• Social Issues
    Jul 13, 2022

    Struggling on the Margins: Necessity-Driven Entrepreneurs in Rural Areas

    • Lina S. Maddah
    Struggling on the Margins: Necessity-Driven Entrepreneurs in Rural Areas

     

    The full impact of the multiple crises unfolding in Lebanon will take some time to assess. Nevertheless, it is already clear that the problems facing rural communities have been exacerbated by their marginalization, with their entrepreneurs virtually disconnected from other parts of the country. Sharing very common challenges, villages like Fnaidek, Hidab and Rashayya worry that they are being left behind, based on a study conducted by Lebanese Center for Policy Studies (LCPS).

     

    Specifically, necessity-driven entrepreneurs (NDEs)—individuals who start microbusinesses out of economic necessity and to compensate for a lack of other job opportunities—tend to lack the means and resources to weather the economic risks thrown up by the current crisis. Rather than focusing on the macroeconomic level (inflation, unemployment, and poverty), this article looks at targeted policies that are critical to NDEs and the rural economy more generally.

     

    To have a better understanding, one can consider a sectoral disaggregated analysis. NDEs in the three Lebanese rural areas mentioned above operate in a number of sectors: agricultural, livestock, poultry, apiculture, food-processing, eco-tourism, creative industries (including crafts and art-related activities), among others.

     

    Challenges on all fronts

     

    NDEs in these rural areas share many of the same challenges. Largely as a result years of government neglect, the agricultural sector faces many difficulties, including (1) the high prices of seeds, fertilizers, and pesticides, among other agricultural inputs, (2) a substantial increase in input prices for farmers, who were already struggling with high operational costs and inadequate supplies, (3) the high cost of plowing and maintaining the land, and (4) the cost of labor to harvest the crops.

     

    In addition, there are fundamental problems in infrastructure related to outdated irrigation facilities and inadequate storage capacity. Smallholder farmers, with limited economies of scale, poor knowledge of the markets, and restricted investment in infrastructure, are often forced out. This is largely due to the very limited number of farmers unions or cooperatives that can give small cultivators more leverage to negotiate better prices for their products. Similarly, the food-processing NDEs, a sector that represents Lebanon’s rural food heritage and cultural identity, in addition to being a significant part of the traditional local agricultural value chain, is struggling more than ever.

     

    The main challenges of agricultural NDEs can be categorized as follows: (1) shortage of fuel and electricity, which restricts the processing of plants, fruits, and vegetables, (2) inability to forecast fixed and operational costs, in addition to the relatively high cost of herbs, plants, fruits, and vegetables, as well as other essential supplies, such as glass bottles or tin cans, (3) changes in production plans due to emergencies and risks, both natural and economic, and (4) limited access to markets.

     

    Other sectors, like ecotourism, are also facing difficult circumstances largely stemming from the economic crisis, including: security concerns, diminishing demand as a result of social unrest and the fuel crisis, and high operational costs of food, electricity, and cleaning material. NDEs operating in the artisanal and creative sector are no exception. Artisans are slashing their profits, in order to survive. Their challenges are limited marketing ability and access to digital tools and export avenues or linkages. In addition, the level of informality in the sector restricts all growth and internationalization potential, as registration, formalization, and branding are prerequisites for any trade plans. All NDEs are suffering from low returns, given the amount of work and cost involved, and the branding process being slow and long, leaving many products without a brand name, which in turn impacts pricing.

     

    Supporting resilience

     

    Supporting the resilience of NDEs in rural settings is an effective way to support local economies, particularly in times of crisis. NDEs generate revenues and increase local productivity, which in turn drives economic growth. The promotion of a socially inclusive development policy that targets rural area is an urgent matter. Government support programs should be focused on rural development and facilitating greater cooperation among small villages, thus lessening existing tensions.

     

    Inclusive development strategies require a sound commitment from policymakers at the local level to address the main challenges of NDEs. Such policies are fundamental for creating a harmonized rural business environment that allows entrepreneurs to both serve—and benefit from—their local and regional communities.

     

    Establishing an emergency plan that relieves rural NDEs in the short run, mainly by ensuring food security within social protection programs, food aid, and the promotion of safe and affordable food supplies is required. This should be coupled with establishing local and regional unions/cooperatives conducive to strengthening the capacity NDEs (both established and new), with the goal of promoting growth and development, focusing specifically on expanding market access. There is also a need to establish capacity-building and vocational training for local stakeholders to develop their skills in areas related to their businesses.

     

    Rural stigma

     

    Despite the stigma associated with rural areas—i.e. the argument that economic development, entrepreneurship, and growth opportunities are strictly urban—is a misconception that has been challenged over the last decade. A new strand of literature is shedding light on the potential of economic development in rural areas, thus shifting the perception from “areas of stagnation” to “areas of opportunity,” where economic resilience can be fostered through a development paradigm shift.

     

    To understand the growth mechanisms of NDEs in rural areas, one must identify the diverse spatial characteristics of these areas—from well-serviced periphery communities close to urban areas, to remote sparsely-populated areas with limited access to basic services—as well as differing cultures. Indeed, promoting rural development through targeted policies cannot exclude supporting NDEs as a strategic development intervention.

     

    The relationship between entrepreneurs and their communities can be described as “interdependent,” and for both to flourish, there must be a linkage for understanding the special needs of both the private sector and the rural communities. It is a combination of several players: municipal unions, municipalities, civil society organizations, universities, private sector, and community. For so long, Lebanese rural areas have faced marginalization, and the time has come for a shift in such an economic paradigm. This new economic reality requires a commitment and a common vision that recognizes the central role rural areas can play in helping the overall economy recover. 

    Lina S. Maddah is an Economic Researcher at the Lebanese Center for Policy Studies (LCPS). Her areas of work include economic development, regional economics, industrial location, firm dynamics, and cultural and creative industries (CCIs). Maddah holds a Ph.D. in Economics from Universitat Rovira I Virgili (URV), Spain. Before joining LCPS, she completed an internship at the Organisation for Economic Co-operation and Development (OECD) in Venice, Italy; was a visiting researcher at the Regional Economics Applications Laboratory at UIUC, USA; and an economic researcher at the Department of Economics at URV-Spain. She is the recipient of the Martí I Franquès COFUND Fellowship (2017-2020), a project funded by the European Commission. She has participated in several national and international economic platforms that dealt with regional science, CCIs and local development, and economic geography.
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