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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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Rural enterprises

and poverty reduction

Asia and the Pacific

importance of rural non farm rnf enterprises for poverty reduction
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)
importance of rnf enterprises for poverty reduction
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
ifad s experience in promoting rnf enterprises
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
ifad s experience in promoting rnf enterprises financial services
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
ifad s experience in promoting rnf enterprises6
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
ifad s experience in promoting rnf enterprises non financial services
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
ifad s experience in promoting rnf enterprises access to markets
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
creating a supporting institutional environment for rmses
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
major issues and the way forward
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
issues for discussion
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?