Rural Entrepreneurship: Concept, Types, Significance, Problems, and Factors Affecting

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Rural Entrepreneurship: Concept, Types, Significance, Problems, and Factors Affecting

Rural Entrepreneurship

Concept of Rural Entrepreneurship

The rural sector differs from the urban sector in a number of ways. The nature of the economic activities is one such area of difference. Agriculture is the main economic activity in rural areas. On the other hand, the industry is the main area of economic activity in the urban area.
Rural entrepreneurship refers to establishing industrial and business units in rural areas. It is entrepreneurship emerging in rural areas. Rural entrepreneurs are those who carry out entrepreneurial activities in rural areas.
Rural areas are characterized by unemployment and poverty. Rural entrepreneurship promotes rural industrialization. Hence, rural entrepreneurship may be viewed as a means of rural development.


“Rural entrepreneurship is the creation of a new organization that introduces a new product, serves or creates a new market or utilizes a new technology in a rural area.”

Rural entrepreneurship emerges in rural areas. It may also be termed rural industrialization. Rural industrialization is normally based on agriculture.

Types of Rural Entrepreneurship

Rural entrepreneurship is a powerful means of rural economic development. It is very important for a country like Nepal where the majority of the people live in rural areas. The development of the country cannot be imagined without the development of rural areas. Rural entrepreneurship takes various forms as mentioned below.

1. Farm entrepreneurship: 

Farm entrepreneurship is related to farming. It involves various agricultural activities for earning a livelihood.

2. Artisan entrepreneurship: 

It includes masonry, black-smithy, carpentry, repair of pump-sets, art, board painting, etc.

3. Merchants and traders: 

It includes businessmen dealing with the products mainly needed by the local population. They may be producing goods themselves or acting as middlemen.

4. Tribal entrepreneurship: 

Tribal entrepreneurs belong to those who operate predominantly in tribal villages. Their source of origin is the tribal community.

Significance of Rural Entrepreneurship

The significance/importance of rural entrepreneurship is mentioned below.

1. Employment generation: 

Rural industries are labor-intensive. Hence, they are important in generating employment in rural areas.

2. Income generation: 

Rural industries create employment and self-employment. It helps to generate income for the rural people. It further reduces the income gap between the rural and urban populations.

3. Balanced regional development: 

Rural entrepreneurship promotes entrepreneurship in rural areas. This helps to have a balanced regional development. This is rather more important to a country like Nepal where the majority of the people live in rural areas.

4. Promotion of culture: 

The industries in the rural areas are traditional. They are based on rural culture and traditional technology. Hence, they help to promote art and culture.

5. Reduction of rural-urban migration: 

With the development of rural entrepreneurship, the independence of the rural people increases. It reduces rural-urban migration. It also helps the city areas to grow better.

6. Environment friendly: 

Since rural industries take small forms and are based on rural technology, they are environmentally friendly. Unlike urban industries, they emit less smoke and wastage. This results in the promotion of the environment.

7. Utilization of idle capital: 

Rural entrepreneurs raise finance from the scattered sources and use them for entrepreneurship development. Hence, rural entrepreneurship is important to use the idle capital in the rural area.

8. Utilization of local resources: 

Rural entrepreneurs mainly depend on local resources. It helps to develop the rural economy.

Problems of Rural Entrepreneurship

Rural entrepreneurship is based on rural factors of production. It suffers from a number of problems. Some of them are;

1. Financial problems: 

Rural entrepreneurship is largely found to suffer from financial problems. It is normally carried with family or personal savings which may not be sufficient for carrying business activities. Rural entrepreneurs borrow funds from their relatives or from informal sources. It hinders rural entrepreneurship to grow and prosper. As per the latest Rural Credit Survey, it is estimated that the institutional sector meets the only % of the demand for credit from the entire rural sector. There is a gap between the demand and supply of rural credit in Nepal.

2. Lack of technological know-how: 

Technology has become an integral part of entrepreneurship. It helps to reduce cost and enhance quality. However, rural enterprises use labor-based or obsolete technology. The rural entrepreneurs also lack proper knowledge about technology to be used. All these negatively affect the growth and development of rural entrepreneurship.

3. Lack of awareness: 

One of the major problems faced by rural entrepreneurship is a lack of awareness and knowledge about the importance of developing industries in rural areas. Rural people are not interested in building their careers as entrepreneurs.

4. Prone to salaried employment: 

Rural people are found to be more interested in salaried employment because of assured income, lesser time, a lesser degree of responsibility, etc. This is further supported by the high status of the salaried people than the self-employed people. This has adversely affected rural entrepreneurship.

5. Poor infrastructure facilities: 

Infrastructure facilities include transport, communication, security facilities, etc. A transport facility is needed for the entrepreneur for distributing their output. Communication facility brings effectiveness in the entrepreneurial development, Security is also very important to run a business smoothly, However, rural entrepreneurs lack such facilities.

6. Low-risk bearing capacity: 

Rural entrepreneurs have a low risk-bearing ability, Hence, they are always fearful of investing in a business. This has adversely affected the entrepreneurial growth in rural areas.

7. Low purchasing power of the people: 

The purchasing power of the rural consumer is lower compared to the urban consumers. It hinders the market performance of the rural business, It further affects rural entrepreneurship adversely,

8. Competition: 

Rural entrepreneurs face’ tough competition from large organizations and urban entrepreneurs. They cannot compete with them on grounds of economies of scale, product quality, and marketing.

Factors Affecting Rural Entrepreneurship

Rural entrepreneurship is very important for the development of a rural economy. It promotes rural industrialization and employment generation. For a country like Nepal where a majority of the people live in rural areas, rural entrepreneurship is very important for the overall development of the country, There are a number of factors that affect rural entrepreneurship. They are mentioned below.

1. Availability of capital: 

Capital is the most important factor that determines the development of entrepreneurship in rural areas. Easy availability of short as well as long-term capital promotes rural entrepreneurship.

2. Availability of raw material: 

The raw material is the basic input in the production process. Hence, it plays a vital role in the promotion of rural entrepreneurship. For this, the raw material base should be strengthened in the villages.

3. Institutional support: 

Rural entrepreneurship can be promoted by institutional support by governmental as well as non-governmental institutions. They can support capital as well as Other aspects of entrepreneurship to support the rural entrepreneurs.

4. Training and education: 

Rural entrepreneurship can be promoted through training and education. Training helps to develop entrepreneurial skills. Education at the school and college level develops an entrepreneurial attitude among the local masses.

5. Public awareness: 

For the development of rural entrepreneurship, awareness should be created among the rural people regarding the importance of developing industries in rural areas. They should be motivated to build their career as entrepreneurs.

6. Development of infrastructure facilities: 

Infrastructure facilities include transport, communication, security facilities, etc. The development of infrastructural facilities attracts rural people towards entrepreneurship.

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