Key Takeaways:
Myanmar’s SMEs are navigating an economy shaped by inflation, power shortages, trade disruptions, labor migration, and policy uncertainty, forcing many businesses to prioritise survival over growth.
Despite these challenges, SMEs have demonstrated resilience through practical adaptation strategies, including alternative energy use, flexible workforce arrangements, informal financing, and digital innovation.
Strengthening SME resilience through supportive policies, improved infrastructure, access to finance, and capacity-building initiatives will be critical for Myanmar’s long-term economic sustainability and recovery.
1. Introduction
Since the 2021 military coup, Myanmar has faced a prolonged polycrisis characterised by political instability, inflation, currency depreciation, power shortages, trade disruptions, and labor migration. More recently, fuel supply disruptions linked to the Middle East conflict have further increased production and transportation costs, amplifying existing economic vulnerabilities. While large firms may possess greater financial capacity to absorb shocks, small and medium-sized enterprises (SMEs) have been disproportionately affected. Yet despite operating in an environment where uncertainty has become the norm, many SMEs continue to adapt and survive. This article examines how Myanmar’s SMEs are coping with an economy of uncertainty.
2. Myanmar’s Current Economic Situation
Although Myanmar’s economy showed signs of a modest recovery in early 2026, the improvement remains fragile amid ongoing political instability and economic uncertainty. Inflation rose to 24.6 percent in April 2026, driven largely by higher fuel and transportation costs, while the depreciation of the kyat increased the price of imported goods and raw materials. At the same time, foreign exchange controls and import restrictions have made it more difficult for businesses to access essential inputs, while conflict-related disruptions continue to raise logistics costs and delay deliveries. Businesses also face persistent electricity shortages, forcing many to rely on generators and alternative energy sources, which increase operating costs. Meanwhile, labor migration, skills shortages, and compulsory military service have made recruitment increasingly difficult. Together, these challenges have pushed many SMEs to prioritize survival and adaptation over growth.
3. The Role of SMEs in Myanmar’s Economy
Small and medium-sized enterprises (SMEs) are widely recognized as the backbone of Southeast Asian economies, accounting for over 90 percent of businesses and employing a large share of the workforce. In Myanmar, SMEs make up 94 percent of enterprises and between 52 and 97 percent of total employment. Beyond their economic contribution, SMEs play an important social role by creating livelihoods, supporting local communities, and generating income opportunities in both urban and rural areas.
However, despite their importance, SMEs continue to face significant structural challenges. Previous studies have highlighted constraints such as limited access to finance, outdated technology, low productivity, and poor market access. Moreover, formal policy support for SMEs remains limited, reducing their ability to reach their full economic potential.
4. Challenges Facing SMEs
Since 2021, Myanmar’s SMEs have faced overlapping economic, operational, workforce, and financial challenges. Unlike large corporations, SMEs are often more vulnerable to external shocks and have fewer resources to absorb rising costs.
Inflation, currency depreciation, and fuel price increases have significantly raised production and transportation costs, while weaker consumer purchasing power has reduced demand and squeezed profit margins. At the same time, frequent power outages, import restrictions, and supply chain disruptions continue to increase operational uncertainty and business expenses.
International sanctions have added further pressure on some SMEs. Although sanctions primarily target military-linked entities, Myanmar’s military-dominated economy means that restrictions on financial transactions, trade, and supply chains can also create unintended spillover effects for civilian-led SMEs. These indirect impacts make it more difficult for businesses to access foreign currency, credit, imported inputs, and international markets, placing additional pressure on firms with limited financial resources.
Labor shortages have become another major challenge, driven by skills gaps, outward migration, and compulsory military service, resulting in higher recruitment and training costs. Access to finance also remains limited, as many SMEs face difficulties obtaining affordable credit and must cope with ongoing liquidity constraints.
Together, these challenges have created a business environment where many SMEs prioritise survival and continuity rather than growth and expansion.
5. Resilience of SMEs in Myanmar
Despite operating in an increasingly uncertain environment, many Myanmar SMEs have demonstrated remarkable resilience by adapting their business models and day-to-day operations. Rather than pursuing expansion, many firms have focused on maintaining continuity, preserving cash flow, and responding flexibly to changing circumstances.
5.1 Energy Adaptation
Frequent power outages have forced businesses to invest in alternative energy sources such as diesel generators and off-grid solar systems. In October 2025, approximately 42 percent of firms’ electricity consumption came from diesel generators and off-grid power sources. While these investments increase operating costs, they enable businesses to continue production and maintain essential services during prolonged outages.
5.2 Workforce Adaptation
To cope with labor shortages caused by outward migration, skills mismatches, and compulsory military service, many SMEs have adjusted how they manage their workforce. As the labor market shifts toward more informal, part-time, and casual employment, particularly in urban areas, firms have adapted by relying on more flexible labor arrangements to maintain business operations. Many businesses have also raised wages and provided short-term training to attract and retain workers, despite the additional costs involved. These workforce adjustments have enabled SMEs to sustain operations in an increasingly constrained labor market.
5.3 Financial Adaptation
Limited access to formal credit has encouraged SMEs to explore both formal and informal financing mechanisms. Following the 2025 earthquake, state-backed recovery loans and subsidised lending programs contributed to a significant increase in SME lending. At the same time, informal financing remains an important coping mechanism. Some firms rely on loans from friends and family, while many businesses facing cash-flow shortages use personal networks to sustain operations. These informal support systems often serve as an important source of resilience when formal financial channels are difficult to access.
5.4 Digital Adaptation
Myanmar’s digital economy has long been shaped by social commerce, with Facebook serving as a major platform for communication, marketing, and online sales. However, internet restrictions and the nationwide VPN block introduced in 2024 disrupted access to many digital platforms and reduced online business activity. In response, SMEs have diversified their digital presence by adopting alternative channels such as Telegram, Viber, and TikTok to reach customers and maintain sales. This ability to adapt to a rapidly changing digital environment highlights the flexibility and innovation that characterise many Myanmar SMEs.
Although these adaptive strategies have helped businesses survive, resilience should not be mistaken for recovery. Many firms continue to face significant constraints and remain focused on sustaining operations rather than pursuing long-term growth.
6. Recommendations
Strengthening the resilience of Myanmar’s SMEs requires coordinated efforts from businesses, policymakers, and development partners.
For SMEs
SMEs should continue investing in energy diversification through solar power and other alternative energy solutions to reduce vulnerability to electricity disruptions.
Businesses should also adopt digital tools such as e-commerce websites, chatbots, artificial intelligence (AI)-enabled customer service, and digital payment systems to improve efficiency and expand market access.
Where possible, firms can strengthen local supply chains by sourcing raw materials domestically to reduce dependence on imports and foreign exchange volatility.
Developing workforce retention strategies, including employee training, flexible working arrangements, and career development opportunities, may also help address labor shortages.
For Policymakers
Policymakers should prioritise improving electricity infrastructure, facilitating access to affordable financing, and simplifying import and licensing procedures.
Expanding vocational training programs and workforce development initiatives can help address skills shortages.
In addition, targeted tax relief and regulatory support for SMEs could reduce operational burdens and encourage business investment.
For Development Partners and the International Community
Development partners can support SME resilience through renewable energy programs, digital literacy initiatives, business continuity training, and concessional financing schemes.
Technical assistance and capacity-building programs can also help SMEs strengthen their ability to adapt to future economic shocks while contributing to inclusive and sustainable economic development.
Governments imposing sanctions, such as the EU and the United States, should strengthen targeted sanctions while minimizing unintended impacts on civilian-led SMEs by maintaining access to essential financial services, trade, and humanitarian support.
7. Conclusion
Myanmar’s SMEs support SDG 8 and SDG 9 by creating employment, sustaining livelihoods, and demonstrating innovation in the face of economic challenges. SMEs are operating under extraordinary economic pressures arising from inflation, energy shortages, trade disruptions, labor migration, and political uncertainty. Despite these challenges, many businesses continue to survive through adaptation, flexibility, and innovation. From investing in alternative energy sources to adopting new digital platforms and informal financing mechanisms, SMEs have demonstrated remarkable resilience in the face of prolonged uncertainty.
However, resilience should not be viewed as a substitute for structural economic reform. The future of Myanmar’s economic sustainability will depend not only on macroeconomic stabilisation and improved infrastructure but also on strengthening the resilience of SMEs.
Hsu Latt Phyu is a Junior Research Fellow at the Sustainability Lab of the Shwetaungthagathu Reform Initiative Centre (SRIc). She holds a Master’s degree in Social Innovation and Sustainability from Thammasat University, Thailand.
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