philippines is taking off - the number of social enterprise start-ups has more than tripled in the last decade alone. The study concluded that, "The social enterprise sector in the Philippines is vibrant and promising" and enumerated their contribution to address the persistent problems of the country. However, it also stated that, "Despite their reported progress and optimism, Filipino social enterprises still face significant barriers to growth - the main barrier being lack of access to financing. In addition to the social enterprise sector's already developing support environment, there is a need for increased government and private sector involvement in their growth and development. The private sector should help facilitate the entry and integration of social enterprises into the market. On the other hand, the government needs to formally recognize social enterprises and their indispensability as both economic agents and drivers of social inclusion and cohesion, and tailor policies that will enable them to maximize their potential."

An article published in October 2024 featured different organizations engaged in social enterprise and the various activities being conducted to invite more corporations to take part in their advocacy as well as to seek support from the members of the community. Indeed, social enterprises in the country are very active and hold promising potentials to contribute to our national development.! The "Poverty Reduction Through Social Entrepreneurship (PRESENT) Act" seeks to institutionalize the programs for poverty reduction and promote social enterprises with the poor as primary stakeholders. The measure seeks to provide a legal framework that will mandate concerned government agencies to support them, provide incentives that will encourage more individuals and groups to engage in social enterprises, and ensure that sufficient resources and public funds are allocated for its implementation. In the hope of enacting the PRESENT Act into law at the soonest possible time, this bill is highly recommended. ' Supporting social enterprises with a purpose: Should we?

TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session 25 JUL 14 A10:32 SENATE S. No._ 468 Introduced by Senator Jinggoy Ejercito Estrada AN ACT INSTITUTIONALIZING THE POVERTY REDUCTION THROUGH SOCIAL ENTREPRENEURSHIP (PRESENT) PROGRAM AND PROMOTING SOCIAL ENTERPRISES WITH THE POOR AS PRIMARY STAKEHOLDERS Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Poverty Reduction

2 Through Social Entrepreneurship (PRESENT) Act".

Sec. 2. Declaration of Policy. - The State shali promote a just and dynamic

social order that wiil ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living, and an improved quality of life for all. The State shall provide social justice in all phases of national development and that the State values the dignity of every human person and guarantees full respect for human rights. The goals of the national economy are a more equitable distribution of opportunities, income, and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and an expanding productivity as the key to raising the quality of life for all, especially the underprivileged. The State shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries

1 that make full and efficient use of human and natural resources, and which are 2 competitive in both domestic and foreign markets. The State also recognizes the important role of enterprises in the economy as the major agent of development, creating off-farm employment opportunities and providing transitional means of improving the livelihood of the people. Towards this end, the State shall pursue an inclusive growth strategy that promotes an environment conducive to the development and growth of a vibrant 8 social enterprise sector engaged in poverty reduction, economic and social 9 development. It shall empower the poor as primary stakeholders in social 10 enterprises, establish mechanism essential to realizing their potential and achieving their full growth, and extend the assistance necessary for their advancement. The State shall likewise provide technical and financial assistance, incentives and other services to enable Social Enterprises to develop into viable and vital anti-poverty agents, and a strong social entrepreneurship movement that will be instrumental in reducing poverty in the country.

Sec. 3. Definition of Terms. -

a) A Social Enterprise or SE shall refer to a social mission-driven organization that conducts economic activities providing goods and services directly related to their primary mission of improving the well-being of the poor, basic and marginalized sectors and their living environment. A social enterprise explicitly declares and pursues poverty reduction as its principal objective by purposefully rendering both transactional and transformational services. An SE engages and invests in the poor to become effective workers, suppliers, clients and/or owners and ensures that a substantive part of the wealth created by the enterprise is distributed to or benefits them. In addition to reinvesting its surplus or profits back to the enterprise to sustain the fulfillment of its social mission, an SE also uses its surplus or profits and mobilizes other resources to assist the poor to become partners in SE or value chain management and governance and to become partners in community, sectoral and societal transformation;

b) Government Procuring Entity refers to any branch, department, office, agency or instrumentality of the government, including state universities and colleges, government-owned and/or controlled corporations, government financial institutions and local government units (LGUs) procuring goods, consulting services and infrastructure projects; c) Economic Subsectors refer to networks of related actors and enterprises performing various functions in value chains. These actors and enterprises transform raw materials into finished products, or develop services, and distribute or provide them through market channels to final consumers; they may be identified by key raw material source, by finished product or final service provided. An economic subsector may be comprised of several competing value chains. By understanding the dynamics of economic subsectors and using them as units of planning social entrepreneurship interventions, government agencies, support institutions and SEs shall more effectively reach and benefit a greater number of poor in poverty reduction programs. d) Marginalized Sectors refer to groups of people who are stigmatized or excluded by virtue of their physical, psychological, economic, social or cultural circumstance; e) Poor, as defined by Republic Act No. 8425, refers to individuals and families whose income fall below the poverty threshold as defined by the National Economic and Development Authority (NEDA) and/or cannot afford in a sustained manner to provide their minimum basic needs of food, health, education, housing and other essential amenities of life; f) Poverty Reduction shall mean overcoming the income, resource and capacity deprivation among the poor, basic and marginalized sectors; g) Social Enterprise Service Institution refers to an organization that provides assistance to SEs for them to become viable and sustainable and which assistance pertains to supplying needs such as trainings, education and other capacity-building measures, research and development, and other similar activities;

h) Transactional Services refer to enterprise or market-driven activities, such as providing loans, demonstrating new technologies or conducting trainings that are necessary for the poor in the SE system to effectively and efficiently perform their roles as workers, suppliers, clients and owners. Transactional services may be fee-based, such as the granting of loans, or non-fee based, such as the extension of production-related trainings; i) Transformative Services refer to activities that empower the poor, such as leadership transformation and organizational development, asset build-up and providing education and experiential learning opportunities, to become conscious change agents for themselves, for their communities, sectors and society as a whole; j) Value Chains refer to value-adding economic activities that an enterprise is interlinked with in the process of producing goods and/or services to serve its chosen market. A value chain typically consists: 1) raw materials processing; 2) inbound distribution or logistics; 3) manufacturing operations; 4) outbound distribution or logistics; 5) marketing and selling; and 6) after-sales service. These activities are supported by 1) purchasing or procurement; 2) research and development; 3) human resource development; and 4) organizational development. An SE that understands and manages its value chain improves its capability to create economic, environmental and social values towards improving the position and benefits of the poor in the value chain and towards ensuring the viability and sustainability of the enterprise.

Sec. 4. Formulation of a Poverty Reduction Through Social Entrepreneurship

(PRESENT). - The PRESENT Program shall be established as a flagship program of the government. The objective of the PRESENT Program is to progressively improve the position and benefits derived by a big number of the poor, marginalized and basic sectors derived from economic subsector development and growth. It shall do this by identifying strategic economic subsectors with the potentials for growth and where the poor are concentrated or could be major players. In the process, it shall identify and develop key SEs and resource institutions as partners in providing

transactional and transformational services towards poverty reduction. SEs shall be 2 developed as vehicles to ensure that the poor benefit the most from sustainable subsector development. The formulation of the PRESENT Program shall be guided by the following principles: a) Promoting sustainable programs that support the development of inclusive value chains in key economic subsectors, towards reducing inequality in incomes and increase self-reliance among the poor; b) Enabling SEs to overcome constraints and to take advantage of opportunities for enhancing the position and benefits of the poor and their living environments; c) Development of sustainable mechanisms for the provision of quality and accessible social services to the poor; d) People's empowerment by ensuring the participation of the poor, basic and marginalized sectors; e) Gender-sensitivity by ensuring women's equal rights and access to SE's resources; f) Ecological soundness in the pursuit of sustainable and equitable development; g) Incorporation of the PRESENT Program in the government's poverty reduction drive as a major sustainable and comprehensive strategy; and, h) Rationalization of poverty reduction programs by streamlining and coordinating the various anti-poverty programs of the government to reduce inefficiency and duplication and to improve the effectiveness of each program. The planning framework of the PRESENT Program and its planning process shall ensure that the poor are engaged as primary stakeholders. It shall add value and complement ecosystem-based, area-based, community-based and other tools and processes in local economic development by promoting and utilizing the economic subsector as a strategic unit of analysis and planning SE development interventions.

PRESENT medium-term and annual development plans shall be formulated in synchrony with the medium-term development plan of the national government.

Sec. 5. National Enterprise Development Council. - The existing Micro, Small

and Medium Enterprise Development (MSMED) Council, which is an attached agency 5 of the Department of Trade and Industry (DTI), shall be strengthened and expanded to effectively spur the growth of development of the MSMEs and SEs throughout the country, and to carry out the policy declared under this Act. It shall now be known as the National Enterprise Development Council, herein referred to as the Council. In addition to the existing functions of the Council as provided under Republic 10 Act No. 9501, "The Magna Carta for Micro, Small and Medium Enterprises," as amended, the Council shall serve as the primary agency tasked to carry out the promotion, growth and development of social enterprises in the country. To ensure that the Council is able to fulfill its additional mandate, there shall be an SE Committee under the Council that shall perform the following specific duties: a) Promote social enterprise as a key strategy for reducing poverty and enabling inclusive growth; b) Provide oversight for the implementation of the PRESENT Program and activities of the Center for Social Enterprise Development (CSED); c) Establish policies, plans, programs and projects to develop and promote SE as a tool for poverty reduction as part of a comprehensive Social Enterprise Development Plan fully integrated and consistent with national development objectives and plans; d) Monitor and evaluate the performance of programs and projects of CSED for appropriate incentives; e) Submit annual and other periodic reports to the President and the Congress of the Philippines; f) Promulgate such rules and regulations and exercise such other power and functions as may be necessary to carry out the purposes of this Act; and, g) Perform such other functions as may be necessary for its effective operations and the continued enhancement, growth and development of the SE sector.

The SE Committee shall be composed of the relevant council members and 2 representatives from the SE sector and SE service institutions as determined by the 3 Council to realize these powers and functions.

Sec. 6. Center for Social Enterprise Development. - There shall be

established a Center for Social Enterprise Development (CSED) under the supervision of the Council and to be headed by an Executive Director, which shall have the primary responsibility of implementing comprehensive policies for Social Enterprise Development. Specifically, the CSED shall be responsible for: a) The development and implementation of the PRESENT Program as approved by the Council, with the following components: 1. Formulation and Implementation of Social Entrepreneurship - oriented strategic economic sub-sector development plans that shall serve as the basis for major policies, projects and activities. 2. Capacity Building and Sustainability - The CSED will work with qualified Social Enterprise Service Institutions and other intermediaries to design and deliver training and education in social entrepreneurship development, institutional start-up or strengthening, human resource competency and skills training, business planning and advisory services, upgrading of accounting and auditing systems, technical assistance for the installation or improvement of management information systems, technology intervention, technology incubation / commercialization, market studies, and product development competitiveness, business matching activities, trade fairs and missions, policy advocacy, disaster-resiliency and other related activities. 3. Research and Development - The CSED in coordination with the NEDA, Department of Science and Technology (DOST), DTI, and other appropriate agencies, research institutions, and intermediaries, shall develop and enhance a research and development system that: i. provide studies on opportunities for poverty reduction and SE development in key economic subsectors and other inputs

for the Council to undertake strategic planning for programs and projects; ii. equip SEs and support institutions with services and technologies that are appropriate for enhancing the participation and benefits of the poor in various economic subsectors; and, ili. equip SEs and support institutions with innovative and sustainable approaches to improve access of the poor to quality basic social services. 4. Information and Marketing Assistance - The CSED shall promote the development and expansion of local and foreign markets for the products and services of SEs. Towards this, the CSED shall: i. establish a marketing assistance program that will assist SEs match supply with demand in both domestic and foreign markets, as well as promote SE products and services through tri-media, trade fairs and trade mission; and, ii. develop, install and sustain a market information system for SEs with the assistance of the DTI and Department of Transportation (DOTr). All government departments, agencies, bureaus, research institutions, as well as the LGUS shall consolidate and continuously update all relevant information and data that would be of use to SEs on a periodic basis and make such data available in a dedicated website. b) Establishment and implementation of criteria and process for the qualification of SEs that shall be eligible for support and other incentives as provided by this Act and as approved by the Council; c) Identification of sources for financing for the SE sector not limited to grants, loans and equity financing for enterprise incubation, start-up and expansion;

d) Management of multi-stakeholder convergence programs and activities among government agencies and private organizations in support of the PRESENT Program; e) Coordination with the concerned government agencies and LGUs in the development and implementation of the PRESENT Program and projects. Other government agencies and LGUs shall be encouraged to work with SEs in the furtherance of the PRESENT Program; and, f) Coordination with social enterprise stakeholders, including people's organizations, non-government organizations, and multi-sectoral and multi-disciplinary pool of experts from the academe, practicing professionals, business, industry, youth, women and other concerned sectors to provide advice and technical assistance on matters pertaining to SEs.

Sec. 7. Social Enterprise Development Fund. - There shall be included in the

budget of the DTI under the annual General Appropriations Act an initial amount of Five Hundred Million Pesos (P500,000,000.00) for the establishment of a Social Enterprise Development Fund (SEDF) to support the capacity building and sustainability component of the PRESENT Program. After the first year of implementation, such sums as may be necessary to fund the SEDF shall be included in the budget of the DTI under the annual General Appropriations Act. Plans for the utilization of the SEDF shall be developed by the CSED for approval by the Council.

Sec. 8. Special Credit Windows. - The Land Bank of the Philippines,

Development Bank of the Philippines and other government financial institutions shall establish special credit windows that shall provide SEs with risk-based, non- collateralized loans for the following purposes: a) Credit line for business development loan or working capital loan to cover the operations and management expenses of an existing business or income generating project, including receivable financing or purchase of additional inventory, soft or intangible investments such as trade fair

participation or acquisition of software or franchise development packages; b) Fixed assets financing to cover acquisition of fixed assets like machineries and equipment, motor vehicle, or acquisition of lot for project site or construction of a plant and building and the improvement thereof; c) Value chain financing to cover any of the value chain activities such as production, processing and marketing; d) Domestic letter of credit or trust receipt to provide a stand-by credit facility for the SE borrower for the purchase of product inputs, equipment, machinery, implements and spare parts, whereby payment of which is guaranteed and to be made to the seller by the lending institution, provided all documents conform with the terms and conditions of the credit; and, e) Revolving credit line for re-lending to finance the livelihood project requirements of end-borrowers.

Sec. 9. Social Enterprise Guarantee and Surety Fund. - There shall be

established a Social Enterprise Guarantee and Surety Fund (SEGSF) which shall be funded from equity contributions of government financial institutions. The SEGSF shall be administered by the Philippine Guarantee Corporation (Philguarantee) to enable SEs to access non-collateralized and other appropriate financing while mitigating the risks involved in SE sector lending. The SEGS shall be used to provide guarantee cover to participating financial institutions and other parties in extending financing to SEs: Provided, That the fund may also be used to cover the performance bond of SEs for their transactions.

Sec. 10. Compliance to Mandatory Allocation of Credit Resources. - Loans

granted by financial institutions to Social Enterprises shall be computed by the Bangko Sentral ng Pilipinas as twice the loan amount for purposes of determining financial institutions' compliance to the mandatory allocation of credit resources to micro, snall and medium enterprises under Republic Act No. 9501, otherwise known as "The Magna Carta for Micro, Small and Medium Enterprises."

Sec. 11. Movable Collateral Registry. - The Land Registration Administration

(LRA), through the Registry of Deeds, shall set-up and establish within two (2) years

1 from the effectivity of this Act a comprehensive, centralized, internet-based electronic Movable Collateral Registry to encourage financial institutions such as banks, credit cooperatives, and microfinance institutions to accept a broad range of assets, in lieu of land and real property, as collateral to secure loans granted to 5 micro, small and medium enterprises, particularly social enterprises. The 6 collateralized assets may be in the form of sales invoice, receivables, purchase 7 orders, contracts, equipment, machinery, quedan, inventory, raw materials, patents, 8 and such other assets of similar nature. The Movable Collateral Registry, which shall replace the existing chattel 10 mortgage registry, should be simple, accurate, transparent and easily accessible. A 11 uniform nominal flat fee shall be charged for registration to cover the cost of operation and maintenance of the Registry and shall, in no way, be based on the amount of the loan, asset or transaction. For purposes of registering a movable collateral, documents covering the transaction shall not be required but only specific details of the offered collateral and such other information as may be determined by the LRA will suffice for purposes of registering a movable collateral. The Department of Justice (DOJ) and the LRA shall ensure that the security interests of lenders over the movable collateral shall be protected, and shall establish an efficient and timely system for the enforcement of such rights.

Sec. 12. Public Procurement for Social Enterprise. - The Government

Procurement Policy Board (GPPB) shall facilitate the full participation of social enterprises in public procurement processes. In support of this provision the Department of Budget and Management (DBM) shall direct key agencies of government to allocate at least Ten percent (10% of their annua budgets specifically for projects to be procured from social enterprises.

Sec. 13. Insurance for Social Enterprises. - The Insurance Commission shall

issue the necessary rules and regulations, and implement measures to ensure that the insurance industry shall provide insurance products, both life and non-life, for social enterprises and their stakeholders among the poor. Furthermore, social enterprises shall be eligible to be licensed agents or delivery channels for their clients and constituents.

Sec. 14. Eligibility for Benefits and Incentives. - In the case of social

enterprises organized as stock corporations, partnerships or sole proprietorships, the following requirements shall apply to become eligible for benefits and incentives provided by this Act: a) A social enterprise must not be organized as a branch, subsidiary or division of a private business enterprise, regardless of the size of such private business enterprise, nor may its policies be determined by a private business enterprise: Provided, That this shall not preclude an SE from accepting subcontracts from large private business enterprises or forms, or from joining in cooperative or joint venture activities with other SEs or foundations practicing Corporate Social Responsibility (CSR). b) At least sixty percent (60%) of a social enterprise's total expenditures must directly accrue to the fulfillment of its social mission or to provide transformational services to the poor.

Sec. 15. Social Entrepreneurship Education in Schools. - Toward strategically

developing the nation's human resource capability in social entrepreneurship, the Department of Education (DepEd) and the Commission on Higher Education (CHED) shall cause the integration of SE content and inclusion of SE courses in the curricula at all levels, especially in the secondary and tertiary levels. A continuing social entrepreneurship education program for out-of-school youth and adults shall likewise be developed and undertaken.

Sec. 16. Social Enterprise Week. - In order to institute continuing awareness

on the importance of SEs as a viable government strategy in pursuing poverty alleviation, the week of the month when this Act shall have been signed into law 25' shall be declared as the "Social Enterprise Week" and shall be celebrated annually. The Council shall, through the CSED, be responsible in organizing activities for the 27 event.

Sec. 17. Appropriations. - The Council shall allocate the initial amount of

Fifty million pesos (P50,000,000.00) from the existing MSMED Council Fund to 30 support the operations and programs of the CSED. Thereafter, such sums as may 31 be necessary for the continued implementation of this Act shall be included in the 32 budget of the DTI under the Annual General Appropriations Act.

The budgetary requirements of the cooperating agencies shall be incorporated in their respective budgets. The CSED may raise funds from other sources for specific projects as may be authorized by law.

Sec. 18. Implementing Rules and Regulations. — Within ninety (90) days from

the effectivity of this Act, the Secretary of Trade and Industry shall, in consultation and coordination with the concerned government agencies, promulgate the necessary rules and regulations for the effective implementation of this Act.

Sec. 19. Separability Clause. - If any provision or part hereof is held invalid

or unconstitutional, the remainder of the law or the provision or part not otherwise affected shall remain valid and subsisting.

Sec. 20. Repealing Clause. - Any law, presidential decree or issuance,

executive order, letter of instruction, administrative order, rule, or regulation contrary to or inconsistent with the provisions of this Act are hereby repealed, modified, or amended accordingly.

Sec. 21. Effectivity. - This Act shall take effect fifteen (15) days after its

publication in the Official Gazette or in a newspaper of general circulation. Approved,