By Beatriz Marie D. Cruz, Reporter

A MOVE to exempt Philippine micro enterprises from submitting audited financial statements is expected to encourage the creation of more micro, small, and medium enterprises (MSMEs), analysts said, but it should be paired with increased funding and training to help these businesses scale.

“Policies that incentivize and create a more conducive environment for MSMEs in terms of regulation, compliance, taxation, easier doing business/requirements, lower cost of doing business, among others, would encourage the creation of more MSMEs in the country as a major economic driver/player,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

In the Philippines, MSMEs are classified based on assets and number of employees. Micro enterprises are those with assets of P3 million or less, excluding land, and typically employ fewer than 10 people. Small enterprises have assets between P3 million and P15 million and employ 10-99 workers, while medium enterprises have assets between P15 million and P100 million and employ 100-199 workers.

Under the Securities and Exchange Commission’s (SEC) Memorandum Circular No. 4, Series of 2026, stock and non-stock corporations with total assets or liabilities not exceeding P3 million are exempt from submitting audited financial statements. Previously, stock and non-stock corporations with total assets or liabilities under P600,000 were exempt from a mandatory audit. The new threshold primarily benefits micro enterprises, reducing compliance costs and encouraging formalization.

John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies, said the regulation “reduces compliance costs and administrative burden, freeing up time and resources for core operations and potentially improving their cash flow and survival rates.”

“It also lowers barriers to formalization, making it easier for very small firms to stay in the regulated economy without heavy reporting costs,” he added in a Viber message.

Under the SEC circular, those below the new threshold must submit certified financial statements accompanied by a Statement of Management’s Responsibility (SMR).

Beyond regulatory changes, micro enterprises would benefit from simplified tax and licensing processes, access to affordable credit, digital adoption support, and targeted business development services such as bookkeeping, marketing, and skills training, Mr. Rivera said.

The government must also ensure proper implementation of the Barangay Micro Business Enterprises (BMBE) Act of 2002, Philippine Chamber of Commerce and Industry Chairman George T. Barcelon said.

Under Republic Act No. 9178, or the BMBE Act, micro enterprises with assets under P3 million (excluding land) are entitled to tax exemptions and simplified registration.

“It aims to foster growth in the informal sector, provide training, and improve access to finance,” Mr. Barcelon said in a Viber message.

MSMEs account for more than 99% of Philippine businesses and contribute around 40% of the country’s economic output. Of the total, 90.66% of 1.13 million are micro enterprises, 8.6% or 106,799 are small, and 0.37% or 4,633 are medium-sized businesses, according to 2024 data from the Department of Trade and Industry.