Bridging the Gap: How Local SMEs Can Thrive in West Africa’s Tourism Economies

The World Bank report highlights how SMEs in Cabo Verde, São Tomé and Príncipe, and The Gambia remain sidelined from the tourism value chain due to limited access to finance, weak institutional linkages, and gender disparities. It calls for targeted financial reforms, gender-inclusive policies, and sustainable tourism initiatives to fully integrate local enterprises into the sector.

The World Bank’s newly published report, developed in collaboration with PD Consult and supported by research from the Instituto Nacional de Estatística de Cabo Verde, Instituto Nacional de Estatística de São Tomé e Príncipe, and The Gambia Bureau of Statistics, casts a bright spotlight on the untapped potential of small and medium-sized enterprises (SMEs) in the tourism sectors of Cabo Verde, São Tomé and Príncipe, and The Gambia. Despite drawing hundreds of thousands of international visitors, these countries are still struggling to integrate local businesses into their flourishing tourism value chains. Cabo Verde welcomed over 819,000 tourists in 2019, followed by The Gambia with 620,000 and São Tomé and Príncipe with 35,000. Yet, the proportion of SMEs relative to population size paints a more sobering picture. Cabo Verde hosts 21.7 SMEs per 1,000 inhabitants, The Gambia 16.8, and São Tomé and Príncipe only 4.4, highlighting a considerable gap between economic opportunity and local business inclusion.

Access to Finance: The Great Barrier

At the core of the issue lies restricted access to finance, which continues to stifle the growth of tourism-related SMEs. High interest rates, low levels of financial literacy, and rigid collateral requirements make it exceptionally difficult for local entrepreneurs to secure funding. While Cabo Verde shows relatively better financial infrastructure, thanks to government interventions and a maturing banking sector, The Gambia and São Tomé and Príncipe are weighed down by limited credit services and low banking penetration. In all three nations, formal financial institutions remain cautious about lending to SMEs, especially informal businesses that lack registration and verifiable credit histories. The result is a cycle of stagnation where promising enterprises are unable to expand, invest in quality upgrades, or effectively market their offerings to tourists. Microfinance schemes and government-backed guarantee funds have emerged in some places but remain underutilized or too small in scale to make a meaningful impact.

Women Entrepreneurs at a Disadvantage

The report delves into the gender dynamics of access to finance and reveals a deep-rooted imbalance. Women-owned SMEs face steeper hurdles when seeking loans, including discriminatory lending practices and limited access to property and inheritance rights, which are often essential for securing collateral. In São Tomé and Príncipe and The Gambia, the informal nature of many women-led businesses further excludes them from formal financial systems. Financial institutions often perceive them as riskier borrowers due to lower educational levels and weaker business networks. The result is a systematic underrepresentation of women in tourism entrepreneurship, which in turn limits the diversity and community integration of the sector. The World Bank strongly recommends introducing gender-sensitive financial products, expanding access to training and mentoring for women entrepreneurs, and supporting the formalization of women-led enterprises through regulatory reform and incentives.

A Fractured Value Chain With Missed Opportunities

In examining how local businesses interact with the tourism industry, the report finds significant gaps in the value chain. While there are multiple potential entry points ranging from food production and transportation to accommodation, handicrafts, and cultural experiences, most SMEs remain disconnected from large tour operators and hospitality providers, which tend to rely on foreign supply chains or established urban businesses. This fragmentation is especially stark in The Gambia, where supply chain inefficiencies and weak infrastructure hinder the timely delivery of goods and services. In São Tomé and Príncipe, the absence of formal business registrations means many microenterprises are invisible to tourism stakeholders. Even in Cabo Verde, where the ecosystem is more advanced, SMEs often lack the product quality or service standards needed to compete with larger providers. The report advocates for the creation of destination management organizations and cooperative marketing strategies to help link small local suppliers with international tourism operators.

The Green Path Forward: Circular Economy and Sustainability

Amid the challenges, the report highlights a growing interest in sustainable tourism and circular economy practices. In The Gambia, for instance, initiatives such as eco-lodges, beach clean-up campaigns, and community recycling projects are slowly gaining traction. These efforts not only enhance the environmental appeal of destinations but also open up new economic opportunities for local entrepreneurs, especially youth and women. However, these green ventures often lack financial backing and face policy and regulatory hurdles that limit their scalability. The report calls for the development of financing tools that specifically target sustainable business models, as well as policy reforms to streamline regulations for environmentally friendly enterprises. By fostering a business environment where sustainability and local ownership go hand in hand, these countries can build a more resilient and inclusive tourism sector.

The report offers a candid and strategic assessment of the tourism sectors in Cabo Verde, São Tomé and Príncipe, and The Gambia, urging governments and development partners to shift the narrative. Rather than treating SMEs as peripheral service providers, they must be recognized as core agents of economic transformation. With improved access to finance, gender-sensitive support systems, better integration into the tourism value chain, and a strong emphasis on sustainability, local SMEs have the potential to reshape their countries’ economic futures—creating not only jobs and income but also a more inclusive and locally-rooted tourism experience.