Jour of Adv Research in Dynamical & Control Systems, May 2017

Special Issue on Recent Trends in Engineering and Managerial Excellence

Problems of Rural Entrepreneurship in the

Central Districts of Tamilnadu
K.P. Balraj, Ph.D Research Scholar, Department of Management Studies and Research, Karpagam University, KAHE,
Coimbatore, Tamilnadu, India. E-mail:balrajpalanisamy.mba@gmail.com
Dr.R. Velmurugan, Associate Professor, Department of Commerce, Karpagam University, KAHE, Coimbatore, Tamilnadu,
India. E-mail:drvelsngm@gmail.com
Abstract--- Rural entrepreneurship acts as a mechanism in controlling the migration of population from rural areas
to semi urban and urban areas. Rural entrepreneur’s acts as a catalyst for the rural development by utilizing the rural
resources in an optimal manner and by offering employment opportunities to the rural masses. On the contrary it is
also a fact that the majority of rural entrepreneurs is facing numerous problems like paucity of funds in promoting a
business, poor knowledge on marketing, non-availability of raw materials in time etc. In this study an attempt has
been made to find out the Problems faced by the entrepreneurs in the central part of Tamilnadu. The result of the
study discloses that the major problem faced by rural entrepreneurs in the central part of Tamilnadu are marketing
and financial problems.
Keywords--- Rural Entrepreneurship, Problems, Development, Central Districts of Tamilnadu.

I. Introduction
The majority of rural entrepreneurs are facing several problems in today’s ultra-competitive business world; due
to the lack of basic amenities in the rural areas like, lack of education, financial problems, marketing hurdles,
Management and human resource problems, insufficient technical and conceptual abilities etc., discourage the rural
entrepreneurs to establish the industries in their rural areas. In this regard, currently the government of Tamilnadu
offered different kinds of entrepreneurial development schemes through various Government owned EDP
Institutions such as Tamilnadu industrial investment corporation Limited, new entrepreneur-cum enterprise
development scheme (NEEDS) from the department of industries and commerce, Government of Tamilnadu, and
small enterprise development scheme offered by MSME, These schemes helping to uplift their entrepreneurial skills
to perform well. The present study focuses on the major problems faced by the rural entrepreneurs. Special emphasis
has been laid on the technological problems, Institutional Problems, Financial problems and lack of other basic
amenities.
An entrepreneur is one who plays a significant role in the economic development of the country. Basically an
entrepreneur can be regarded as a person who has the initiative, skill and motivation to set up a business or an
enterprise on his own and who always looks for the high achievements. He is a catalyst of social change and works
for common good. He looks for opportunities, identifies them and seizes them mainly for the economic gains. An
entrepreneur is a person who is able to express and execute the urge, skill; motivation and innovative ability to
establish a business or industry of his own either alone or in collaboration with his friends. His motive is to earn the
profit through production or distribution of socially beneficial goods or services. He is enriched with the inborn
qualities of adventurism, willingness to face the risks, innovative urge and creativity and eager to make dynamic
changes in the production process, also introduces innovations to find out new uses of raw materials. In addition to
this the other challenges including; developing the vision and ideas, raising capital, assembling a team, finding the
right location, finding the right employees, finding good customers, overcoming competition, unforeseen challenges
and expenses, keeping up with the industrial changes and trends and exiting the business. In the present scenario of
business, the micro, small and medium enterprises have been accepted as the engine of growth for promoting the
equitable development. The MSME`S also have the vital role in the dispersal of industries and generation of
employment opportunities. The MSME`S are providing jobs more than 6 crore people. The MSME sector is
contributing 8% of country’s GDP, 45% of manufacture and 36% its exports. The MSME`s sector has consistently
registered higher growth rate compared to the overall industrial sector. The distribution of MSME`S in all over India
is not equal because of unavailability of raw material, unawareness or lack of entrepreneurial skills development and
lack of support of financial and technical assistance from the concerning local authorities at the district or state and
central level. Annual Report 2014-15, Govt. of India, Ministry of Micro, Small and Medium Enterprises.

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Jour of Adv Research in Dynamical & Control Systems, May 2017
Special Issue on Recent Trends in Engineering and Managerial Excellence

II. Review of Literature

Sureka (1989) in her study focused on the role of women as entrepreneurs and stated that the problem faced by
women entrepreneurs were quite different from that of male entrepreneurs, because most of the women in the field
were new entrants or belonged to the first generation. Hence consequently, she argued for the intensified support
from the government, banks and their institutions on priority basis to facilitate the development of women
entrepreneurs. Mali (1998) observed that the small and medium enterprises (SMEs) and micro enterprises have to
face the increasing competition in the present scenario of globalization, they have to specifically improve
themselves in the fields of management, marketing, product diversification, infrastructural development,
technological up gradation. Bhatia (2004)in his study finds that the entrepreneurs established their business in
various sectors like service, trading, manufacturing and agriculture. The research analysis showed no relationship
between the growth of firms and socio-economic background of the entrepreneurs. The study revealed that the firms
which continuously expanded, had a gradual growth and were started with a relatively favorable capital base were
mostly established by the merchants. The entrepreneurs showed a tendency to diversify instead of expanding after a
point and the researcher suggests that this was because of the lack of vital information about the wider markets.
Thiripurasundari, K and V. Gurumurthy (2009)in their study highlights the challenges of micro, small and medium
enterprises of India. One side the globalization isan opportunity as well as a challenge for the indigenous MSME’S.
The Indian MSME’S are facing a great problem due to the larger production of foreign manufacturing concerns. The
financially strong MSME’S will survive strongly at globalized platform. Sandeepsaxena (2012) in his study finds
that the Rural entrepreneur uses the scarce resources in the most efficient manner thereby increasing the profits and
decreasing costs. Due to the lack of education, majority of the rural people are unaware of the technological
development, marketing etc. Shortage of finance and raw materials are the main problems faced by the rural
entrepreneurs. Most of the rural entrepreneurs face the peculiar problems like illiteracy, fear of risk, lack of training
and experience, limited purchasing power and competition from the urban entrepreneurs Promotion of the rural
entrepreneurship is a key to develop rural areas and backward towns This paper focuses on the identification of
various problems associated with the rural entrepreneurship. Suitable cures have also been discussed to overcome
these problems.
Kanitkar Ajit (2015) did a study of 86 entrepreneurs belonging to 22 villages from the seven states of India and
Rajasthan in the western India; Uttar Pradesh and Bihar in the northern India; West Bengal in the eastern India;
Madhya Pradesh in the central India; and Tamil Nadu and Kerala in the Sothern India. The focus of the analysis and
understanding the underlying pattern of entrepreneurs in the villages across the different states of India. The study
found that 55 percent of the entrepreneurs stepped out of the school-leaving examination. Only 17 percent of the
entrepreneurs stepped out of the school and enrolled in colleges. A large majority (73%) of the entrepreneurs did not
possess professional or technical qualifications which supposedly would have made them stores marketable in the
job market. Only 23 percent had trained themselves in some trade or vocation. The study found that almost 90
percent of the respondents were the first-generation entrepreneurs. The average investment by the entrepreneurs was
Rs. 16,000 and it ranged from a minimum of Rs.5000 to a maximum of Rs. 60,000. And almost every entrepreneur
reported a lack of access to the institutional credit as their important problem.

III. Statement of the Problem

India lives in its villages, nearly 73 % of the total population lives in the rural areas where the agriculture and
allied activities are the main stay of their lives. The economic development of our country largely depends on the
development of rural areas and the standard of living of the rural mass. Rural entrepreneur is one of the most
important inputs in the economic development of a country. Rural entrepreneur uses the scarce resources in the most
efficient manner thereby increasing the profits and decreasing costs. Due to the lack of education, majority of the
rural people are unaware of the technological development, marketing etc. Shortage of finance and raw materials are
the main problems faced by rural enterprises. Most of the rural enterprises face peculiar problems like illiteracy, fear
of risk, lack of training and experience, limited purchasing power. The rural entrepreneurs have also face
competition from the urban entrepreneurs who make more attractive and cheaper products due to the use of modern
technology, commercial production and marketing networks. Keeping this in view, the researcher specially touched
upon the problems faced by rural the entrepreneurs from the central districts of Tamilnadu with the empirical
analysis.

IV. Objective
To identify the problem faced by the rural Entrepreneurs of the central districts of Tamilnadu.

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Jour of Adv Research in Dynamical & Control Systems, May 2017
Special Issue on Recent Trends in Engineering and Managerial Excellence

V. Methodology
Data
The data required for the study is primary in nature. The primary data have been collected by making use of the
Questionnaire.
Area of Study
The present study is confined to the problems faced by the rural Entrepreneurs of the central districts of
Tamilnadu. In the geographical map of Tamilnadu. Like that Salem, Dharmapuri, Perambalur, Namakkal, Karur,
Trichy, Krishnakiri and Erode are located in the part central of Tamilnadu. Before conducting the research survey,
the researcher has gone through the annual and performance reports issued by the District investment corporation,
MSME and SIDCO of Tamilnadu, the result of this report shows the entrepreneurial performance of Tamilnadu,
especially in the rural area of these districts are not having an adequate level of development, some of the central
districts are already having enough facilities to uplifting the entrepreneurs even the people are not aware about the
opportunities of the entrepreneurship development offered by the Government within their districts like Erode and
Trichy.
Sample Design
Naturally the entrepreneurs are always little busy with their regular schedule of assignments, even they have
contributed their presence according to their convenience, By adopting the convenient sampling method, 560
entrepreneurs have been selected.
Framework of Analysis
The collected data have been analyzed by making use of the Structural Equation Model.A structural equation
model implies a structure of covariance matrix of the measures (analysis of covariance structures). After estimating
the model's parameters, the resulting model-implied covariance matrix can be compared to the empirical or data-
based covariance matrix. If the two matrices are consistent with one another, the structural equation model can be
considered as a plausible explanation for relations between the measures. This study focused on the problems faced
by the rural entrepreneurs by using the structural equation model analysis.

Regression Weights: (Group number 1 - Default model)

Estimate S.E. C.R. P Label
Problems <--- Technology .123 .024 5.215 ***
Problems <--- Marketing .328 .022 14.992 ***
Problems <--- Financial .318 .018 18.151 ***

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Special Issue on Recent Trends in Engineering and Managerial Excellence

Covariances: (Group number 1 - Default model)

Estimate S.E. C.R. P Label
Technology <--> Financial .792 .661 1.197 .231
Marketing <--> Financial -2.691 .722 -3.727 ***
Technology <--> Marketing 9.471 .683 13.864 ***
CMIN
Model NPAR CMIN DF P CMIN/DF
Default model 10 .000 0 .000 .000
Saturated model 10 .000 0
Independence model 4 841.333 6 .000 140.222
Baseline Comparisons
Model NFI RFI IFI TLI CFI
Delta1 rho1 Delta2 rho2
Default model 1.000 1.000 1.000 1.000
Saturated model 1.000 1.000 1.000
Independence model .000 .000 .000 .000 .000
RMR, GFI
Model RMR GFI AGFI PGFI
Default model .000 1.000 1.000
Saturated model .000 1.000
Independence model 4.737 .721 .535 .433
RMSEA
Model RMSEA LO 90 HI 90 PCLOSE
Default model .000 .000 .000 .000
Independence model .338 .326 .350 .000
AMOS-Summary Statistics for Model Fit
Model fit index Recommended values Observed values
Chi-square/degrees of freedom <=3.00 0.000
GFI >=0.90 1.000
AGFI >=0.80 1.000
CFI >=0.90 1.000
RMSEA <=0.08 0.000
TLI >=0.95 1.000
CFI- Comparative Fit Index, GFI- Good Fit Index, AGFI-Adjusted Goodness of Fit, RMSEA-Root Mean Square
Error of Approximation, SRMR-Standardized Root Mean Residual, NPAR-Number of Parameters, LOC-Locus of
Control, EFA-Exploratory Factor Analysis, CFA-Confirmatory Factor Analysis, AFI-Absolute Fit Indices, IFI-
Incremental Fit Indices, NFI-Normed Fit Index, PFI-Parsimony Fit Indices, RFI-Reporting Fit Indices and TLI-
Tucker-Lewis Index.
*Source for the model fit index and recommended values “Application of structural equation modelling in
educational research and practice” by MyintSweKhine (Ed.).
Inference
Exhibit 1 shows that the coefficient value is 0.00 which is positively correlated and the value of p (0.050) is
lesser than or equal to 0.05.

VI. Findings
Results of SEM analysis indicates that the model offers a good fit to the data. Six fit indices which are
commonly used in SEM to test the model fit are Chi-square/degrees of freedom, GFI, AGFI, CFI, RMSEA, TLI are
summarized in the table 6. Chi-square/degrees of freedom is lesser than or equal to 3 (0.000), GFI, CFI and AGFI
are greater than or equal to 0.90 and 0.80 (1.000, 1.000, 1.000), RMSEA is lesser than or equal to 0.08 (0.000) and

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Jour of Adv Research in Dynamical & Control Systems, May 2017
Special Issue on Recent Trends in Engineering and Managerial Excellence

TLI is greater than or equal to 0.095 (1.000) which clearly shows that all the goodness of the fit statistics is in the
acceptable ranges.
The results derived from the Structural equation model Analysis, marketing constrains are the major problem of
the entrepreneurs. Financial constrains plays a second major problem of rural the entrepreneurs. Commonly All the
three problems are found to be significant (i.e) technological problem, marketing problem and financial problem acts
as a constraint for the rural entrepreneurs in successfully running their business.

VII. Suggestions
Rural entrepreneurs are moving to urban markets to sell their outputs, in this regard they have faced many
expenses in meeting the transportation and warehouse maintenance, hence it is suggested to Government to establish
the market in the rural villages, and it should take initiation to create a road Network from village to urban areas of
the state.
Rural entrepreneurs are not in a position to avail the institutional credit due to the absence of the tangible
security and credit in the market. Further, the procedure to avail the loan facility is too cumbersome which
disappoints the rural entrepreneurs. Hence it is suggested the banks and financial institution to simplify the
procedural process for availing the loan, thereby the rural entrepreneur may avail the loan in time. Moreover, the
rural entrepreneurs may make use of the District Industries Centers while preparing the proposals
Lack of finance available to the rural entrepreneurs is one of the biggest problems which the rural entrepreneur is
born nowadays especially due to the global recession. Major difficulties faced by the rural entrepreneurs include low
level of purchasing power of the rural consumers, so the sales volume is insufficient, lack of finance to start the
business, reduced profits due to competition, pricing of goods and services, Financial statements are difficult to be
maintained by the rural entrepreneur, stringent tax laws, lack of guarantees for raising the loans, difficulty in raising
the capital through equity, dependence on small money lenders for the loans for which they charge discriminating
the interest rates and huge rent and property cost. These all problems create a difficulty in raising money through
loans. Landlords in Punjab proved to be a major source of finance for the rural entrepreneurs but the rates of land are
reduced due to the global recession so they also lack in hardcash nowadays.

VIII. Conclusion
Rural entrepreneurship plays an important role for the economic development in developing countries such as
India. Rural entrepreneurship helps in developing the backward regions and thereby removing the poverty.
Government should go for appraisal of rural entrepreneurship development schemes and programmes in order to
uplift the rural areas and thereby increasing the economic development. It can be stated that the reason why the rural
entrepreneurship finds it difficult to take off is due to lack of connectedness among the elements crucial to the
fostering of the capital accumulation, risk taking and innovation. The rural development programs should combine
the infrastructure development, education and health services, investment in agriculture and the promotion of rural
non-farm activities in which the women and rural population can engage themselves.

References
[1] Dhameja, S.K., Bhatia, B.S. and Saini, J.S. Women Entrepreneurs. SDME 27 (4) (2000) 46-47.
[2] Mali, D.D. Development of Micro, Small and Medium Enterprises of India Current Scenario and
Challenges. SEDME (Small Enterprises Development, Management and Extension) 25 (4) (1998).
[3] Saxena, S. Problems Faced by Rural Entrepreneurs and Remedies to Solve It. Journal of Business and
Management 3 (1) (2012).
[4] Surekha. Women Entrepreneurs : Problems and Potentials. Economic Times, 1989.
[5] Thiripurasundari, K. and Gurumurthy, V. Challenges for Small Scale Industries in the Era of
Globalization” in “Small and Medium Enterprises under Globalization: Challenges and Opportunities. L.
Rathakrishnan (Ed), 2009.

Websites
[1] https://fusionmx.babson.edu/entrep/fer/XXXVII/XXXVIIB/XXXVIIB.htm
[2] https://globaljournals.org/GJMBR_Volume14/4-Dimensions-of-Entrepreneurial-Self.pdf
[3] http://smestreet.in/

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Special Issue on Recent Trends in Engineering and Managerial Excellence

[4] http://www.coimbatore.nic.in/pdf/SHB017.pdf
[5] http://joe.sagepub.com/content/2/2/177.abstract
[6] http://www.drmgrdu.ac.in/Thesis_doc/Documents/Suresh%20Mallaya%20Ph.d%20Thesis/final.pdf

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