KUALA LUMPUR, 18 November 2025 – Malaysia’s micro, small and medium enterprises (MSMEs) are shown to be quickly adopting artificial intelligence (AI), according to a new whitepaper from global small business platform Xero. Based on a survey of 1,033 Malaysian MSMEs, the report highlights early progress towards the country’s goals under the 13th Malaysia Plan – to be an AI-driven economy and for MSMEs to contribute half of national GDP by 2030.
Malaysian MSMEs are optimistic about an AI-powered future, viewing it as a powerful driver of growth and competitiveness. Three-quarters of MSMEs believe AI will benefit their business (75%) and be a standard part of running a business by 2030 (77%). Driving this optimism is recognition of AI’s practical benefits, with increased efficiency (63%), cost savings (52%) and improved employee productivity (48%) topping the list of expected returns.
This high level of optimism directly translates into action, with 81% of MSMEs having already adopted AI and almost half (48%) planning to further expand its use within the next year.
The “Confidence Gap”: High adoption, low intentionality
This high adoption rate conceals a critical knowledge and trust gap. Many MSMEs are implementing AI without fully understanding its strategic applications and implications, limiting its potential value. Over 8 in 10 MSMEs (82%) say they need more education to deploy AI confidently and effectively, and only 56% are familiar with its different business use cases.
This lack of knowledge and confidence fuels wider concerns around risk and governance. 59% of MSMEs identify data privacy and security issues as their top AI adoption concern, and 38% cite ethical risks such as plagiarism. This uncertainty leads to a call for guardrails: a majority of MSMEs (68%) believe the government should strongly regulate the use of AI in business. Despite these worries, 30% of those already implementing AI have yet to put in place any policies governing AI use within their organisation.
“It’s encouraging to see Malaysian MSMEs already embracing AI and exploring how it can transform their business.” said Koren Wines, Managing Director of Xero Asia.
“But early adoption alone isn’t enough. MSMEs need confidence, guidance and guardrails to use AI effectively and responsibly. Many are already turning to AI for low-risk, tactical tasks – but with the right support, they can start using it in core business functions to improve how they run their business day to day, while also driving long-term growth.” She added.
Datuk William Ng, National President of SAMENTA, echoed the sentiment, “AI’s promise is that it can level the playing field for smaller businesses. For Malaysian MSMEs to remain competitive regionally, AI adoption is essential. However, they need more than enthusiasm; they need accessible training, peer-to-peer knowledge sharing, and clear guidance on responsible implementation.”
The Path Forward: Building confidence through education, guidance and regulation
To truly unlock AI’s full potential, MSMEs must move towards strategic and secure implementation. The survey reveals a clear policy pivot is needed, with MSMEs prioritising knowledge-based support over financial aid:
- MSMEs cite training and education (61%) and advisory and consulting (50%) as their most desired resources.
- This demand for knowledge significantly outweighs the need for financial support, which ranked lower than all other support types surveyed.
“Malaysia has an incredible vision of becoming an AI-powered economy, and the great news is that the country’s MSMEs are ready to be significant drivers of that future. But without support from the rest of the ecosystem, that appetite cannot translate into sustainable growth,” said Wines. “To see intentional and impactful AI adoption, the public and private sectors must step in with tailored support – including frameworks around responsible AI use, training programmes geared towards increasing AI literacy, and accessible tools that address some of the most pressing challenges facing MSMEs today.”
