1 Get Smart SIM
If you have smart money, proceed to item #2, otherwise read on. You need to have a smart sim (so globe and sun users, be smart hehehe kidding), then activate your smart money. You can either text MONEY to 343 or access it on your SIM menu, select Smart Money then activate account (Enter your desired PIN number). For details how, visit Smart Money page. You can also optionally apply for Smart Money card so you could use it to deposit funds from BDO, withdraw from ATM and use it for shopping.
2 Activate Smart Money
Once your Smart Money account is activated, unlock it now for online transaction. Again, access your SIM Smart Money menu from your cellphone. Select Smart Money, then Internet, choose Unlock (Some Smart Money users complaint they can't use it to link this account to PayPal, it's because they are not aware of that security feature from Smart which could be unlocked at will from your cellphone)
3 Add as Debit Card
Login to your PayPal and select Profile, then add/edit Credit Card. (see screen shot, forget the label used, technically credit and debit are both the same, except that debit is like a prepaid, while credit is like a postpaid). Take note though to have initial deposit of at least 200Php if you're going to have your PayPal account verified.