Rural enterprise development supports increased rural household incomes and employment creation - IOE
Rome, 31 March 2023 – IFAD-financed projects supporting rural enterprise development have contributed to income diversification and risk mitigation for entrepreneurs, mostly by creating or strengthening pre-entrepreneurial activities and very small microenterprises. As a result, the project strategies have fallen short of supporting enterprises with potential for larger employment impact. Fumiko Nakai, Senior Evaluation Officer at the Independent Office of Evaluation of IFAD (IOE) presented these findings during an on-line learning event, on 31 March 2023.
“Overall, there was often lack of clarity in whether the project focus was on supporting very small microentrepreneurial activities for household income increase and diversification and family member employment, or enterprises with more growth potential for generating employment opportunities for non-family members in rural landscape – or both. These require different strategies”, stated Ms Nakai.
Organized by IOE, the virtual learning event offered an opportunity to share and discuss the findings, conclusions and lessons of the project cluster evaluation on rural enterprise development which was conducted over 2021 and 2022. The session, which brought together over fifty participants, also featured a panel discussion that explored key issues around the overarching question of ‘how can IFAD contribute to improving the availability, quality and sustainability of business development services to support new and existing rural enterprises?’.
The project cluster evaluation is a new evaluation product, the aim of which is to enhance the learning aspect of project-level evaluations through comparative analyses of a small number of projects sharing common features. The evaluation presented at the learning event covered four projects that had a focus on rural entrepreneurship, enterprise development and employment creation, and that included support for non-financial services, access to finance and an enabling environment for rural micro and small enterprise development.
“Projects generally entailed an implicit assumption that many supported entrepreneurs would grow enterprises and create jobs for others, but this was over-optimistic: in reality, for many, micro-scale entrepreneurial activities are not a choice but a necessity”, noted Indran A. Naidoo, IOE Director.
The evaluation found that the introduction of new technologies and practices was effective in improving the performance of existing enterprises through improved productivity, both on- and off-farm. At the same, there was less contribution to enterprise upgrading by better business practices or access to markets.
The event highlighted that the factors affecting the project performance in enterprise establishment and growth included the sequencing and intensity of advisory and follow-up support, the process of screening and selecting participants with entrepreneurial aptitude, synergy with financial services, as well as types of enterprise and markets. Also, projects often underestimated the effort and time required to create, strengthen and sustain entrepreneurial activities and enterprises. However, the evaluation also positively noted that one of the projects covered in this evaluation (Cameroon) pursued the incubation approach and business coaching with a focus on youth with well-sequenced and intensive support.
“Creating and growing enterprises requires systematic, longer-term support. Efforts to improve rural entrepreneurs’ access to finance must be based on the assessment of their needs, as well as policy and institutional bottlenecks”, explained Ms Nakai.
The evaluation also underlined the importance of longitudinal and granular data on enterprise performance to better understand who participated and who benefited and to what extent, and which project interventions were most effective and for whom.
For further information, please contact Alexander Voccia [here]
- To access the presentation delivered by Fumiko Nakai, IOE Senior Evaluation Officer, please click here.
- To access the IFAD Policy on rural enterprise, please click here.