An Intervention of Microfinance in Tourism Sector: An Emerging Country Perspective

Abstract

India has a tremendous potential for development in the tourism sector with huge heritage attractions. India is regarded as the 2nd fastest growing tourist market globally. To meet its potential, it needs a variety of funding in the form of unique set of financial products, services such as long-term and short-term credit, investment subsidies, supporting tax policies, lease financing & insurance products which could be taken care by commercial banks and Micro Finance Institutions (MFIs). They play a crucial role in providing innovative financial products and services in promoting livelihood in tourism destinations. Micro-Finance Institutions have an ability to create a positive impact on the development of tourism industry, particularly in emerging countries. Over the years, micro-finance as well as tourism sectors have been promoted independently, which have contributed towards poverty reduction worldwide. Thus, there is a high positive association between opening up of economies and poverty alleviation through financial inclusion achieved largely with contributions from micro-finance institutions. Microfinance operations being raised within the tourism sector to lend services to the micro business owners of tourism industry is an innovative approach. The tourism sector would get a further boost in terms of access to commercial capital to deliver the goods & services through the creation of better tourism infrastructure. This would attract greater no of tourists, for the sustainable growth creating a win-win situation for microfinance institutions and tourism-oriented businesses including other stakeholders.