In international development, access to finance at the local level is one of the biggest obstacles to real and sustainable progress. Wealthy donor agencies bring exciting promise of great opportunities, but many require matching funding or only agree to short-term engagements after which local businesses scramble to secure ongoing support. The local businesses find it tough to get financing, especially in the current economic climate, but for small accommodation providers, it is even more dire.

Traditional providers of finance, particularly commercial banks, do not understand the accommodation industry or where the real assets in the business lie, so money is not forthcoming. Local businesses therefore often opt to forego any beneficial donor-driven opportunities, putting themselves at odds with desirable but expensive best practices and often reducing their chances of survival in competitive markets.

Enter the Tourism Development Bank (TDB). In a bit of good news the WHL Group has set up the TDB to allow small, local accommodation providers (and other tourism enterprises) to pay for selected professional services using room nights or services instead of cash.

The two leading benefits of this structure are immediately evident. First, tourism enterprises (especially accommodations) that could never have afforded essential business buoys like market-access tools or energy-saving retrofits and renovations can now barter for services with, for example, room inventory. Second, cash that might have been sacrificed to pay for these improvements can now be spent on other key services and in other key sectors, thereby contributing to the local economy.

The rooms/services may then be sold or utilised in a variety of ways (individual nights or package tours) through a network of distribution partners, which includes all of the member companies of the WHL Group.

Pilot implementation of the TDB has been underway for the past year in South Africa, Mexico and Brazil to test the service. As can be seen from the video below (and also on the TDB website), accommodation providers like it.

The company driving this initiative is WHL Consulting, a subsidiary of the WHL Group (and Local Travel Movement partner) with a special focus on supporting small accommodation and tour providers through capacity-building services and market access. Frustrated by development models that seem to further marginalise local entrepreneurial efforts already struggling at the periphery, WHL Consulting set about building this new and innovative solution.

Until now support services available through the TDB have been limited to sales and marketing (particularly online marketing and distribution) through Project:Exposure, a groundbreaking bundle of marketing and market-access supports for accommodation providers that includes an immersive photography platform called 360 Cities that creates spherical panoramic images showing the true character of a property; however plans are now progressing in a collaboration with E+Co (an investor in renewable energy service providers) to expand the range to include work in energy efficiency and renewable energy.

As Len Cordiner, CEO of the WHL Group explains it, “The TDB is a bit like a micro-financing institution. We intermediate the supply chain, sitting between the capital markets and the small accommodation providers, in the same way micro-finance institutions do. What we bring is a deep sector knowledge and the means to leverage room inventory as collateral for money lent. This is not something banks could or would do.”

WHL Consulting and its work in creating the TDB were recently singled out as finalists in the 2010 TIES Innovation Leadership in Sustainable Tourism Awards. The TDB is now also an applicant in the Changemankers G-20 SME Finance Challenge and welcomes your comments.