Harnessing Tourism for Financial Inclusion

> Posted by Center Staff

If you’ve ever been a tourist in a developing country, there’s a good chance you’ve partaken in a tour where you were brought to the intimate setting of an artisan, chef, or small-business owner’s shop. When you arrived at the shop, your tour guide introduced you to its proprietor, and the proprietor told you a little bit about the history and operation, and maybe even demonstrated a bit of the craft. After all this, you were asked if you’d like to buy anything. This model works. As a tourist, you want to be exposed to local cultures, you want unique experiences, and maybe you want to pick up a souvenir or two to bring back home. If you can accomplish all three, and get to know the person your purchase benefits, all the better.

But what if we could take this model one step further? After all, tourism is an enormous industry. Globally it accounts for roughly 5 percent of the world’s GDP and one in every 12 jobs. In Mexico alone, for example, international tourists spent roughly US$12 billion in 2011. If some of this capital could be used to create greater impact, the benefits would be huge.

En Via, an organization based in the southern Mexican state of Oaxaca, is attempting to achieve this by combining tourism, microfinance, and education. En Via offers tours of five largely indigenous communities in Oaxaca, where participants are given the opportunity to meet with local women who are farmers, artisans, vendors, chefs, and other small business owners. As a tourist you meet with the women and their families, learn about their livelihoods and communities, watch product demonstrations like the spinning of wool, taste freshly made foods, and, yes, make purchases if you’re so inclined. In turn, En Via uses the money collected in tourism fees to fund small business loans to the women who were visited during the tours.

En Via is structured so that 100 percent of a tourist’s fees go directly towards the loans of the women that they had the opportunity to meet. The loans range from US$100 to $250, and carry zero interest. To date, En Via’s client default rate is at less than one percent. Since it began offering loans in 2008, over 1,500 loans have been given out to almost 400 women. Funds repaid are applied towards En Via’s administrative costs and education programs.

Before women receive their first loan, they’re required to complete En Via’s free introductory business course which offers information and tools regarding financial literacy and business management. En Via holds weekly training sessions on management and financial literacy for loan recipients. Free business workshops are held in the communities each month, which all current borrowers are required to attend. Additionally, En Via has held classes and workshops on topics including English, health and nutrition, and art and branding.

In 2012, En Via began providing interest-bearing loans to established borrowers who have successfully repaid several smaller loans. The loans, between US$350 to US$550 provide the women with access to more capital. To be eligible to receive these loans recipients are required to take an additional course that explains interest rates and how to calculate them. Women receiving loans at these levels are no longer frequented by tours.

En Via sounds great in theory. Tourists gain a deeper understanding and connection to local cultures and traditions, while getting a firsthand look at the positive impact their patronage will have on a community. Local women and their communities are empowered to grow their businesses and prosper. But, there are perils here that need to be acknowledged. Maintaining cultural heritage is a concern, tourists can be voyeuristic, exploitive, rude, or disrespectful. Indeed, “slum tourism” as it’s come to be called, has both grown in both popularity and generated backlash in recent years. For its part, En Via emphasizes that it practices “responsible tourism”, facilitating productive cultural exchanges, where it is known that tourists are meeting with locals to show support for their work.

En Via isn’t the only organization operating at the intersection of tourism and microfinance. Others include Bloom Microventures in Vietnam, Zikra Initiative in Jordan, Investours in Tanzania and Mexico, and OneSeed Expeditions in Nepal and Chile. A common theme among these outfits is that the tourism-fee-based model relieves dependency on interest-carrying loans, enabling better borrowing terms.

For more on the topic, check out the joint publication from the World Tourism Organization and Positive Planet, Tourism, Microfinance and Poverty Alleviation – Recommendations to Small and Medium-Sized Enterprises (SMEs) and to Microfinance Institutions (MFIs).

Photo credit: Accion

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