Anushruti Singh
While India Inc positively counts its GDP each time, there is a miniscule part that contributes to it—rural entrepreneurs.
In recent years, rural entrepreneurship has emerged as a pivotal force driving economic growth and development in India, particularly the micro, small, and medium enterprises (MSMEs). This trend is more than just a wave of new businesses; it signifies a transformative shift towards harnessing local talent and resources to foster self-reliance and sustainable development in rural areas.
According to a 2022 survey, nine out of ten rural businesses are led by first generation entrepreneurs. Additionally, the rural economy is also flourishing due to the manufacturing sector moving towards the Indian hinterland from urban areas. This has enabled the country’s rural economy to grow at a faster pace, growing by a real annual average of 7.3 per cent during the past decade, compared to 5.4 per cent for the urban economy.
Rural businesses are silent partners
Rural entrepreneurship has immense potential to contribute to the economic growth of India as more than 68 per cent of the population resides in these areas.
That being said, the businesses in the hinterland are more like silent partners—contributing to economic growth and job creation but remaining hidden. However, we cannot ignore their part in the country’s economic growth, says Ankit Verma, Indian Subcontinent Head at Air8.
“Rural enterprises can drive regional growth and reduce urban migration by encouraging innovation and sustainable practices. With adequate support in terms of infrastructure, training, and access to markets, rural MSMEs have the potential to significantly contribute to the national GDP and uplift entire communities from poverty,” he asserts.
Agreeing with him, Amit Bansal, CEO at Solv points out that these businesses empower villages through MSME development. “Empowering these enterprises can curb the growing poverty issue in the rural regions and boost the GDP. It also leads to job creation and encourages innovation. At Solv, we recognise that nurturing rural entrepreneurship is essential for achieving inclusive economic progress,” he says.
Overcoming the hurdles
However, businesses in rural regions face several challenges. Their most common hurdle is access to and awareness about finance. Their other challenges include inadequate infrastructure and insufficient market exposure.
“Navigating regulatory complexities and maintaining compliance also pose significant hurdles. Additionally, they often lack the technical expertise and resources needed for efficient business management,” says Verma.
Bansal meanwhile sees limited access to banking facilities as the main barrier for small businesses. “Small enterprises, especially in rural areas, face difficulty in getting financial resources due to a lack of awareness and education,” he says.
However, there is a silver lining we can’t ignore. The primary source of finance for starting rural businesses seem to be family and friends. According to insights from Social Enterprise World Forum, about a quarter of businesses were started with savings. SHGs, banks and NBFCs came later. Also, rural business owners approaching start-ups for customised solutions is the latest trend.
Conversely, here is a graphical presentation on why these businesses fail to expand.
Innovative solutions and future prospects
Organisations like Air8 and Solv are stepping in to provide innovative solutions to these challenges. Air8, an insight-based supply chain finance platform, sees vast opportunities for SMEs in rural regions. Recognising this, they are actively expanding their services to rural areas, providing crucial financial support to SMEs that struggle with limited access to working capital.
“By bridging this gap, Air8 not only aims to aid in the financial inclusion of rural businesses but also to stimulate local economies,” says Verma. Air8 addresses these issues by providing accessible financing options, leveraging technology to streamline processes, and offering comprehensive support to help SMEs overcome these obstacles, enabling them to achieve sustainable growth and economic stability.
Solv tailors its financial services to meet the needs of rural entrepreneurs by offering microloans with flexible repayment terms and digital payment platforms. “We provide collateral-free loans based on alternative credit assessments and utilise mobile banking to reach underserved areas. Our services are designed to be accessible via mobile technology, reducing transaction costs and overcoming geographical barriers,” Bansal explains.
Additionally, Solv’s in-house tech stack is tailored for MSMEs that target their specific needs, aiming to revolutionise trade by digitising the value chain. “This empowers MSMEs to stand their ground against large corporations and tech companies,” Bansal adds.
Stories of success
The impact of these initiatives is already visible. For instance, Air8 has facilitated the growth of various small businesses by providing much-needed financial support. An example is an Indian exporter who faced extended credit terms from their UK buyer. Air8’s post-shipment factoring solution helped them to secure funding within a day, easing their working capital constraints and enabling them to increase their exports.
“That exporter had a turnover slightly less than 5M USD and he was facing extended credit terms from their UK buyer, with barely sufficient notice. This exporter approached us, and within the same day, applied for our post-shipment factoring solution and thereafter, successfully secured access to funding,” Verma tells us.
Similarly, Solv has also witnessed many success stories and has helped numerous businesses to rebuild and thrive. Bansal cites one example for us. During the COVID-19 pandemic, a seller who lost 90% of his clients due to export restrictions was able to refocus on the domestic market with Solv’s help.
“Solv helped him rebuild his business with a focus on the domestic market. Today, he is one of the largest sellers on the platform, with a strong relationship with us,” he says.
The road ahead
The future looks promising for rural entrepreneurship in India. The SEWF survey notes that there has been a positive disposition towards entrepreneurship among rural citizens. The drivers being—earning a comfortable living, dissatisfaction with their present occupations in terms of money making, or people simply wanting to be their own bosses as business owners are among the richest in their villages.
Consequently, companies like Air8 and Solv are committed to expanding their reach and impact. Solv plans to educate rural entrepreneurs on financial awareness, create an educational environment to help them understand policies, and form strategic partnerships to help scale their businesses. “We aim to equip these entrepreneurs to meet global standards, ensuring broader access to finance for rural entrepreneurs,” says Bansal.
Rural entrepreneurship is not just a growth story; it’s a story of resilience, innovation, and transformation. By overcoming significant challenges and leveraging local talent and resources, rural entrepreneurs are not only contributing to the GDP but are also paving the way for sustainable development and inclusive economic progress in India.
