Empowering MSMEs in Community Based Tourism: A Conceptual Review of Internal and External Capabilities

Empowering MSMEs in Community Based Tourism: A Conceptual Review of Internal and External Capabilities

Faridah Shariyah binti Sharuddin, Rohayu binti Roddin

Faculty of Technical and Vocational Education, University Tun Hussein Onn Malaysia

DOI: https://dx.doi.org/10.47772/IJRISS.2025.907000309

Received: 07 July 2025; Accepted: 15 July 2025; Published: 15 August 2025

ABSTRACT

Community Based Tourism (CBT) has emerged as a sustainable development strategy that empowers local communities through participatory tourism activities. Micro, Small and Medium Enterprises (MSMEs) play a pivotal role in facilitating inclusive economic growth and enhancing community ownership of tourism initiatives. However, the full potential of MSMEs in sustaining CBT remains underexplored, particularly in rural settings where infrastructural, digital and institutional challenges persist. This conceptual paper reviews and synthesizes existing literature to examine the internal and external capabilities that influence the effectiveness of MSMEs in CBT. Drawing on three theoretical lenses, namely the Sustainable Livelihood Framework (SLF), Community Empowerment Theory (CET) and the Resource Based View (RBV). This paper proposes a holistic conceptual model for strengthening MSMEs in CBT contexts. Key themes include digital readiness, innovation capacity, social capital, strategic leadership and supportive policy environments. This paper offers practical insights for policymakers and community planners seeking to optimize the role of MSMEs in fostering sustainable tourism.

Keywords: Community Based Tourism, Micro Small and Medium Enterprises (MSMEs), SLF, CET, RBV.

INTRODUCTION

Tourism has evolved beyond its conventional economic function, increasingly positioned as a strategic tool for community development and sustainable livelihoods. Among its various paradigms, Community Based Tourism (CBT) has emerged as a participatory and inclusive model that empowers local communities to manage tourism resources and benefit directly from its outcomes [1], [2]. Particularly in rural areas of developing countries, CBT enables the preservation of cultural heritage, enhancement of local identity and diversification of economic opportunities [3]

Micro, Small and Medium Enterprises (MSMEs) have become crucial actors in CBT ecosystems. They are function as grassroots enablers, bridging community resources with tourism demand through activities such as homestays, agro-tourism, heritage crafts and local gastronomy [4]. MSMEs contribute to income generation, community self-reliance and local innovation. However, despite their critical role, the sustainability of MSMEs in CBT remains a concern, as many continue to face infrastructural, technological and institutional constraints [5], [6]

Current literature on tourism development often focuses on macro level policy evaluations, leaving a gap in understanding the micro-level capabilities and strategic readiness of MSMEs to thrive in CBT environments [7]. These enterprises frequently encounter difficulties such as limited digital literacy, weak managerial competencies, low access to finance and lack of integration into formal tourism value chains [8] Consequently, they become overly dependent on short term aid, failing to achieve the resilience and adaptability required for long term success.

The COVID-19 pandemic further exposed the structural fragility of tourism dependent communities. Many rural MSMEs were unable to pivot quickly due to the absence of digital infrastructure or business continuity planning. This calls for a strategic reassessment of the enabling conditions required for CBT to deliver on its sustainability promise [9]. Scholars have pointed to the need for internal capabilities such as innovation and leadership and external enablers including policy support and institutional collaboration [10]

To address these gaps, this paper proposes a conceptual review that synthesizes three theoretical lenses Sustainable Livelihood Framework (SLF), Community Empowerment Theory (CET) and the Resource-Based View (RBV) to examine how internal and external capabilities collectively influence MSME sustainability in CBT. These frameworks help elucidate the multifaceted dimensions of capability-building, including social capital, knowledge transfer, adaptive governance and digital empowerment (Ibrahim et al., 2024; Machado et al., 2024).

This paper contributes to a growing body of work that seeks to align tourism development with inclusive growth, especially in Malaysia’s rural context. By highlighting the capabilities needed to empower MSMEs in CBT, it provides insights for policymakers, development agencies and community stakeholders to reframe support structures and interventions. In doing so, it aspires to inform the design of more resilient and inclusive CBT models that align with national agendas such as RMK-12 and global frameworks like the Sustainable Development Goals (SDGs) [13], [14]

THEORETICAL BACKGROUND

The analysis of MSME capabilities within Community Based Tourism (CBT) requires a robust theoretical foundation that accounts for both internal competencies and external enablers of sustainable performance. To develop a comprehensive understanding, this paper draws upon three interrelated theoretical frameworks namely The Sustainable Livelihood Framework (SLF), Community Empowerment Theory (CET) and the Resource Based View (RBV). Each of these frameworks offers unique insights into the dynamic interplay between local enterprise development, community agency and systemic support structures.

Sustainable Livelihood Framework (SLF)

The SLF provides a lens through which to assess the tangible and intangible assets that shape the adaptive capacity of communities and enterprises. Developed originally by Chambers and Conway (1992) and further expanded in development literature, the SLF emphasizes five core capital assets human, natural, financial, social and physical that determine livelihood sustainability. In the context of CBT, SLF facilitates the identification of barriers and opportunities in MSME access to resources, resilience to shocks and long term viability [15]

For MSMEs operating in tourism, the relevance of SLF lies in its capacity to integrate multidimensional vulnerabilities, such as lack of market access or poor infrastructure, with opportunities for innovation and network [16]. Studies have shown that tourism enterprises that actively invest in human capital (e.g., training), leverage social networks and preserve natural assets are more likely to survive in competitive and uncertain environments [13]

Community Empowerment Theory (CET)

CET underlines the processes through which individuals and communities gain control over decisions and resources that affect their lives. In tourism, empowerment is seen not only as a means to enhance participation but also as a transformative approach to shift power dynamics and ownership structures [17]; [2]. Empowerment is often examined in four dimensions namely psychological, social, political, and economic each contributing to the capacity of community-based enterprises to lead, innovate and sustain themselves.

In the Malaysian rural tourism context, CET is particularly relevant as it aligns with national objectives to decentralize development and enhance local agency. Studies show that when communities are empowered to set tourism agendas and manage MSMEs, the outcomes are more culturally congruent, economically inclusive and environmentally responsible [18] CET also emphasizes capacity-building, participatory governance, and grassroots leadership as key levers for sustainable CBT.

Resource-Based View (RBV)

RBV is a firm level strategic management theory that asserts organizational success is determined by its ability to develop and utilize valuable, rare, inimitable and non-substitutable (VRIN) resources [19]. When applied to MSMEs in tourism, RBV helps to uncover internal capabilities such as entrepreneurial knowledge, brand identity, and operational flexibility that contribute to competitive advantage [11]

RBV provides a powerful tool to differentiate high-performing MSMEs from others, especially in fragmented and highly competitive tourism markets. It encourages the identification of intangible resources like relational capital, innovation culture and knowledge sharing practices that are often overlooked in traditional policy frameworks [10], [12] In CBT contexts, such internal strengths are critical for navigating crises, adapting to changing market preferences and maintaining authenticity.

Integrated Theoretical Perspective

By integrating SLF, CET and RBV, this paper adopts a holistic view of MSME empowerment within CBT. SLF offers a macro community lens, CET frames participatory and social transformation processes, while RBV provides a firm level strategic capability focus. Collectively, these frameworks enable a multi scalar analysis of how internal and external factors converge to shape MSME performance in rural tourism ecosystems.

This integrated lens also addresses a key gap in existing literature namely, the tendency to treat MSMEs either as passive beneficiaries of policy or as isolated economic agents. Instead, this paper argues for a system thinking approach where MSMEs are simultaneously shaped by and shaping their socio-institutional environments.

Msme roles in community based tourism

Micro, Small and Medium Enterprises (MSMEs) serve as the backbone of many rural economies and play a critical role in operationalizing Community-Based Tourism (CBT). As localized and community-embedded entities, MSMEs are uniquely positioned to deliver authentic tourism experiences while simultaneously advancing socio-economic development, preserving cultural heritage and promoting environmental stewardship [1], [3]

Economic Catalysts in Local Tourism

MSMEs contribute directly to job creation, income diversification, and economic resilience in rural areas. In CBT settings, enterprises such as homestays, eco-lodges, traditional food stalls, craft production and guided tours offer tourists immersive experiences rooted in local knowledge and practices. These services are often more flexible, culturally integrated and responsive to community needs compared to large scale tourism operations [5]

Moreover, MSMEs create value chains within local economies by generating multiplier effects across sectors. For instance, a successful homestay operation can increase demand for agricultural products, transportation and artisanal crafts. This interconnectedness supports a circular rural economy and reduces dependency on external markets [20]

Preservers of Cultural and Natural Heritage

One of the core pillars of CBT is the conservation of local identity. MSMEs, being embedded within their communities, are instrumental in safeguarding cultural assets through economic valorization. Enterprises that promote heritage cuisine, indigenous storytelling, traditional dance, or natural healing practices do not merely offer products they transmit cultural meaning [21]. In addition, many MSMEs are involved in nature-based tourism such as trekking, agrotourism and eco-education. These activities foster environmental awareness and can incentivize conservation behaviour among both hosts and visitors. The sustainability of these efforts often depends on the enterprise’s ability to balance resource use with regeneration, a capability that can be enhanced through training and partnership.

 CBT enables the preservation of cultural heritage, enhancement of local identity and diversification of economic opportunities. However, environmental sustainability must be foregrounded as a critical dimension of CBT. MSMEs involved in nature-based tourism must be equipped and incentivized to adopt regenerative practices such as responsible waste disposal, ecosystem preservation, renewable energy usage and sustainable sourcing. Integrating eco-certification systems and periodic environmental audits could ensure tourism growth does not compromise local ecology. Moreover, training modules and community workshops on environmental stewardship should be incorporated in MSME capacity-building efforts [13].

Platforms for Community Participation and Leadership

Unlike corporate led tourism models, CBT emphasizes democratic governance and local ownership. MSMEs act as platforms for community members to actively participate in tourism development, not just as laborers but as decision-makers, managers, and innovators [4]. This democratization of tourism production strengthens local agency and enhances the legitimacy of development efforts.

Furthermore, MSMEs often foster youth and women’s participation by offering flexible roles and low-entry barriers. Women’s cooperatives in food and handicrafts, or youth-led digital tourism initiatives, exemplify how MSMEs expand inclusivity in tourism governance [22]. These roles not only redistribute economic benefits but also empower marginalized groups to shape the narrative and future of their communities.

Vehicles for Innovation and Digital Transformation

In the post-pandemic era, MSMEs have increasingly embraced digital tools for marketing, bookings, storytelling and customer engagement. Platforms like social media, e-commerce and online travel agencies provide MSMEs with visibility and access to global markets. However, the degree to which they can capitalize on digital opportunities depends heavily on their internal digital readiness and external infrastructural support [6]

Innovative MSMEs are also experimenting with hybrid models that integrate sustainability, education and entrepreneurship. Examples include farm-stay experiences that teach regenerative agriculture or cultural workshops bundled with local product sales. These innovations reflect a broader shift towards experience-based tourism that values meaning over mass consumption [10].

Internal and external capabilities

Sustainable engagement of MSMEs in Community-Based Tourism (CBT) is contingent upon a combination of internal capabilities possessed by the enterprises and external support systems embedded in their operational environment. The dynamic interaction between these two dimensions determines the adaptability, competitiveness, and longevity of MSMEs in rural tourism landscapes [8]. This section critically examines both sets of capabilities based on the integrated lens of SLF, CET, and RBV.

Internal Capabilities

Internal capabilities refer to the inherent strengths, resources, and competencies within MSMEs that enable them to deliver value, innovate, and remain resilient in evolving tourism ecosystems. The digital divide remains a critical barrier for rural MSMEs. Nevertheless, innovative digital solutions and strategic partnerships can help bridge this gap. MSMEs can begin by leveraging user-friendly tools such as WhatsApp Business, TikTok Shop, Google My Business and Shopee to promote products and engage customers. These platforms require minimal technical skills and offer high visibility with low cost. Furthermore, collaborations with universities, NGOs or local councils can facilitate training in digital storytelling, content marketing and analytics. Beyond access, digital confidence and contextual training are key to meaningful adoption and transformation [6], [9].

Innovation and Frugality

Innovation is widely recognized as a critical survival factor for MSMEs, particularly those in tourism that must continuously adapt to changing visitor preferences and global trends. In rural contexts, this often manifests as frugal innovation creative problem-solving using limited resources to generate meaningful outcomes [10] For example, a small-scale homestay might use recycled materials to build eco-lodges, or leverage community festivals as seasonal tourism products.

Digital Readiness

The digital divide remains a critical barrier for rural MSMEs. Yet, enterprises that develop basic digital competencies such as managing social media accounts, using online booking platforms and engaging in digital storytelling gain significant visibility and market access (Murniati et al., 2023). Digital readiness also enhances operational efficiency and opens pathways for data-driven decision-making and customer relationship management.

Strategic Leadership and Governance

Effective leadership within MSMEs fosters a culture of innovation, participatory decision-making, and long-term planning. In CBT, many MSMEs are family-run or community-managed; hence, the presence of visionary local leaders is vital. Leaders who can navigate both traditional community norms and modern tourism dynamics are better positioned to bridge local knowledge with market demands [2], [12]

Social Capital and Trust

Social networks within the community and across stakeholders are intangible but powerful assets. MSMEs with strong relational capital tend to benefit from shared resources, local legitimacy, and collective marketing efforts [11]. Moreover, enterprises embedded in high-trust environments exhibit greater resilience during crises due to mutual support mechanisms and informal safety nets.

External Capabilities

External capabilities are defined by the availability and effectiveness of institutional, policy, infrastructural, and knowledge systems that enable MSMEs to function optimally within the tourism sector.

Policy Support and Institutional Alignment

CBT initiatives often thrive in environments where public policies are inclusive, decentralized and responsive to local realities. In Malaysia, agencies such as KUSKOP, KPLB and MOTAC provide targeted schemes for MSMEs. However, fragmentation and top-down implementation often undermine impact [4], [23]. Successful MSMEs frequently benefit from integrated policy frameworks that align tourism with community development goals.

Infrastructure and Connectivity

Basic infrastructure roads, electricity, sanitation and digital infrastructure network coverage, internet speed are fundamental enablers of tourism enterprise viability. MSMEs located in areas with poor connectivity face barriers in both attracting visitors and integrating into digital platforms [13]. Government-private partnerships are crucial in addressing these deficits and unlocking tourism potential in underserved regions.

Capacity Building and Technical Assistance

Training programs in hospitality, digital marketing, financial literacy and sustainable business practices are essential for enhancing MSME capabilities. However, such programs must be contextualized, accessible, and participatory. Research shows that many rural MSMEs either lack awareness or face logistical challenges in accessing training opportunities [7] . Collaborative models involving higher education institutions, NGOs and local governments offer promising alternatives [18].

Market Access and Strategic Partnerships

Access to tourism value chains especially through tour operators, online travel agents and community-based networks enhances the scalability of MSMEs. Strategic partnerships with larger firms, educational institutions, or NGOs can provide mentoring, funding and co-branding opportunities. These relationships often function as “external accelerators” that compensate for internal limitations ([9]

DISCUSSION

The synthesis of internal and external capabilities reveals a complex interdependence that determines the success and sustainability of MSMEs in Community-Based Tourism (CBT). While theoretical models such as the Sustainable Livelihood Framework (SLF), Community Empowerment Theory (CET) and Resource-Based View (RBV) offer useful analytical lenses, their practical application in developing contexts such as Malaysia exposes significant limitations and contradictions.

Reframing MSMEs as Strategic Development Actors

Mainstream tourism development policies often frame MSMEs as passive recipients of state support or as peripheral players to corporate-driven growth. This perspective ignores the strategic agency of MSMEs in shaping grassroots tourism systems. As shown in multiple studies [2], [5] locally embedded MSMEs are not merely service providers they are gatekeepers of cultural identity, environmental stewards, and political actors within their communities. Therefore, national development agendas such as RMK-12 should reposition MSMEs as co-developers of tourism ecosystems, not just implementers of top-down programs.

Critically, the empowerment narrative surrounding CBT often fails to account for power asymmetries within communities. The assumption that all MSMEs or community members share equal access to resources, decision-making and voice is overly optimistic. For instance, women-owned MSMEs in many rural settings often face cultural and structural constraints that limit their participation in leadership roles or decision-making forums. Youths, on the other hand, may lack access to startup capital, mentorship, or digital infrastructure, hindering their ability to innovate within CBT ecosystems. Additionally, class-based dynamics determine which groups are prioritized in receiving support or are more visible in policy consultations, potentially excluding the most marginalized. These intersectional dynamics of gender, age and class need to be explicitly integrated into CBT empowerment strategies to ensure inclusivity and equity [17], [18].

Addressing Intersectionality in CBT Empowerment

To achieve inclusive and transformative outcomes in CBT, it is essential to analyse the intersecting barriers faced by marginalized groups such as women, youth, and low-income community members. Empowerment strategies must move beyond a one-size-fits-all model. For instance, training programs should be gender-sensitive, ensuring safe spaces and childcare access. Youth entrepreneurship initiatives should include digital bootcamps, microgrants, and mentoring to overcome generational divides. Policies must also assess how traditional hierarchies or land ownership norms influence access to tourism assets. By incorporating an intersectional lens, MSMEs in CBT can better reflect the diversity of their communities and avoid reinforcing systemic exclusions [17],[16].

Beyond Capacity Building: Cultivating Adaptive Resilience

While capacity building is a frequent policy prescription, its effectiveness depends on whether it fosters adaptive resilience the ability of MSMEs to navigate uncertainty, learn continuously, and transform business models when needed. For example, the COVID-19 pandemic highlighted the limitations of rigid business models and the need for digital adaptability. However, digitalization alone is insufficient without addressing structural inequalities such as internet access, digital literacy and generational readiness [6], [10]

Moreover, most capacity-building programs remain fragmented, short-term and overly focused on technical skills. There is an urgent need for more holistic and community-led training ecosystems that integrate social learning, innovation labs, and peer mentoring. Institutions of higher education could play a central role here by acting as “knowledge bridges” between theory and practice, while simultaneously strengthening the research policy practice nexus ([4]

Policy–Practice Mismatch and Fragmentation

One of the most pressing challenges identified in the literature is the mismatch between policy objectives and actual implementation. While agencies such as MOTAC, KUSKOP and KPLB have launched promising initiatives, their efforts are often siloed, duplicative, or disconnected from the everyday realities of rural MSMEs. This fragmentation not only leads to inefficient resource use but also contributes to “consultation fatigue” among communities that are repeatedly engaged without long-term follow-up or integration [12], [23].

What is needed is an integrated governance framework that harmonizes support mechanisms, builds synergies across agencies and actively involves MSMEs in co-designing policies. A “bottom-linked” approach that blends top-down infrastructure with bottom-up agency offers a promising direction for Malaysia’s CBT agenda. This would ensure that MSMEs are not merely policy targets but strategic partners in rural transformation.

Conceptual Model for MSME Empowerment in CBT

Figure 1.0: Conceptual Framework for Empowering MSMEs in Community-Based Tourism (CBT)

Drawing from the preceding analysis, this paper proposes a conceptual model (illustrated in the visual diagram above) that positions MSME empowerment as the outcome of three intersecting domains:

• Internal Capabilities – encompassing innovation, digital literacy, leadership, and operational adaptability.
• External Enablers – referring to institutional support, market access, infrastructure, and ecosystem partnerships.
• Community Context – comprising social capital, local governance structures, and cultural dynamics.

This tripartite model bridges micro-level agency with macro-level structures, offering a holistic roadmap for strengthening the role of MSMEs in Community-Based Tourism (CBT). It also aligns with Malaysia’s Wawasan Kemakmuran Bersama 2030 (WKB 2030) and the Sustainable Development Goals (SDGs), particularly those related to decent work, reduced inequalities, and inclusive institutions [13].

Conceptual framework

This section presents the proposed conceptual framework derived from the synthesis of the Sustainable Livelihood Framework (SLF), Community Empowerment Theory (CET), and Resource-Based View (RBV). The model illustrates how internal capabilities, external enablers, and community context interact to empower MSMEs in sustaining community-based tourism.

Figure 1: Conceptual Framework for Empowering MSMEs in CBT

CONCLUSION

This paper has examined the strategic role of Micro, Small and Medium Enterprises (MSMEs) in sustaining Community-Based Tourism (CBT), with a focus on the interplay between internal capabilities and external enabling factors. By integrating the Sustainable Livelihood Framework (SLF), Community Empowerment Theory (CET), and the Resource-Based View (RBV), the paper proposed a conceptual understanding of how MSMEs can be empowered to thrive in rural tourism settings.

The discussion reveals that MSMEs are not merely peripheral actors but central to the success and authenticity of CBT initiatives. Internally, they require innovation capacity, digital readiness, strategic leadership, and relational capital. Externally, they rely on coherent policies, infrastructure, institutional support, and market access. The presence of these capabilities in a supportive community context determines the resilience, competitiveness and sustainability of MSMEs.

However, significant gaps remain in both practice and policy. Current support systems are often fragmented and misaligned with the lived realities of rural MSMEs. Capacity-building efforts tend to overlook long-term empowerment, while digitalization initiatives frequently ignore foundational infrastructural barriers. Without a shift towards integrated and inclusive development approaches, many MSMEs risk remaining trapped in cycles of dependency and marginalization.

Therefore, this paper proposes a holistic conceptual model that repositions MSMEs as co-creators of sustainable tourism systems. Policymakers, practitioners and researchers must move beyond technocratic interventions and embrace participatory, place-based strategies that reflect the complexity and diversity of community tourism.

Future research should empirically validate the proposed model through fieldwork, longitudinal case studies, or action research methodologies. There is also a need to explore intersectional issues such as gender dynamics, youth entrepreneurship and the ethics of cultural commodification within CBT enterprises. In doing so, the field can contribute to a more just, inclusive and contextually grounded vision of rural tourism development.

ACKNOWLEDGMENT

The author extends appreciation to the academic staff and peers at University Tun Hussein Onn Malaysia (UTHM) for their support and insightful feedback throughout the process of developing this conceptual paper.

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