8 Rural Entrepreneurship

Shivani Mahajan

 

Learning Outcome

After completing this module students will be able to:

i.   Understand the concept of rural entrepreneurship

ii.  Understand the need for rural entrepreneurship

iii. Know the problems of rural entrepreneurs

iv. Role of NGO in developing Rural Entrepreneurship

 

“India lives in Villages and it’s true spirit lives in rural areas” – Mahatma Gandhi.

 

1. Introduction

 

India is principally an agrarian economy. About three- fourth of the Indian population lives in rural area and out of which 75% is still earning its livelihood from agriculture and its allied activities. There is a wide gap between the economic activities of the rural and urban people. Rural Population is more or less dependent on agriculture whereas industries are exclusively located in urban areas. Moreover, the growth in agriculture sector is much slow than industry which widens the income level gap between both. Further, the relationship between the agriculture and industry has a dependency structure which puts the rural area at more disadvantageous position in terms of gain and thus leads to poverty and backwardness. Therefore there is a need of the rural development which can be best done through rural entrepreneurship.

 

2. Concept of Rural Entrepreneurship

 

Rural entrepreneurs are those who carry out entrepreneurial activities by establishing industrial and business units in the rural sector of the economy.(Ajmeri, 2012) “Rural Entrepreneurship can be defined as entrepreneurship rising at village level which can take place in a variety of fields of venture such as business, industry, agriculture and acts as a powerful reason for economic development”. Industries coming under the purview of Khadi and Village Commission (KVIC) are treated as rural industries. According to KVIC, “village industry or rural industry means any industry located in rural area, population of which does not exceed 10,000, or such other figure which produces any goods or renders any services with or without the use of power and in which the fixed capital investment per head of an artisan or worker does not exceed a thousand rupees.” (Misra, 2005)

 

To enlarge the scope, the definition has been tailored recently by the government. Accordingly, any industry located in rural area, village or town with a population of 20,000 and below and an investment of Rs. 3 crores in plant & machinery is classified as a village industry. (Source: Government of India) Village industries have been grouped into seven categories as follows:

  • Mineral-Based Industry: e.g stone crushing, cement industries, red oxide making, wall coating powders etc.
  • Forest-Based Industry: e.g wood products, bamboo products, honey, coir industry, making eating plates from leaves.
  • Agro-Based and Food-Based Industry: e.g sugar industries, jaggery, oil processing from oil seeds, pickles, fruit juice, spices, dairy products etc
  • Polymer and chemical-Based Industries: e.g manufacturing of aloevera gel, ball pen ink, aggarbatti.
  • Engineering and non-conventional energy-based Industries: e.g agriculture equipments.
  • Textile Industry: e.g spinning, weaving, colouring, bleaching.
  • Service Industry: e.g tractors and pumpsets repairs etc.

    3. Types of Rural Entrepreneurship:

 

a. Individual entrepreneurship

b. Group entrepreneurship

c. Cluster formation

d. Cooperative

 

a. Individual entrepreneurship: It is the type of the entrepreneurship where the single entrepreneur is the owner or the sole proprietor. The entrepreneur bears the whole risk and is solely responsible for the business decisions.

 

b. Group Entrepreneurship: It is mainly classified into three types: 1) Private limited company 2) Public limited company 3) Partnership

 

1) Private limited company: In this case, minimum two members are required and maximum members are 50. The financial capital is divided into shares and shares are not sold to the general public. Therefore such companies are generally small in size and are owned by the families. Liability of the shareholders is limited in such companies.

 

2) Public limited companies: in such companies, minimum seven members are required and there is no maximum limit. Being a public limited, it can raise money from the general public. There is separation between the control and ownership. Shareholders are the owners but they do not take active participation in the running of the business. The control of the business is in the hands of the board of directors.

 

3) Partnership: In this case there is no individual owner and the business is handled by the partners (maximum 20). For the partnership, mutual trust is must and all the partners should complement each other for common goals and objectives. Partnership companies are easier to form and provide large resources but it has unlimited liability on the partners.

 

c. Cluster formation: It is a formal and informal group of people to achieve common objectives. It includes NGO‟s, VO‟s, SHG‟s & CBO‟s.

 

1) NGO’s (Non-Government organisations): These are the non – profit organisations sponsored or formed by the government and are registered under the Society‟s Registration act, 1860. A minimum seven people are grouped together for the socio- economic growth of the people. These are the formal organisations and usually receive funds from the government.

 

2) VO’s (Voluntary Organisations): These are the organisations generally initiated by the individuals to serve the society and for the socio economic development of the people. These organisations may or may not register under any act. Such organisations are generally sponsored by the NGO‟s or the Government.

 

3) SHG’s (Self Help Groups): These groups are mainly consisted of 10-20 people and are formed with the objective to mutually help each other. These groups are sponsored by the NGO‟s, VO‟s and sometimes by the Government for the socio – economic development of the backward people. It is an informal organisation.

 

4) CBO’s (Community based organisations): They are informal in nature and are formed with the objective to enhance the bargaining power of the community. People from the common living are or from the common community come together with the common objective of upliftment of the community.

 

d. Cooperative: According to the International cooperative alliance (ICA), “a cooperative is an autonomous association of persons united voluntarily to meet their economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.”

 

4. Need of Rural Entrepreneurship:

 

There is a need of the rural entrepreneurship to develop the rural economy. Rural entrepreneurship is needed because of the following reasons:

 

Employment Generation: Rural Entrepreneurship is a labour intensive and requires large number of human resource. Therefore, it has a large potential of employment generation and can reduce the problem of unemployment in rural area.

 

Income Generation: By providing employment, rural entrepreneurship has potential for income generation and thus bridging the gap between the rural and urban disparities.

 

Rural development: Rural entrepreneurship helps in setting industries in rural areas and thus leads to the employment generation and income generation which directly help in rural development.

 

Curbs Rural – Urban migration: Rural development helps in curbing the rural – urban migration by reducing the unequal growth in cities.

 

Environment Friendly: Rural industries are more environment friendly thus leads to the development without damage.

 

Builds up Village republics: Development of the rural industries serves as an effective means to build village republics and thus make them more independent.

 

Improved standard of living: As rural entrepreneurship helps in income generation which helps in prospering the community and thus improving their standard of living.

 

Balanced regional growth: Rural entrepreneurship will direct the concentration of industries in rural areas which leads to the balanced regional growth.

 

5.  Scope of rural entrepreneurship:

 

Rural entrepreneurship is active and is opening new scopes for the entrepreneurs and are discussed as follows:

  • Rural area has the capacity of small and medium enterprises and these sectors acts as the economy builders by generating Employment and income for poor and unemployed people and is contributing more than 52% of the GDP.
  • Moreover, there is a rapid expansion in the small and medium industry arena. Therefore, Repair shops, service centers, PCO, internet café, hiring of agriculture implements & tractor, computer and other skill training centers have good scope in cluster of villages.
  • Entertainment, cable TV ,rural tourism and amusement parks (near urban areas) are also some of the potential areas for rural entrepreneurs in service sector
  • Various development programs are being executed through Panchayti Raj Institutions, who are engaging contractors for civil /mechanical works. Rural youth can start this business.
  • Changed consumption pattern has opened up new avenues for trading activities in rural areas.
  • Rural areas are also using large amount of agriculture products like fertilizers, seeds, pesticides and insecticides etc.

    6.  Problems faced in the growth of rural entrepreneurs:

 

Rural entrepreneurs face large number of problems like illiteracy, risk factor, improper training and experience, limited purchasing power and tough competition from urban entrepreneurs. Various problems faced by rural entrepreneurs are following.

 

a) Scarcity of funds: Rural entrepreneurs find it difficult to get external funds due to the risk involved in the rural industries. Moreover, the procedure to avail loan facility is too long and cumbersome that its postponement often disappoints the rural entrepreneurs.

 

b) Competition: Rural entrepreneurs face tough competition from large scale industries and the urban entrepreneurs as their cost of production is high due to high input cost.

 

c) Middlemen: As there is small market available for the rural entrepreneurs so they are heavily dependent on the middlemen for marketing of their products and thus Middlemen exploit rural entrepreneurs.

 

d) Legal formalities: As Rural entrepreneurs are illiterate and ignorant so they find it extremely difficult to comply with various legal formalities in obtaining licenses. Moreover, the legal formalities are so complex and time consuming that it become tough for the entrepreneurs.

 

e) Procurement of raw materials: Arranging raw material is really a tough task for rural entrepreneur. They may finish with poor quality raw materials and can also face the problem of storage and warehousing.

 

f) Risk element: Rural entrepreneurs face tough competition from large scale industries and do not have large market available for them. Therefore, have much less risk taking capacity due to shortage of financial resources and external support.

 

g) Lack of technical knowledge: Rural entrepreneurs suffer a problem of lack of technical knowledge because rural people are illiterate and lack of training facilities which acts as hurdle for the rural development.

 

h) Lack of infrastructural facilities: Though government is putting its best efforts but the growth of the rural entrepreneurs is not very healthy due to lack of proper and adequate infrastructural facilities.

 

i) Poor quality of products: Rural entrepreneurs produce inferior quality of products due to lack of availability of standard tools and equipment and the availability of poor quality raw materials.

 

j) Negative attitude: The environment in the family and society is not favorable to support rural people to take up entrepreneurship as a career. It may be due to lack of awareness and knowledge of entrepreneurial opportunities.

 

7.  Advantages of Rural entrepreneurship:

  • Abundance of Resources: Rural areas have abundant natural resources including land, water minerals and solar power and also wind power. Moreover land is easily available at cheap rates.
  • Easy availability of labour: Semi skilled and unskilled labour is easily available and low wage rates increases the vulnerability of rural areas for industrialization.
  • Tax advantage: Tax burden in rural areas is low, which increases competitive strength of rural industry.
  • Low investment: Rural industries can be started with low investment and Production can be done at a less cost due to easy availability of resources.
  • Employment: Rural Industries generate jobs in the developing countries like India where the unemployment is the main problem.
  • Slow down urban migration: As rural industries create jobs, therefore it slows down the rural – urban migration which creates problems in urban areas.
  • Meet demands: in developing countries like India, where the population is extremely large, rural industries can help in meeting demands arising from local consumption needs.

    The role of rural industries is of vital importance in our country due to above-mentioned advantages.

 

8. Developmental strategies for rural entrepreneurship:

 

While developing strategy for industrial enterprise in rural areas, it is necessary to take into consideration the totality of rural reality in terms of resources physical and human as also environmental. It is believed that following approaches can be used for formulating strategy for rural industrial enterprise:

  • Harmonize Govt. efforts: Government should synchronize its initiatives with some NGO‟s or the agencies working for the rural development so that policies can be implemented in a perfect order for the rural growth.
  • Technology development: Provisions should be made to provide the rural population with the latest technologies so that rapid development can takes place.
  • Basic training for prospective rural entrepreneurs: Prospective entrepreneurs must be identified and basic training should be provided. They should be motivated by telling the success stories of the different entrepreneurs.
  • Skill enhancement training programs: Such training programs should be provided to the rural population so that skilled workers can be available for the rural industries.
  • Modern infrastructure facilities: It is necessary to create modern infrastructural facilities in the rural areas so that entrepreneurs can be attracted.
  • Credit supply: banking and non banking agencies should provide the funds at cheaper credit and at short terms and conditions.
  • Co-ordination between small and large industries: collaborations should be encouraged between small and large scale industries so that cheaper products made by small industries can be marketed at large scale.

    9.  Role of NGO in Development of Rural Entrepreneurship

 

Rural entrepreneurship is one of the most important factors for the rural development to remove the problem of unemployment and poverty. Therefore, it is the need of the hour. Government has taken many initiatives for the rural development and started various self employment and poverty alleviation programmes like Pradhana Mantri Rozgar Yojna, IRDP, TRYSEM etc. but proved ineffective due to the improper execution of the programmes. For the rural development, one has to be at the grassroots to identify the problems and then find the solutions and this can be done only when one is in the contact of the rural population. Such a situation necessitated the need of the NGO‟s to join hands with the Government and find the problems and thus helps in the execution of the programmes implemented by the government. Government therefore collaborated with the NGO‟s to reach the actual problems of the rural population.

 

Today we have large number of the NGO‟s working for the rural entrepreneurship. The main NGO‟s are: National Alliance of Young Entrepreneurs (NAYE), World Assembly of Small and Medium Entrepreneurs (WASME), Xavier institute for Social Studies (XISS), SEWA of Ahmedabad, „Y‟ Self-Employment of Calcutta, AWAKE (Association of Women Entrepreneurs of Karnataka), and Rural Development and Self-Employment Training Institute (RUDSETIs) based in Karnataka:

 

NGO‟s functioning for the rural entrepreneurship can be classified into three types:

1. Primary level NGO‟s

2.  Secondary Level NGO‟s

3.  Grass root level NGO‟s.

 

1. Primary Level NGO’s: These are the NGO‟s who assemble their own resources and implement developmental activities on their own and works at international level. Example: ACTIONAID, OXFAM, Christian Children Fund, etc. are some of the best examples of primary level NGOs in India.

 

2. Intermediate NGO’s: These are the NGO‟s who arrange funds from the external agencies and impart training and conduct workshops for the target group. Example: SEWA and AWAKE are examples of intermediate NGOs

 

3. Grass Root Level NGO’s: These are the NGO‟s who make direct contact with the target group and work at the grass root level. Example: Such NGO‟s are RUDSETIs, ANARDE Foundation (Gujarat), Indian Institute of Youth Welfare (IIYW) of Maharashtra etc.

 

The training imparted to the rural population can be divided into three types:

 

1. Stimulation: Conducting workshops and trainings for the rural population to stimulate the entrepreneurial attitude amongst them.

2. Counselling: Providing counseling and consultancy services to the rural entrepreneurs regarding Project analysis, selection of an idea, preparation of business plan etc.

3. Assistance: Providing help to the target group in financial support and providing market for their products.

 

The NGOs can prove to be a boon for rural entrepreneurship due to following reasons:

 

a. NGO‟s works at the grassroot level so they are near to the rural population which helps in understanding them well.

 

b. their experiments with the community can helps in developing policies.

 

c. working of the NGO‟s is flexible so they help in formulate appropriate solutions and can tailor to meet the individual needs.

 

d. NGO‟s concerns with the rural poor, so can reach at the remote locations, where it is not possible for the government to reach.

 

e. Due to their flexibility, they have the capability to innovate and adapt using technology transfer and settle them according to the local conditions.

 

NGOs also suffer from certain weaknesses as following:

 

a. NGO‟s prime job is to work for the social development of the community. So, there can be role conflict.

 

b. NGO‟s have limited capacities, therefore there projects are limited in area.

 

c. They are dependent on other agencies for funds. Therefore, donor pressure may create problems.

 

d. The NGO‟s structures are becoming bureaucratic in nature leading to the reduced efficiency in the overall development.

 

In spite of the weaknesses, the role of NGOs in entrepreneurship development cannot be undermined. There is large number of Evidences which shows that NGOs in India have succeeded largely in imparting entrepreneurial skills among the weaker sections of the society.

 

11. Summary

 

Rural area has a wide potential which can be harnessed by developing appropriate strategies for the rural entrepreneurship. Rural entrepreneurship has incredible opportunities but due to lack of infrastructure and awareness people don‟t prefer rural entrepreneurship. Moreover, the glamour of urban life has so widened that people prefer to migrate to urban areas then starting enterprise in rural areas. Coordinated efforts of Government along with various agencies are requires to achieve the goal. Therefore, Rural entrepreneurship will help in developing the rural area by employment and income generation and thus developing the economy.

 

WEBLINKS:

 

http://www.ijarcsms.com/docs/paper/volume1/issue2/V1I2-0003.pdf

 

http://www.fao.org/docrep/w6882e/w6882e02.htm

 

http://www.publishyourarticles.net/eng/articles2/role-and-importance-of-rural-entrepreneurs-in-india/2722/

 

http://www.preservearticles.com/201101143355/importance-of-rural-entrepreneurs.html

 

http://www.journal.bonfring.org/papers/iems/volume1/BIJIEMS-01-1004.pdf