As the global community approaches the 2030 deadline for the Sustainable Development Goals (SDGs), progress on poverty reduction, decent work, and inclusive growth is at serious risk of reversal. The COVID-19 pandemic triggered the first rise in extreme poverty in over 20 years, pushing over 70 million people into poverty in 2020 alone (World Bank). Meanwhile, over 2 billion workers, or 60% of the global labor force, remain trapped in informal employment without job security, living wages, or social protection (ILO).
These vulnerabilities have been exacerbated by intersecting global crises: geopolitical instability, rising inflation, escalating debt burdens in developing countries, and the worsening impacts of climate change. At the same time, traditional development financing is in crisis. Official Development Assistance (ODA) from major donors is shrinking. In 2024, global development aid declined by 7.1%, and humanitarian assistance alone fell by 9.6% (OECD). By 2025, ODA from the 17 largest DAC donors is projected to fall by an additional $39.84 billion, with significant reductions from the U.S. and Germany. Meanwhile, USAID has experienced near-total program halts, contributing to a $60 billion shortfall in global development assistance.
In this context, the tourism sector—once a global economic engine—is both a casualty and an opportunity. Pre-pandemic, tourism contributed over 10% of global GDP, supported 1 in 10 jobs worldwide, and accounted for over $1.7 trillion in international receipts. In 2020, however, the sector suffered catastrophic losses: $1.3 trillion in export revenue vanished, and 62 million tourism jobs were lost (UN Tourism). Recovery is underway, in 2024, an estimated 1.4 billion international tourist arrivals were recorded globally, marking a 99% recovery compared to 2019—pre COVID-19 pandemic. This figure represents an 11% increase over 2023, or 140 million more arrivals; but the rebound is uneven and fragile, particularly in Least Developed Countries (LDCs), which are highly depended on tourism representing up to 90% of total exports or GDP.
The recovery is further threatened by the sector’s slow digital transformation and finance, especially among small and medium-sized enterprises (SMEs), SMEs are the backbone of the tourism industry which account for approximately 80% of tourism businesses globally (G20/UNWTO). The International Finance Corporation (IFC) estimates that 65 million firms, or 40% of formal micro, small, and medium enterprises (MSMEs) in developing countries, have unmet financing needs totaling $5.2 trillion annually. This financing gap hinders SMEs’ ability to invest in digitalization, sustainability, and resilience, which are crucial for strengthening the tourism value chain which make up the vast majority of tourism businesses globally. In many developing economies, these businesses face barriers to adopting technology, including high costs, low digital skills, and lack of access to tailored financing.
Access to financing is vital for tourism SMEs to promote entrepreneurship and build an innovative, competitive, and sustainable tourism sector. However, these enterprises often struggle to secure funding due to factors such as lack of collateral, limited financial literacy, and the perceived high risk associated with the tourism industry. Furthermore, the cost of capital remains a significant barrier, particularly in developing economies, where high-interest rates and stringent lending conditions prevail.
These challenges matter because digitalization is key to increasing productivity, creating higher-value jobs, and unlocking green and inclusive growth. Without targeted investment in digital infrastructure, skills development, and innovative finance for tourism SMEs—especially in low-income countries—the sector risks perpetuating low-wage, insecure, and informal employment.
Despite the urgent need, the financing gap to achieve the SDGs in developing countries is estimated at $2.5 trillion annually (UNCTAD). While impact investing has grown significantly—reaching $1.571 trillion in assets under management across 3,900 organizations (GIIN, 2024)—this remains a fraction of global capital markets, and most investments still prioritize financial returns over inclusive job creation or digital equity.
