Rural entrepreneurship and resilience

By Dennis Mombauer

The concept of entrepreneurship is closely linked with the concept of risk. An entrepreneur is someone willing to take risks to set up a business, and risk management is one of the core skills needed to turn an idea into a start-up, a start-up into a small to medium enterprise (SME), and an SME into a larger business. Such risks can include financial risks, market and economic risks, competition risks, product and technology risks, reputational risks, compliance risks, or environmental risks. Furthermore, with the advent of climate change and the resulting long-term impacts and extreme weather events, climate risk has become a key consideration for anyone aiming to become an entrepreneur.

This is particularly important for entrepreneurs in rural areas, who often have lesser access to resources, infrastructure, and start-up ecosystems than entrepreneurs in urban and peri-urban areas. Especially in the start-up and SME stage, rural entrepreneurs can benefit from targeted support and holistic risk management that takes into account the specific challenges of setting up a business in rural or remote areas, such as limited market access, limited availability of technology, low levels of consumer purchasing power, difficulties with logistics, transport, and storage, lack of capacities and skilled labour, and limited financial and technical assistance.

Climate change and other risks

In addition to these challenges, rural areas in Sri Lanka, South Asia, and many other regions also tend to be vulnerable to climate-related risks. As documented by the recent sixth assessment working group II report of the Intergovernmental Panel on Climate Change (IPCC), “Approximately 3.4 billion people live in rural areas around the world, and many are highly vulnerable to climate change.” Reasons for this heightened vulnerability include a dependence on natural resources, a prevalence of climate-sensitive livelihoods, low economic diversification, poverty, unemployment, insufficient infrastructure, out-migration, and others.

Climate change disproportionately affects economic sectors and livelihoods that rely on predictable weather patterns and natural resources, such as agriculture, fisheries, aquaculture, or forestry. Extreme weather events such as tropical storms, high winds, flash floods, heat waves, prolonged dry spells, and droughts can be as devastating as slow-onset processes, for example soil degradation, decline in crop yields, loss of ecosystem services, salinisation, sea level rise, and spread of pests and diseases. If these climate-related risks are not properly managed, they can severely affect rural entrepreneurs, especially those without sufficient safety nets.

In today’s world, entrepreneurs are faced with a variety of risks that interact in complex ways and can compound each other. For example, climate-related risks can interact with market risks and cause price volatility for food staples such as rice or wheat, which is an impact projected for South Asia in the new IPCC report. Navigating this risk environment is a key part of the entrepreneurial skill set, but entrepreneurs might need support and guidance to identify the right strategy and actions to risk-proof their business.

The need for rural entrepreneurship

What is the importance of rural entrepreneurship from a climate lens? As outlined above, rural areas are highly vulnerable to climate change impacts and exposed to a multitude of climate- and non-climate related risks. Covariate shocks can affect many individuals, households, or businesses at the same time. For example, if all households in an area are cultivating a certain crop, a drought could affect all of them and greatly reduce the overall harvest, which in turn will affect the entire community ecosystem and secondary jobs, for example small shops, farm labourers, processors, or migrant workers. Conversely, if some members of the community engage in other activities – tourism, product development, running a small-scale business – the same shock or hazard might have a lesser effect.

Therefore, rural entrepreneurship and the resulting economic diversification can render communities more resilient to climate change and other shocks. It can be considered a way to better manage the complex risks of today through a diversified rural economy and labour market, including the creation of new jobs and sub-sectors, for example as part of a just energy transition or a transformation of food systems towards plant-based and ethical production. Entrepreneurship is the search for new solutions to existing problems, for new ways to address issues within or beyond the country. If start-ups succeed, they can generate significant profits, scale up, and establish themselves as a permanent fixture of their community and economic landscape.

Supporting rural entrepreneurship and ecosystems

Rural regions often have a variety of underutilised resources and capacities, including natural ecosystems and products, cultural and social practices, food varieties, potential for tourism activities, traditional knowledge, biodiversity, landscapes, archaeological sites, and more. These resources and capacities can form the basis for entrepreneurship and innovation, but entrepreneurs need support to harness this potential and turn their concepts into robust business cases.

Measures such as setting up training programmes and certificate courses, conducting workshops and open forums, creating help desks, developing support networks, establishing capacity-building hubs, and providing co-working spaces, support facilities, and local accelerators can make a pivotal difference for rural entrepreneurs. By nurturing local start-up ecosystems, rural areas can turn into hubs for entrepreneurship that benefit individuals, households, and communities through the creation of new jobs, expansion of the consumer base and market, capacity-building, and poverty reduction.

After setting up the basics of their business, rural entrepreneurs might also need to scale their enterprise beyond the local level to increase market potential, reach a larger audience, and be able to interact and collaborate with other start-ups and businesses. Therefore, it is important that local hubs are not set up in isolation but in active dialogue with other areas and at a national level. Simultaneously, actions can also be taken on the national level to create a better environment for local entrepreneurship, for example through integration of entrepreneurship into national education curricula and business education, strengthening social protection programmes, or enhancing access to relevant information, guidelines, and toolkits.

Resilience and sustainable development

When entrepreneurs and start-ups connect on different levels, they begin to form and grow complex business ecosystems. These ecosystems can revolve around a single centre of gravity, for example a university or an accelerator, but they can also become multi-polar, establishing vital flows of information and investment, knowledge hubs, and physical or virtual spaces. This process has the potential to grow rural areas in many ways by enhancing their economies, infrastructure, connectivity with urban areas, available skill sets and technology, social cohesion, and risk-sharing.

To bring all this together: supporting rural entrepreneurship is not only a way to empower individuals and uplift rural areas from poverty, it also builds the resilience of households and communities against climate change and other shocks. Supporting entrepreneurship is therefore not only an important element of sustainable development and working towards the Sustainable Development Goals, it is also a strategy of climate change adaptation and risk management that provides co-benefits far beyond the individual start-ups, SMEs, and businesses involved.

(The writer works as Director – Research and Knowledge Management at SLYCAN Trust, a non-profit think tank based in Sri Lanka. His work focuses on climate change, adaptation, resilience, ecosystem conservation, just transition, human mobility, and a range of related issues. He holds a Master’s degree in Education from the University of Cologne, Germany and is a regular writer to several international and local media outlets.)