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Asia and the Pacific

Rural enterprises. and poverty reduction. Asia and the Pacific. Importance of Rural Non-Farm (RNF) Enterprises for Poverty Reduction. Rural non-farm sector and employment is a vital source of income and employment

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Asia and the Pacific

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  1. Rural enterprises and poverty reduction Asia and the Pacific

  2. Importance of Rural Non-Farm (RNF) Enterprises for Poverty Reduction • Rural non-farm sector and employment is a vital source of income and employment • Non-farm economy accounts for 40-60% of employment, and rural non-farm economy accounts for up to 50% of rural employment in Asia • Non-farm economy is particularly important for households with less than 0.5 hectare (earn 30-90% of income through non-farm sources)

  3. Importance of RNF Enterprises for Poverty Reduction • RNF Self-employment and casual and regular wage employment comprise: • Household or livelihood enterprises • Micro-enterprises • Small-enterprises • RNF fosters linkages with farm sector through production, consumption, capital, and labour linkages • Linkages between rural and urban areas through supply of inputs, marketing of outputs, and subcontracting between rural and urban enterprises

  4. IFAD’s Experience in Promoting RNF Enterprises • Since 1978, IFAD has supported 60 projects and programmes with components on developing rural micro and small enterprises (RMSEs) • In 2003, a third of IFAD’s ongoing projects in in the Region included RMSEs-related activities • IFAD-supported projects promote RMSEs by • Facilitating access to financial and non-financial services • Improving access to markets • Creating a supportive institutional environment

  5. IFAD’s Experience in Promoting RNF Enterprises: Financial Services • Microfinance has historically been central in IFAD-funded projects as a catalyst to empower rural poor – especially women – and building local institutions • Channels of credit: • Individuals • Self-help groups • Linkage banking • Equity financing through apex institutions • Second-generation credit for the rural poor

  6. IFAD’s Experience in Promoting RNF Enterprises • Rural microfinance alone, though, is not a panacea in the fight against poverty • Two issues: • its effectiveness in reaching the extreme poor and the “missing middle” of entrepreneurs • its suitability for longer-term investments and poverty reduction • For RMSEs to graduate from livelihood level to growth-oriented level, there is a crucial role for skills training, production technologies and market linkages

  7. IFAD’s Experience in Promoting RNF Enterprises: Non-Financial Services • Non-financial services comprise: • Management-oriented or “business” training • Production-oriented or “technical skills” training • Entrepreneurial development training • IFAD has attempted to correct past imbalances by providing raising awareness about business opportunities, and providing technical assistance • Results of these interventions have been mixed

  8. IFAD’s Experience in Promoting RNF Enterprises: Access to Markets • Market access is crucial for RMSEs (ability to operate in local, national and export markets) • They usually suffer from lack of • Physical access to markets • Market-related skills for competitive markets • Information on markets and opportunities • Assistance in improving access to markets has not always received adequate attention

  9. Creating a Supporting Institutional Environment for RMSEs • RMSEs cannot be effective in a policy and institutional vacuum • Governments can create a conducive framework for RNF sector development by promoting • Macroeconomic and sectoral reform policies • Programmes and projects for financial, physical, social and human infrastructure • IFAD can assist governments in adopting prudent policies for RNF sector

  10. Major Issues and The Way Forward • Placing strong emphasis on business development/non-financial services • Enhancing women’s ownership • Improving market access and infrastructure • Targetting of vulnerable populations and scaling up of their activities

  11. Issues for Discussion • What innovations by IFAD and other partners are needed to better design and implement projects for rural enterprise development? • What complementary roles should IFAD, governments and other partners play to promote rural enterprises in marginal areas and for disadvantaged sections of rural poor (women, indigenous peoples)? • How can we link household or micro-enterprises in rural areas to larger, growth-oriented enterprises in semi-urban/urban areas? • How can we assist the rural poor in enterprise development in the context of macro policy changes, including trade liberalization?

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