PERSPECTIVES
3.2 UNDERSTANDING ENTREPRENEURSHIP: A GLOBAL PERSPECTIVE
3.2.3 Challenges Facing Rural Entrepreneurship in the Global Context
Although rural entrepreneurship plays a very important role in the development of the local economy, there are peculiar challenges that hinder the successes and prospects for
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entrepreneurship in rural areas to survive and thrive (Venkateswarlu & Ravindra, 2015).
According to Banerjee (2011), entrepreneurship demands an enabling environment to flourish.
Venkateswarlu and Ravindra (2015); Gowrishanka, Raja and Prasad (2014); Saxena (2012);
Banerjee (2011) state that the major of problems associated with rural entrepreneurship include finance, marketing, management and human resource. Finance, lack of education and limited skills, marketing hurdles, management, social and human resource problems, insufficient technical and conceptual ability, and institutional problems are among the most common challenges facing rural entrepreneurship and small business development around the world (Madzivhandila & Dlamini, 2015; Venkateswarlu & Ravindra, 2015; Patel & Chavda, 2013).
These challenges make it difficult for rural entrepreneurs to start businesses and industries in their communities.
3.2.3.1 Financial Challenges
Lack of start-up money, loan facilities, reduced profits as a result of competition pricing of goods and services, and strict tax rules are just a few of the financial obstacles that rural businesses face (Saxena, 2012). In most developing countries, one of the most significant obstacles to rural business is the lack of funds. According to Saxena (2012), a majority of rural entrepreneurs do not have access to external financing due to lack of security and credit facility in the market. In their research, Mugobo and Ukpere (2012) found that credit remains highly problematic for rural entrepreneurship as financing institutions still find it difficult to help rural entrepreneurs due to lack of security. Nandanwar and Jalgaon (2011) agree that less support from financial institutions and lack of financial resources, particularly in obtaining micro credit is one of the major problems facing rural entrepreneurship. As a result, limited access to financial resources and services has a negative impact on the growth and performance of rural businesses. Financial institutions in most African countries are underdeveloped, and access to credit is limited, making shortage of credit one of the continent's major barriers to business growth (Edoho, 2015).
Edoho (2015) argues that because of underdeveloped and inefficient financial markets, rural entrepreneurs tend to resort to internal or personal funds for investment. Rural entrepreneurs
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experience difficulties accessing these scarce resources due to among others, lack of information, and appropriate technology. Fatoki and Patswawairi (2012) identified lack of resources and lack of access to finance as some of the barriers to entrepreneurial promotion. Jayadatta (2017) and Venkateswarlu and Ravindra (2015) agree that some of the financial problems faced by rural entrepreneurs are associated with paucity of funds, lack of infrastructural facilities and less risk bearing capacity. Due to the absence of tangible security and credit in the local market, most rural entrepreneurs fail to get external funds. Furthermore, the procedure of getting credit from financial institutions is too time-consuming thereby discouraging rural entrepreneurs (Jayadatta, 2017; Imedashvili, Ivchenko, Kekua, 2013; Sharma et al., 2013).
Venkateswarlu and Ravindra (2015) discovered that many rural entrepreneurs were unable to obtain the necessary support from various financial institutions due to their lengthy procedures.
Major sources of finance or funding for rural entrepreneurs are loans from local banks with very exorbitant interest rates, however some government institutions are meant to provide assistance for such purposes. Despite this, a majority of these government institutions have failed to produce the expected results (Vendathadesikan & Pathmanathan, 2016). Other challenges faced by rural entrepreneurs include rural consumers’ limited purchasing power, resulting in insufficient sales volume, reduced earnings due to competition, a lack of capital to establish a firm, and pricing of goods and services (Jayadatta, 2017). Because of the decreased purchasing power of most rural residents, rural markets shrink. One of the most significant hurdles to people wishing to start their own enterprises in rural areas, according to Ngorora and Mago (2013), is a lack of adequate start-up funding. Most rural entrepreneurs find it challenging to start businesses because of their financial difficulties. As a result, many rural businesses face difficulties as a result of the scarcity of financial resources in rural areas. Another major issue confronting rural entrepreneurship is management or institutional flaws, which is discussed in the proceeding section.
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Rural entrepreneurs face management deficiencies such as lack of knowledge of information technology, legal customs, procurement of raw material, lack of technical knowledge and poor quality of products, goods or services (Jayadatta, 2017; Venkateswarlu & Ravindra, 2014; Patel
& Chavda, 2013; Saxena, 2012). Managing an enterprise requires an entrepreneur to have management competencies such as financial control, marketing, production, leadership and record keeping among others. Consequentially, in order to set up and operate a business, entrepreneurs must have such managerial skills. Small business owners in most developing countries struggle to master the art and science of managing their businesses, which has hampered economic growth because they devote less time to learning managerial skills (Eriobunah & Nosakhare, 2013). The majority of entrepreneurs confront difficulties due to a lack of knowledge about business methods, capital management, book-keeping, marketing, and leadership. As a result, it is critical for rural entrepreneurs to have managerial skills and competences in order to run their firms successfully in the rural areas.
3.2.3.3 Marketing Challenges
Lack of marketing orientation and knowledge is considered as one of the major factors for entrepreneurial failure (Eriobunah & Nosakhare, 2013). Another challenge that rural entrepreneurs face in most developing countries is limited access to markets. Their argument is that an entrepreneur without the necessary marketing skills or ideas in business tends to face marketing challenges. Because they lack access to training and experience, most entrepreneurs are unable to advertise their firms due to a lack of competence and understanding. Additionally, rural entrepreneurs are unable to compete with their urban counterparts because of lack of standardization, branding and product quality (Jayadatta, 2017). According to Sharma et al.
(2013), rural entrepreneurs face marketing challenges, the most significant of which are standardization and competition from large-scale firms. Identifying customers, executing promotion tactics, understanding the customer, overcoming discouraging opinions, successfully networking, getting business from large corporations, and developing new products and services
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are just some of the issues that an entrepreneur faces in marketing (Eriobunah & Nosakhare, 2013).
Rural entrepreneurs are heavily reliant on middlemen for product marketing, who pocket a large portion of the profit (Jayadatta, 2017). Other marketing issues in rural areas include a lack of storage space and a lack of transportation. Clearly, marketing involves a wide range of activities intended at persuading customers to buy a company’s products or services. In other words, marketing allows a business owner to interact, communicate, and build relationships with customers while also maintaining relevance, making informed decisions, and increasing sales. As a result, a lack of effective marketing operations can wreak havoc on rural enterprises. Rural entrepreneurs struggle to understand market trends and policies due to a lack of effective communication and access to relevant information.
3.2.3.4 Human Resource Challenges
One of the other challenges faced by rural entrepreneurs is human resource problems (Fiseha &
Oyelana, 2019; Mugobo & Ukpere, 2012; Saxena, 2012). Human capital or resource is one of the most important assets that entrepreneurs cannot do without for their businesses to thrive (Lekhanya, 2018). Some of the major problems associated with human resources include low skill levels of workers and negative attitudes in most rural areas (Jayadatta, 2017; Dilip, 2014;
Imedashvili, Ivchenko & Kekua, 2013; Saxena, 2012). Most rural entrepreneurs find it extremely difficult to find or attract workers with high-level skills or willing to work in a rural setting.
Consequently, rural entrepreneurs are forced to settle for low skilled labour available and provide training to their employees, as they are mostly uneducated (Sharma et al., 2013). Lack of access to highly skilled workers is one of the major problems entrepreneurs’ encounters in rural areas.
These observations suggest that any business success, in rural or urban settings, depends primarily on the kind of human resource a business has. Many rural workforces have low skills level, lack of skills miscellany, retirement of experts and a structural mismatch between available jobs and people (Dabson, 2001). Ojha (2016) also mentions lack of technical expertise, low skills base, lack of knowledge and self-confidence of the rural populace as some of the problems faced
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by rural entrepreneurs including lack of education and limited experience. Generally, there is shortage of highly skilled and educated people residing in rural areas. Such skill deficiencies hamper the success and growth of most enterprises in rural areas. Clearly, access to skilled labour is one of the major constraints facing rural enterprises.
In addition to the problems and challenges mentioned above, government policies on licenses, taxes and duties, information technology, poor infrastructure facilities, unsupportive financial institutions, lack of technical know-how, lack of communication facilities, lack of storage and warehouse facilities are other major problems in the development of entrepreneurship in rural areas (Venkateswarlu & Ravindra, 2015; Bhuvaneswari & Raju, 2014; Lavanya et al., 2014;
Sharma et al., 2013; Banerjee, 2011). These challenges constitute both internal and external factors that inhibit development and growth of entrepreneurship and small business in rural areas. As a result, starting and growing an enterprise remains a challenging activity in the rural areas (Madzivhandila & Dlamini, 2015). Thus, in order to promote entrepreneurship and encourage establishment of new business ventures in rural areas, there is a necessity to understand more about these obstacles and how to overcome them. Lavanya et al., (2014) argue that a critical prerequisite for nurturing entrepreneurship in rural areas is the creation of a favourable business environment. Clearly, rural entrepreneurship faces diverse challenges, which could create an environment not conducive for entrepreneurship in the rural areas to flourish.
Entrepreneurs all over the world face general problems, however variations between developing and developed countries exists. As such, there are numerous barriers to entrepreneurship in most developing countries.