INTRODUCTION TO RURAL ENTREPRENEURSHIP

ENTREPRENEUR –“Entrepreneurs” are people who create and grow enterprises. “Entrepreneurship” is the

process through which entrepreneurs create and grow enterprises.

“Entrepreneurship development” refers to the infrastructure of public and private policies and practices that foster and

support entrepreneurship.

WHAT IS RURAL ENTREPRENEURSHIP?

The problem is essentially lop-sided development which is development of one area at the cost of

development of some other place, with concomitant associated problems of under development. For instance, we have seen unemployment or underemployment in the

villages that has led to influx of rural population to the cities. What is needed is to create a

situation so that the migration from rural areas to urban areas comes down.

Migration per se is not always undesirable but it should be the minimum as far as employment is concerned. Rather the situation should be such that people should find it worthwhile to

shift themselves from towns and cities to rural areas because of realization of better

opportunities there. In other words, migration from rural areas should not only get checked

but overpopulated towns and cities should also get decongested. The question is, is it really possible? If it is so, ways can always

be found out.

One is by forcibly stopping villagers from settling in the slums of towns and cities,

making use of all powers to clear the slums so the villagers are forced to go back. But

such practices have not achieved the desired results in the past. Apart from causing

suffering to the poor people and adding to the expenditure for the Government, social

tensions and economic hardships created by the government officials and their staff in every demolition of slums is not desirable

from a sane government. Moreover, when a slum is demolished people do not move out

of urban locality.

Though governments have tried out various schemes for generating incomes in the rural areas such

government initiatives have not stopped people from moving out of villages to cities. This is because

such government initiatives are not on their own capable of enabling people to earn adequately and

ameliorate their conditions. Some individuals who happen to be local leaders

and NGOs and who are committed to the cause of the rural people have been catalytic agents for development. Though their efforts need to be

recognized yet much more needs to be done to reverse the direction of movement of people, i.e. to

attract people to the rural areas.

This is possible when young people consider rural areas as places of opportunities. Despite all the

inadequacies in rural areas one should assess their strengths and build on them to make rural areas

places of opportunities. This is much to do with the way one sees the reality of the rural areas.

Entrepreneurship purposefully is utmost for the development of rural areas.

Young people with such perspective and with the help of rightly channelized efforts would usher in an

era of rural entrepreneurship.

In this country successful rural entrepreneurs would solve many of the chronic problems within a short

time.

Entrepreneurs taking to rural entrepreneurship should not only set up enterprises in rural areas but should

be also using rural produce as raw material and employing rural people in their production

processes. Rural entrepreneurship is, in essence, that entrepreneurship which ensures value addition

to rural resources in rural areas engaging largely rural human resources. In other words, this means that finished products are produced in rural areas out of resources obtained in rural areas by largely rural people. The entrepreneur may or may not be

of rural origin. The entrepreneurs may be from anywhere, but their enterprises have to be located in a rural area, using mainly local resources both

material as well as human.

TRAINING AND DEVELOPMENT OF RURAL ENTREPRENEURS

A brief sketch of the training and support programmes launched by the government is given to enable the

reader get a comprehensive view of the efforts of human resources development for rural entrepreneurship.

Training of rural Youth for Self Employment (TRYSEM): Training of Rural Youth for Self Employment was

launched by the Government of India in 1979 as a facilitating component of Integrated Rural Development

Programme (IPDP). In this programme, the selected rural youth are put through a period of training, either

with a training institution or a master craftsman to provide necessary technical and entrepreneurial skills.

On completion of training, the identified youth receive a combination of subsidy and

institutional credit under IRDP for acquisition of an income generating asset. The syllabus for

each trade under TRYSEM should include training in job skills, as well as management

skills. The latter may include elements of bookkeeping, simple knowledge of marketing,

product costing, familiarization with entrepreneurial assistance agencies and with

project financing by banks.

Prime Minister's Rozgar Yojana (PMRY): Prime Minister's Rozgar Yojana was

launched on 2nd October 1993 to assist educated unemployed youth to set up self-

employment ventures. It relates to the setting up of the self employment ventures in

all economically viable projects (except direct agricultural operations). The Scheme

also seeks to associate reputed non-governmental organisations in

implementation of PMRY Scheme especially in the selection, training of entrepreneurs

and preparation of project profiles.

The scheme targeted for setting up of nearly

7 lakh enterprises and consequent employment generation to more than one million educated unemployed youth in the

last four years of the Eighth Five Year Plan. The target for the year 2004-05 & 2005-06 under the Yojana has been enhanced from

2.20 lakh beneficiaries to 2.50 lakh beneficiaries per annum for creation of

additional employment opportunities in the rural non-farm sector.

Swaranjayanti Gram Swarozgar Yojana (SGSY):

Swaranjayanti Gram Swarozgar Yojana (SGSY) was launched by Government of India in 1999 with a focus on providing

effective self employment through self help group approach and activity cluster approach for rural poor families below poverty line. The

self help groups are motivated through training and capacity building for taking up thrift and credit activity and start their own

small rural enterprises through the financial assistance of Revolving Fund Assistance.

The Scheme also seeks to associate reputed non-governmental organisations in implementation of

SGSY Scheme Rural Employment Generation Programme (REGP): On the basis of recommendation of the High Power Committee submitted in May 1994, headed by the then Prime Minster of India, the KVIC launched Rural Employment Generation Programme (REGP) with effect from 1st Nov 1995, for generation

of two million jobs under the KVI sector in the rural areas of the country.

TYPES OF RURAL ENTREPRENEURSHIP

Rural entrepreneurial activity can be broadly classified in four types such as:

Individual Entrepreneurship - It is basically called proprietary i.e. single ownership of the enterprise.

Group Entrepreneurship - It mainly covers partnership, private limited company and public limited company.

Cluster Formation - It covers NGOs*, VOs*, CBOs*, SHGs* and even networking of these groups. These also cover

formal and non-formal association of a group of individuals on the basis of caste, occupation, income, etc.

Cooperatives - It is an autonomous association of persons united voluntarily for a common objective. An entrepreneur

has to decide on a particular type of entrepreneurship based on the various options available.

NGO’S

These are non-profit making organizations registered under the Society's Registration Act, 1860. A group of seven

people come on a common platform to carry out defined activities for the socio-economic development of people.

The main characteristics of NGOs are: These are initiated, sponsored and constituted mainly by

the Government as autonomous bodies to fulfill specific developmental objectives.

These receive funds mainly from the Govt. and channelize them through VOs.

These are usually non-political in nature. These are formal organizations with rules, regulations and

procedures with professional management.

SELF HELP GROUP (SGH)Self-help groups are a platform of 10-20 people mainly,

below the poverty line (BPL) to form a social group not only to mutually help each other but also to achieve common objective. Only one member from a family is eligible for membership group. The Swanjayati Gram Swarozgar Yojana (SGSY) of the Ministry of Rural Development,

Govt. of India covers all aspects of self-employment of the rural poor viz. organisation of the poor in SHGs and their

capacity building, training, selection of , key activities, planning of activity clusters, infrastructure building up,

technology and marketing support. This is a non-formal group. The SHGs get funding from the NGOs, VOs and

even from the Government to carry out various activities in areas of common interest and an objective for economic

empowerment.

ENTREPRENEURIAL MOBILITY

Factors Influencing Mobility.

Occupational Mobility.

Location Mobility.

Let Us Sum Up.

FACTORS INFLUENCING MOBILITY

What makes the entrepreneurs mobile?

There cannot be a common factor influencing

all the entrepreneurs to move from one location

to another and similarly from one occupation to

another.

EDUCATIONEducation enlarges one's thinking and understanding horizons. It enables one to

comprehend conditions more easily and clearly and in a better manner. An educated person can also easily adjust with the changed environment,

hold better discussion and communicate in a more convincing manner. That an educated

entrepre neur tends to be more mobile than an uneducated one is supported by empirical

evidences also.

EXPERIENCE An entrepreneur's past experience in

business and industry also increases his/her propensity to move. The reason is not difficult to seek. An experienced

entrepre neur better perceives the available opportunities, better analyses his/her strengths and weaknesses and

also better understands the complexities involved in running an enter prise.

AVAILABILITY OF FACILITIES

A tendency is noticed among the entrepreneurs to move from the areas with no or less facilities to the areas with more and better facilities. Heavy concentration

of industries in Okhla, Ghaziabad and Faridabad near Delhi represent such

examples. The reason lies in the fact that these areas have proximity to various

agencies, facilities like transport, communication, power, market, etc.

POLITICAL CONDITIONS

For examples, the well-known enterprising Punjabi community, lost

almost everything during the partition and were compelled to move to every nook

and corner of the country in the pursuit of profit opportunities and shaped their lucks. Similarly, the Marwaris known as the most

'footloose' community in India also left their home and hearth long ago compelled

by the historical circumstances.

SIZE OF ENTERPRISE

Larger business houses are found more mobile than smaller ones. Initially, the entrepreneurs try to consolidate their

business position at a place, scale the commanding heights in the area, attain the

dominating position and thereafter try to successfully seize the business

opportunities elsewhere. The Indian business giants /houses like Tata, Birla, Dalmia etc. represent such examples.

Although one may add more factors to this list, yet the said factors seem to be the common ones influencing the entrepreneurial mobility.

Having known the factors influencing the entrepreneurial mobility. Hence, in what follows is the occupational and locational

mobility of the entrepreneurs

OCCUPATIONAL MOBILITY

In simple words, the occupational mobility denotes movement or changes in

occupation. This may take place in two forms. It may be a movement of a

son/daughter from the principal occupation of his/her father or it may be a drift in one’s

own occupation during his/her occupational career.

The first type of movement is called as 'inter-generation movement' and the latter

type of change as ‘intra-generation occupational movement’. The mobility is

called ‘horizontal’ when it takes place between the occupational classes of the

equal rank or vertical when it occurs between classes of unequal rank.

LOCATIONAL MOBILITY

The early theories of industrial location carried out the analysis on a simple

framework where the locational and spatial diversifications were simply determined by

an adjustment between location and weight distance characteristics of inputs and outputs. The reason is that the then

industrial structure was heavily dominated by the natural resource base and

consumer-oriented industries.

But, over the period, the very consideration for locating industries in a particular region has

undergone a considerable change. So, the early theories of industrial location have become

improper to explain industrial location. Consideration of the availability of natural

resources in the choice of industrial location has declined and the industries are likely to be established even in those areas with poor

natural endowment.

It is not always possible to explain the entrepreneurial mobility to a particular location independently with the help of anyone factor. In

fact, several considerations influence an entrepreneur to move to a particular

area/location to establish his industry. And in this lies the significance of studying the

entrepreneurial mobility from one place to another. As stated earlier, movement and

settlement have been an integral part of human history all over the world.

LET US SUM UP

Human life swings between two poles - movement and settlement. Various factors

like one's education and experience, availability of facilities, political conditions, etc. influence the entrepreneurs to move from one occupation to another and from

one location to another. Occupational mobility takes place in the forms of ‘inter-

generation occupational mobility’ and ‘intra-generation occupational mobility’.

PROJECT IDENTIFICATION

If you ask any one intending entrepreneur what project he/she will select, the obvious

answer would be “ a project having a good market”. But the question is how without knowing the product could one

determine the market? Whose market will one without knowing the item, i.e. product?

Idea generation about a few projects provides a way out of above tangle.

Project Identification is a repeatable process for documenting, validating, ranking and approving

candidate projects within an organization.

For identifying a new project, there are many institutions/agencies such as Entrepreneurship Development Institutes (EDIs)/Centers, Small Industries Service Institute (SISI), Technical

Consultancy Organizations (TCOs), etc. at State level and District Industries Centers (DICs), private consultancy organizations, etc. usually located at the district headquarter or in a nearby town which

can provide effective counseling services in planning the enterprise and also in the subsequent

activities. Once one decides to set up own business, one has a wide choice before her/him. In

other words, one has a choice of starting

Manufacturing unit - Setting up an industry means one has to organize many things like planning, arranging for technical know-how, buying and installing machinery, building a factory, managing several departments like production, sales, quality control, personnel

and administration, finance and so on and so forth.

Trading - Trading involves planning, purchase, sale, stock control and financial

management. A retail grocery shop, compared to an industry, is a simpler business. A large departmental store

however, is not so simple.

c) Service enterprise - A service enterprise can either be simple or complex. For instance, setting up a

photocopying centre and managing it may be simple but inspection of offshore oil-gas lines is a rather

complex business. To set up an industry or a service enterprise, one can start an enterprise in sectors like chemical, pharmaceuticals, basic metal industries,

metal products, machinery other than electrical machinery, electrical machinery, electronics,

transport equipments, textile, rubber, plastic, food, mineral-based industries, ceramics, agro-based but

non-food industries (e.g. making briquette from agricultural waste), paper, or glass.

Idea Generation

Project selection process starts with the generation of a product idea. In order to select the most promising

project, the entrepreneur needs to generate a few ideas about the possible projects he/she can undertake. The project ideas can be discovered from various internal

and external sources. These may include Knowledge of potential customer needs, Watching emerging trends in demands for certain products, Scope for producing substitute product,

Knowledge of potential customer needs,Watching emerging trends in demands for certainProducts,Scope for producing substitute product,Going through certain professional magazines catering to specific interests like electronics,computers etc.,Success stories of known entrepreneurs or friends or relatives.Making visits to trade fairs and exhibitions displaying new products and services,Meeting with the government agencies,Ideas given by the knowledgeable person,Knowledge about the government policy, concessions and incentives, list of items reserved for exclusive manufacture in small-scale sector, and A new product introduced by the competitor.

PROJECT SELECTION

Project selection starts from where project identification ends. After having some projects

ideas, these are analysed in the light of existing economic conditions, the government policy and

so on. The intending entrepreneur analyses his/her

strengths and weakness as well as opportunities/competitive advantages and

threats/challenges offered by each of the project ideas. On the basis of this analysis, the most

suitable idea is finally selected to convert it into an enterprise.

PROJECT SELECTION

RAW MATERIAL

LABOUR

PRODUCT

MARKET

TOTALINVESTMENT

WORKINGCAPITAL

LOCATION

OWNERSHIP

What is PROJECT FINANCE?

Project Finance involves a corporate sponsor investing in and owning a single purpose, industrial asset through a legally

independent entity financed with non-recourse debt.

Equity P reference

Share Capital Retained Earnings

OWNED CAPITAL

Debentures Term Loans, DPGs Public Deposits

BORROWED CAPITAL

LONG T ERM SOURCES

What is a PROJECT..?

In simple words project can be defined as

Or

“ A piece of work planned with a particular aim”

“a piece of work involving research”

CONTENTS OF A PROJECT REPORT

A good project report should contain the following contents:

General Information Promoter Location Land & Buildings Plant & Machinery Production Process Utilities

Transport and communication Raw Material Man Power Products Market

PLANNING COMMISSION GUIDELINES FOR FORMULATING A PROJECT

REPORT

• GENERAL INFORMATION• PRELIMINARY ANALYSIS OF ALTERNATIVES• PROJECT DESCRIPTION• MARKETING PLAN• CAPITAL REQUIREMENTS AND COSTS• OPERATING REQUIREMENTS AND COSTS• FINANCIAL ANALYSIS• ECONOMIC ANALYSIS• MISCELLANEOUS ASPECTS

The purpose of Project Appraisal is to ascertain whether the project will be sound – technically, economically, financially and managerially – and ultimately viable as a commercial proposition.

The appraisal of a project will involve the examination of:

a) Technical Feasibility : To determine the suitability of the technology selected and the adequacy of the technical investigation, and design.

PROJECT APPRAISAL

PROJECT APPRAISAL

b) Economic Feasibility : To determine the conduciveness of economic parameters to setting up the project and their impact on the scale of operations.

c) Financial Feasibility : To determine the accuracy of cost estimates, suitability of the envisaged pattern of financing and general soundness of the capital structure.

d) Commercial Viability : To ascertain the extent of profitability of the project and its sufficiency in relation to the repayment obligations pertaining to term finance.

PROJECT APPRAISAL e) Managerial Competency : To ascertain

that competent men are behind the project to ensure its successful implementation and efficient management after commencement of commercial production.

A project should also be examined, wherever appropriate, from the point of view of its value to the national economy in terms of socio-economic benefits like generation of employment opportunities, forex earnings, the quantum of import substitution, etc.

PROJECT APPRAISAL The first step in Project Appraisal is to find out

whether the project is prima facie acceptable by examining salient features such as:

The background and experience of the applicants, particularly in the proposed line of activity

The potential demand for the product The availability of the required inputs, utilities

and other infrastructural facilities Whether the project is in keeping with the

priorities, if any, laid down by the Government.

PROJECT APPRAISALIn project appraisal, nothing should

be assumed or taken for granted.

All the data / information should be checked and, wherever possible, counter-checked through inter-firm and inter-industry comparisons.

It should be borne in mind that “Healthy skepticism is a cardinal virtue in project appraisal.”