Constraints to the growth of small firms in Northwest Myanmar

•The rate of firm ownership in Northern Myanmar is high.•Firms are small, informal, and stagnant.•Very few firms have access to credit and invest.•Access to finance and infrastructure provision are major constraints to business activity.•Access to informal credit and restricted market access are the most binding constraints.

This paper uses survey data collected from Northwestern Myanmar to analyze business activity and determine the most binding constraints to firm growth. Most households in the region are operating informal firms with low earnings and no employees. The most binding constraints are related to external financing and competition. Firms that view access to informal credit as a major constraint are 9.6% less likely to invest and grow, on average, 5.7% less in 2008-2010. Restricted access to markets is also a major binding constraint, reducing the likelihood of investment up to 15.3% and income growth up to 6%.