One of the more unusual ones in Dar es Salaam is Investours, a non-profit that combines microlending with tourism.* Visitors spend the day with local business owners and afterwards decide which one gets a loan, funded by the tour fees. A few months later, the money is repaid: the local microfinance bank responsible for prescreening businesses and administering loans keeps 30%, and the rest goes to Investours to cover their operational costs.
It’s not running perfectly yet – I did the tour over a month ago and am still waiting for the promised updates from the hair salon I selected, and for an invitation to the Investours online “community”. But the concept works on many levels. Thanks to tourists’ fees, the NGO can become self-sufficient; tourists get to meet locals and learn something; microfinance institutions (MFIs) get more capital and more clients; small businesses get interest-free loans (instead of paying an average of 30-40% interest) and maybe business advice or future support from their lenders. Even the businesses not selected by a tour group – whose decision after all may be based on personal preferences – don’t lose out: those who’ve been visited three times without selection automatically get a loan directly from Investours.
Since the NGO got going – the pilot programme began in 2008 in Oaxaca, Mexico and launched end of 2010 in Tanzania – results seem promising. “We need more tourists”, said my tour guide; there are no shortage of entrepreneurs looking for loans. Default rates here are 5% in Tanzania. And tourists like it: TripAdvisor users rate it the top thing to do in Dar es Salaam, though admittedly this says more about the lack of alternative tourist attractions in the city.
I spoke to the COO, who’s based in Mexico. She’s cautiously optimistic about expanding the Investours model beyond Oaxaca and Dar es Salaam, first within the two countries, and potentially – with more secure funding – further afield.
In the meantime, one of the original co-founders of Investours has set up a similar organisation in Vietnam, which is also to launch soon in Costa Rica.
To my knowledge, these are the only countries where such a model currently exists. Could it work elsewhere? Given the ever-increasing desire of tourists to get off the beaten track and visit non-traditional tourist destinations – including developing countries, and given the worldwide rise of microlending, the Investours model surely has huge potential.
Of course, all of this also depends on one’s view of microfinance. It’s come under a huge amount of criticism recently; at the least, for having overstated its impact on reducing poverty.
Investours COO believes the problem lies with some of the MFIs, some of whom are “definitely not ethical” (charging huge interest rates for example) rather than within the practice of microfinance itself. But others claim the focus on access to finance is entirely misplaced. A recent commentator argues that the poor are “not financially constrained so much as demand constrained”.
Maybe he is right. When we visited the women selling charcoal – in a street where everyone else sells the exact same product – you wonder if encouraging them to expand that business, by getting into debt, will help them in the long-term.
And yet, in a country like Tanzania where tourist dollars so often end up in the accounts of foreign tour operators, finding ways to direct that money to ordinary Tanzanians has got to be a priority.
Is microfinance tourism the answer?
*More on the origins of the concept here.