KUALA LUMPUR: Rising costs remain the biggest challenge for Malaysian small and medium enterprises (SMEs), even as businesses continue to prioritise revenue growth and efficiency, according to a survey commissioned by Airwallex.

The Malaysia SME Business Outlook 2026 found that 67% of SMEs cited rising costs as a key pressure, followed by the availability of suitable manpower at 43% and managing local and global cash flow at 42%.

Among the main drivers of higher business costs, 25% pointed to the cost of goods or raw materials, while 20% cited rising supplier costs and 16% identified technology and software expenses.

Businesses are responding by seeking alternative suppliers, restructuring and using technology to improve operational efficiency.

Despite the cost pressures, SMEs remain focused on expansion, with 57% identifying revenue growth as a priority for the year ahead and 55% looking to improve efficiency. Another 35% plan to innovate or introduce new products and services.

Spending intentions also remained relatively resilient, with 29% planning to increase spending slightly and 24% expecting to raise spending significantly.

Technology is playing a growing role in SME operations, with marketing capabilities identified as the most important tool by 50% of respondents, followed by expense management and accounting software at 42% each.

However, 44% cited high implementation costs as a barrier to adopting technology, while 34% raised data privacy and security concerns and 33% pointed to a lack of internal expertise to manage new tools or technology.

The survey also found Malaysian SMEs looking beyond the domestic market, although overseas expansion presents additional challenges.

Some 51% identified legal, regulatory and compliance barriers as a major obstacle to overseas expansion, while 42% cited setting up local operations and logistics arrangements.

To fund their overseas expansion, 58% of respondents said they were turning to investors, 51% to partnerships and affiliates, while 40% were reinvesting profits.

Meanwhile, digital and fintech platforms are becoming more widely used, with 54% of SMEs saying they had adopted such services.

Faster transactions were the main reason for adoption, cited by 66% of respondents, followed by convenience at 64% and cost savings at 53%.

Economic uncertainty is also influencing how SMEs think about their financial infrastructure, with 42% of respondents saying they were moving more aggressively towards digital and fintech platforms, compared with 33% moving towards traditional banking services.

On workforce issues, productivity and performance management emerged as the biggest challenge at 38%, followed by rising wage and benefit costs at 32% and skills gaps at 30%.

To retain employees, 48% of SMEs said they were providing better benefits packages, while 41% were investing in training and career development and 36% were increasing salaries.

The research was commissioned by Airwallex and conducted by Vase.ai among 415 SME respondents across various sectors in Malaysia during the first half of 2026.