What is Rural Entrepreneurship? Need, Types, Challenges, Importance

  • Post last modified:26 March 2023
  • Reading time:17 mins read
  • Post category:Entrepreneurship
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What is Rural Entrepreneurship?

Rural entrepreneurship is that entrepreneurship which ensures value addition to rural resources in rural areas engaging largely rural human resources.

Rural entrepreneurship has arisen as a dynamic concept. It is generally defined as entrepreneurship emerging at village level which can take place in a variety of fields of attempt such as commercial, manufacturing, agriculture and acts as an effective factor for economic development.

“Entrepreneurship development at village level which can take place in a variety of fields of enterprise such as business, industry, agriculture and acts as a powerful factor for economic development can be defined as Rural Entrepreneurship.”

In simple words, rural entrepreneurship suggests entrepreneurship developing in rural areas. In other words founding industries in rural areas refers to rural entrepreneurship. This means rural entrepreneurship is identical with rural industrialization.

Need for Rural Entrepreneurship

As Industrial units started by rural entrepreneurs are providing much employment to men than machines there is a rising need for rural entrepreneurs. Because of additional employment occasions, it has high potential for income generation in rural areas.

The following measures are to be applied for development of rural entrepreneurs.

  • There should be a free and continuous supply of raw materials as raw materials generate the basic element of the industry. Continuous supply of raw materials guarantees a constant and smooth production process.

  • Rural entrepreneurs face inadequacy of capital which is observed as the lifeblood of business unit. The establishment for sufficient capital will comfort development of rural entrepreneurs.

  • Establishing Industrial and business infrastructure in rural areas such as Road, Power, Water, Telecommunication, Banking services, Hotels etc.etc.

Types of Rural entrepreneurship

Rural industry or village industries are generally classified into the following categories:

  1. Agro Based Industries
  2. Forest Based Industries
  3. Mineral Based Industry
  4. Textile Industry
  5. Handicrafts
  6. Engineering and services

Agro Based Industries

This category of village industries involves direct sale or processing of agrobased products such as dairy and dairy products, Vegetable processing, fruit processing such as fruit juices or pulps, pickles, jiggery, processing ofoil from oil seeds, sugar industries, spices, cleaning and grading of grains, cereals, Pulses Millsetc.

Forest Based Industries

Forest based industries include products manufactured from processing raw material from the forest such as wooden products, bamboo products, beedi making, coir industry, honey making, etc.

Mineral Based Industry

These include quarrying, rock crushing, cement industries, wall coating powders etc.

Textile Industry

These include Cotton Ginning and Pressing, knitting, dyeing, spinning and bleaching, sericulture etc.etc.


These include making of wooden or bamboo handicrafts thatare local to that area, old-fashioned decorative products, toysand all other forms of handcrafts typical to the region.

Engineering and services

These include agricultural tools, tractors and pump sets, repairs etc.

Challenges of Rural Entrepreneurship

Developing entrepreneurship, predominantly rural entrepreneurship, is not so easy. It is controlled by numerous problems. Following are some of the challenges faced by rural entrepreneurs:

  1. Finance
  2. Knowledge
  3. Technical know-how
  4. Enterprising skill
  5. Infrastructural facilities
  6. Unfavourable social, cultural and industrial environments
  7. Communication
  8. Skilled labour
  9. Low-quality products
  10. Risk bearing ability
  11. Competition
  12. Middlemen


Of any business, entity finance is the life force. Most of the rural entrepreneurs are mostly worried to raise the finance for their businesses. Non-availability of satisfactory collateral security often shells the chances of rural youth in attaining adequate funds in time to set up their own project. Due to this, the entrepreneurs are required to take credit from village money lenders who charge excessive rates of interest.


Among the rural youth, there is an absence of sufficient knowledge of entrepreneurial opportunities as well as skills. The educated and skilled youths generally leave for urban destinations in search of jobs.

Technical know-how

On account of the imperfect education system, rural youth lack managerial, professional, mechanical know-how which is a weakness in developing the spirit of enterprise, hence not many people come forward to create self-employment units.

Enterprising skill

Most of the rural people in India lack risk-bearing ability, financial rationale, marketing knowledge and skills hence they are reluctant to engage themselves with business. Inclination towards wage employment and absence of creative thinking are few more reasons which have controlled the development of self-employment in a rural area.

Infrastructural facilities

Rural areas are measured by poor infrastructural facilities viz, roads, water, market, power, street lighting, road transport, storage and communication etc. which hinder the smooth movement of various industrial activities not only for the rural entrepreneurs but also for those from urban areas desiring to set up their unit in rural areas as it works out better for their project viability.

Unfavourable social, cultural and industrial environments

Social evils, caste systems, negativity, religious misconceptions, particularly in the countryside, do not allow the growth of adventurous spirit. Lack of skill and expertise in labourers, their tendency to wander to cities and consumer’s habit to buy goods produced by big companies generate many problems for fresh entrepreneurs.


Communication plays a vital role in any business, the absence of access to the right information and effective communication creates a hardship for rural entrepreneurs to recognize market trends and policies investigated by the government on industrialization.

Skilled labour

Skilled labours cannot be found simply by the entrepreneurs in rural areas. Due to high salary, highly skilled personnel prefer to work in big cities than in rural areas.

Low-quality products

Nowadays, consumers are more thoughtful of the quality of the product. But, due to the poor quality of raw materials and the absence of consistent tools and equipment, rural entrepreneurs cannot produce competitive products.

Risk bearing ability

Due to absence of financial resources and outside support, rural entrepreneurs have low risk-bearing ability. So, they tend to limit their capital infusion in their enterprises which is much needed to make the venture successful.


From urban entrepreneurs and larger-scale organizations, rural entrepreneurs are facing threatening competition. Due to the lack of standardization and branding of the products they cannot contest with the city entrepreneurs.


For marketing their products rural entrepreneurs primarily depend on middlemen. But they are cheated by offering low prices to their goods.

Importance of Rural Entrepreneurship

Following are the advantages of rural entrepreneurship:

  1. Creating employment opportunities
  2. Check on migration
  3. Regional Growth
  4. Promotion of art and handicrafts
  5. Check on social evils
  6. Awaken the rural youth
  7. Improved standards of living
  8. Utilisation of local resources
  9. Foreign exchange

Creating employment opportunities

Rural entrepreneurship is manpowerintensive and offers a clear solution to the rising problem of unemployment. Development of industrial units in rural areas through rural entrepreneurship has high potential for employment generation and income creation.

Check on migration

Rural entrepreneurship can fill the big hole and changes in income of rural and urban people. Rural entrepreneurship will bring in or raise infrastructural facilities like power, roads, bridges etc. It can help to contain the relocation of people from rural to urban areas in search of jobs.

Regional Growth

Rural entrepreneurship can dismiss the attention of industrial units in urban areas and endorseequitable regional development in a steady way.

Promotion of art and handicrafts

Through rural entrepreneurship the age-old rich inheritance of rural India is preserved by protecting and endorsing art and handicrafts.

Check on social evils

The development of rural entrepreneurship can decrease the social evils like poverty, growing of slums, contamination in cities etc.

Awaken the rural youth

To accept entrepreneurship and endorse it as an occupation rural entrepreneurship can awaken the rural youth and expose them to various avenues and prospects.

Improved standards of living

Rural entrepreneurship will also increase the literacy rate of rural population. Their education and self-employment will flourish the community, hence increasing their standard of living.

Utilisation of local resources

Rural industries help in the intenseuse of local resources like labour and raw materials for productive purpose and which raises the overall productivity and value addition of agricultural and allied products. An efficient, effective and optimum use of limited resources by therural entrepreneursleads towards overall economic development of that region.

Foreign exchange

Through export of their produce rural entrepreneurship plays significant role in growing the foreign exchange earnings of the country.

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