Expert says fabricated financial statements remain rife among MSMEs

The prevalence of fabricated financial statements among Philippine MSMEs points to a systemic issue beyond simple fraud. The core problem, as highlighted by OneCFO Founder Jay Olos, is the high cost of doing business and the lack of accessible, affordable accounting support for small enterprises. This forces many MSMEs, which constitute 99.63% of all businesses in the Philippines, to resort to illicit practices like using "notarial CPAs" or maintaining dual books to secure financing or reduce tax burdens. While the Securities and Exchange Commission (SEC) has expanded exemptions for smaller corporations from submitting Audited Financial Statements, the underlying pressure on MSMEs to misrepresent their finances remains. This situation creates a significant risk for lenders and regulators, undermining financial transparency in a crucial segment of the Philippine economy. The focus on financial literacy for MSMEs, as suggested by Olos, is a necessary but long-term solution; immediate policy interventions are needed to address the cost of compliance and access to legitimate accounting services. The broader implication for the Asian tech and startup ecosystem is that while fintech solutions are emerging to support MSMEs, the fundamental issues of financial literacy and affordable compliance remain critical. Without addressing these, even advanced digital tools may struggle to gain traction against deeply entrenched informal practices, particularly in markets with similar economic pressures on small businesses.