Performance of Rural Business Enterprises in Ankober District in North Shewa Zone of Amhara Regional State

Content

Acknowledgment

List of Acronyms and Abbreviations

List of tables

List of figures

Abstract

Chapter one: Introduction
1.1 Background of the study
1.2 Statement of the problem
1.3 Objectives of the study
1.3.1 General objective
1.3.2 Specific Objectives
1.4 Scope and limitations of the study
1.4.1 Scope of the study
1.4.2 Limitations of the study

Chapter Two: Literature review
2.1 Important concepts and definitions
2.1.1 What is rural business?
2.2 Role of RBEs in Improving Socio-economic Development of Rural Areas
2.3 Contribution of RBEs for R-U linkage
2.3.1What is Rural Urban linkage?
2.3.2 Significance of Rural-urban linkage
2.3.3 The Contribution of RBEs in facilitating R-U linkage
2.4 Conceptual Framework

Chapter Three: Methodology
3.1 Site Selection and Description of the Study Area
3.2 Research Strategy and Design
3.3 Data Type and Sources
3.4 Target Population and Sampling Design
3.5 Data Collection Methods
3.6 Data Processing and Analysis
3.7 Validity and Reliability
3.7.1 Validity
3.7.2 Reliability

Chapter Four: Results and Discussion
4.1 General Profile of Respondents
4.2 Characteristics of Rural Business Enterprises Operating in Ankober District
4.3 Role of RBEs in improving socio-economic development of rural areas
4.3.1 Income
4.3.2 Consumption expenditure
4.3.3 Employment Creation for other people
4.3.4 Provision of goods and services
4.3.5 Improving quality of life
4.3.6 Reduction of migration
4.3.7 Contribution to community development
4.4 Contribution of Rural Business Enterprises for Improved Rural-Urban Linkages
4.4.1 Rural Business Enterprises Demand for Urban Products
4.4.2 Urban Demand for Products of Rural Business Enterprises
4.4.3 Rural Business Enterprises interaction and relationship with urban businesses
4.4.4 Frequency of Rural Business Enterprise Owners’ visit to urban areas
4.5 Challenges faced by RBEs

Chapter 5: Summary of Results, Conclusion and Policy Implication
5.1 Summary of Results
5.2 Conclusion
5.3 Policy implication

6. References

7. Appendixes
Appendix 7.1: Household survey questionnaire
Appendix 7.2: FGD Guide
Appendix 7.3: KII guide

Acknowledgment

First of all, I would like to thank my Almighty God for helping me through all this process of my study and research work. Next to that I am very grateful to my advisor Mr. Goitom Abera (Assistant Professor) for his unreserved support and inputs throughout my research work. I would also like to thank my co-advisor, Mr. Asega Adane, for his support and input in the thesis work. I am also grateful to Ankober district Trade and Investment office, Revenue office and Cooperative Promotion Office for their support in terms of providing me important information. I also would like to thank my colleague Gemechu Kebede for preparing map of Ankober district which is part of this research paper. Last but not least, I would like to thank all my families for their unreserved support and encouragement without of which I would not be here.

List of Acronyms and Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

List of tables

Table 3.1 Target Population and Sample Selection

Table 4. 1 Distribution of sample respondents by Household size, Gender, Age, Marital status, and Education level

Table 4. 2 Distribution of Respondents by Gender and business type

Table 4. 3 Distribution of Age by Business type

Table 4. 4 Distribution of Education level by Business types of sample respondents

Table 4. 5 Capital of Rural Business Enterprises

Table 4. 6 Annual Income of Rural Business Enterprises in Ankober

Table 4. 7 Proportion of income from the different sources

Table 4. 8 Expenditure on consumption

Table 4. 9 Percentage of income spent on HH expenditure (Food, education, health, durables and social service)

Table 4. 10 Employment opportunity generated by the RBEs in Ankober district

Table 4. 11 Average age of employees working in the rural enterprises in Ankober district

Table 4. 12 Level of improvements in RBE owners’ quality of life in Ankober district

Table 4.13 Migration from the households of RBE owners

Table 4.14 RBEs engagement on community development work

Table 4.15 Source of ingredients for products and services of Rural Business Enterprises in Ankober

Table 4.16 Amount of money spent on buying items from urban areas per one visit

Table 4.17 Sell of product or service in the urban areas by RBEs

Table 4.18 Amount of money collected by selling in urban areas

Table 4.19 Interaction of Rural Business Enterprises with Urban business in Ankober District

Table 4.20 Rural Businesses engagement in urban businesses

Table 4.21 Frequency of Rural Business Enterprises visit to urban areas

Table 4.22 Challenges faced by RBEs in Ankober

List of figures

Figure 3. 1 Map of Ankober District

Figure 4. 1 Services and products rendered by the rural businesses in Ankober District

Figure 4. 2 Age of Rural Business Enterprises in Ankober District

Figure 4. 3 Income sources of the business owners

Figure 4. 4 Owners agree that the quality of change in their life is due to RBEs

Figure 4. 5 Ownership of sells outlet in urban areas

Abstract

This study was conducted to investigate the performance of rural business enterprises in terms of improving socioeconomic condition of rural people and contributing for improved rural-urban linkages in Ethiopia. It was carried out in Ankober district to contribute towards filling the gap on the knowledge and understanding about the performance of rural business enterprises in Ethiopia. The study used 105 rural businesses selected using simple random sampling proportional to size. It also used 4 Focus Group Discussions and 5 Key Informant Interviews; purposely selected based on their knowledge and experience in rural business. The data was analyzed using descriptive statistics. The result indicates that ownership of rural business enterprises is dominated by male headed households (79% male) which implies that women face more limitations to engage in formal businesses due to limited access to capital among others.. The finding also indicated owning rural business enterprise significantly contributed for the socioeconomic improvement of the business owners. The annual income of the enterprise owners is 1.94USD per person per day, which is significantly greater than rural households’ income in Ethiopia, which is 0.8 USD (George, 2015). Rural businesses are main source of income for 85.7% of enterprise owners. But the income is season sensitive and depends on agricultural performance. Annual non-food expenditure of the enterprise owners is 186.83 USD in 2013/2014 and 177.1 USD in 2015/2016, which is higher than the national average; 112.66 USD (CSA, 2015). Rural business enterprises contributed for the improvement of the enterprise owners’ quality of life. Rural enterprises also contributed to enhanced rural urban linkage through increased demand for the urban products in the rural areas and for rural products in the urban areas which is being met by the rural business enterprises. Rural enterprises also resulted in enhanced interaction between rural and urban areas through their collaboration with urban businesses which has contributed to improved rural urban linkage. Thus, rural enterprises are performing well in terms of improving socioeconomic condition of rural people and contribution for rural urban linkages and future policies should aim in promotion and development of rural business enterprises through addressing the key constraints such as shortage of capital, shortage of working place and shortage of infrastructure hampering them and investing in improvement of agricultural productivity to use their potential for poverty reduction in rural areas.

Key Words: Ankober, Rural Business Enterprises, Socioeconomic Improvement, Rural Urban Linkage

Chapter one: Introduction

1.1 Background of the study

Ethiopia joined the fast growing Sub Saharan Africa countries and sustained the fast growth rate for more than a decade at a double digit rate. The country achieved unusually high growth rate which is among the top world records and make the country one of the three leading countries in Africa (Habtamu, 2013). Habtamu (2013) also noted that this growth rate is an exceptional one because it is a growth rate achieved by non-oil economy. The World Bank also recognized the higher economic growth and the consequent significant poverty reduction attained by Ethiopia which is evidenced by the reduction of poverty head count from 38.7 percent to 29.67 percent from 2005 to 2011(World Bank, 2015b). This figure was estimated to decline to 23.4 by the end of 2014/15and the GTP plan aims to further reduce it to 19.6 (NPC, 2016). African development bank also witnessed this economic advancement attained by the country since 2005 by indicating that the growth is underpinned by the leadership of the public sector (AfDB, OECD & UNDP, 2016). The policies and strategies adopted and promoted by Ethiopian government highly contributed for the achievement of such striking economic growth. The fiscal policy which mainly focused on pro-poor and growth-enhancing sectors and heavy infrastructure development has been very prudent in achieving higher economic growth and it is also forecasted that this growth rate will continue (AfDB, et al., 2016and). But very disappointingly Ethiopia remains among the poorest countries of the world regardless of the higher and rapid growth attainment in the past decade as evidenced by the lowest human development index of 2016 which ranked the country 174th out of 188 countries (UNDP, 2016).

Majority of Ethiopian population lives in the rural areas where agriculture is the main source of livelihoods and poverty is also widely prevalent (NPC, 2016). Agriculture in Ethiopia accounts 38.5% of GDP, 73% of employment (NPC, 2016 and Admit & Hail, 2016). This shows that the economy of the country and the life of its people largely depend on agriculture. The over dependence of the country’s economy in the rural areas and mainly on rain-fed agriculture is the main reason for the wide spread poverty among the people, particularly in the rural areas which is reflected by the higher incidence of poverty in the rural areas with 30.4 % poverty head count compared to 29.6 % poverty head count for the whole population of the country (Yirga, 2012). To address this challenge, there are strategies such as diversification of the rural economy including rural business enterprise development which is very crucial for poverty reduction (Josef, L., Bob, R. & Måns, S., 2009).

The purpose of this study is to understand the performance of rural business enterprises in improving socioeconomic condition o of rural people and contributing for rural urban linkages through their impact on purchasing power or rural people and improved interaction of rural business owners with urban businesses and the study also aims to understand the constraints limiting the performance of rural business enterprises.

1.2 Statement of the problem

While rural business enterprises have big potential to contribute for the improvement of the socioeconomic condition of rural people and for the improved linkage of rural and urban areas, evidences generated so far luck comprehensiveness to inform policies and strategies to promote such enterprises in the rural area to achieve the goal of poverty reduction. The role of rural enterprises in terms of creating local employment and delivery of services and products in rural areas and contribution for maintaining working age population in the rural areas through sustaining existence of other services has been revealed by Arture and Jane( 2015) in the study of the performance of rural business enterprises. The rural enterprises role in terms of contributing for the increased income in rural areas and reduction of inequalities is also documented in the early studies (Remco, H. O., Tran, Q. T. & Nguyen, T. T., 2009). Private enterprises have immense contributions for the improvement of rural communities through their direct impacts such as employment creation and services and products delivery (Martz and Sanderson, 2006 and Eachus, 2014, in Artur and Jane, 2015). Some studies show that rural businesses contribute to the local community development in different ways that include engagement and providing leadership across a range of community groups or committees, serving as source of fund for local organizations and events and in some cases serving as training opportunity providers ( Bruce and Halseth, 2004, in Artur and Jane, 2015).

Studies from Ethiopia also signified that rural peoples’ livelihoods significantly depend on non-farm enterprises and approximately 25 percent of all households in the rural areas own one or more nonfarm enterprises (CSA, 2013 and Josef, et al., 2009). Income from nonfarm enterprises play significant role for rural households who participate in the sector and profits from such enterprises account for about 21% of their total income in Ethiopia (Josef, et al., 2009). Though these studies tried to address the role of rural enterprises in terms of contributing for the improvement of socioeconomic condition in the rural areas from different perspective, they have limitations in areas including addressing specific contribution of the rural enterprises in improving income, employment, consumption level and improving quality of life. They also luck how such enterprises contribute for community development in Ethiopia.

Another important aspect of rural enterprises is their contribution for rural urban linkage. Evidences from Nepal shows rural enterprises are successful in making positive impact on rural-urban linkages through facilitating and enhancing the exchange of commodities between rural and urban areas (Saiful, 2006). Another study also shows that rural enterprises contribute for bridging the rural urban divide through their access to some of the urban features such as knowledge, information and markets while they get profited from their peripheral location advantage (Heike, M., Antoine, H. & Rahel, M., 2016). Aynalem and Assefa (2010) indicated that rural urban linkages are weak in Ethiopia due to insufficient trade links between the urban and the rural areas. But this study did not indicate the contribution of rural enterprises to address this challenge. Thus, this research has been carried out in Ankober District in North Shewa zone of Amhara region to contribute for addressing the limitations in understanding of the performance of rural business enterprises in Ethiopia.

1.3 Objectives of the study

1.3.1 General objective

The study is conducted with the objective of understanding the performance of rural business enterprises in Ankober District in North Shewa Zone of Amhara Regional State.

1.3.2 Specific Objectives

The study has been undertaken to address the following four specific objectives:

- To characterize rural business enterprises operating in Ankober district.
- To understand the contribution of rural business enterprises in improving the socio-economic development of the rural communities.
- To understand the contribution of rural business enterprises for improved rural-urban linkages.
- To find out the factors affecting rural business enterprises’ operations.

1.4 Scope and limitations of the study

1.4.1 Scope of the study

The study investigated the performance of only formal (registered and licensed) rural business enterprises in relation to their role of improving socioeconomic condition of rural people and contributing for improved rural urban linkages. Conceptually, the study focused on the employment, income, income distribution across the months of a year for the socioeconomic development and demand of rural products in the urban areas, demand of urban products in the rural areas and transaction frequency aspects of rural business enterprises for rural urban linkage. The geographic scope of the study is Ankober district in North Shewa zone of Amhara Regional State. Methodologically also the study focused on the characteristics of rural business enterprises only; it did not consider the aspect of the context in which they are operating.

1.4.2 Limitations of the study

The study was carried out in one district in Ethiopia, Ankober District, and thus its findings may not represent other contexts. Though the data was collected from representative samples using standard sampling techniques, the study did not considered non business owners and analysis techniques that will help to exclude the influence of other factors. Therefore, it is recommended to take these things in to consideration while using the findings of this study. But the findings will serve to complement the earlier findings and future research work on the performance of rural business enterprises.

1.4.3 Significance of the study

Governments and policy makers have recognized the important role of rural business enterprises for poverty reduction. There are different researches aimed at building understanding on the performance of rural business enterprises. As one of these efforts to build more understanding on performance of rural business enterprises, particularly in the context of Ethiopia, this study investigated performance of rural business enterprises. Thus, the result has significant importance for policy makers, governments, donors and other development actors whose main aim is poverty reduction.

Chapter Two: Literature review

2.1 Important concepts and definitions

2.1.1 What is rural business?

There is no clear cut definition of rural business. Despite the debate among the rural sociologists and enterprise researchers, the definition of the concept remains vague. Different types of activities such as shops, recreation activities, tourism business, dairy and garden center, grain trade, cafe/restaurant, grain mill, and livestock trade can be mentioned as rural business activates (Gary, 2011). According to Gray (2012) there are three important parameters that are used to define or characterize rural business enterprises, which are their service to the rural population, their location in the rural area and they sell rural products. Others also categorize rural businesses in terms of the type of people employed by them, as most of the rural business are operated with family based labor and with fewer employed people, mostly less than ten(Glenn Muske, et al, 2014, in Sule, 2015). Rural businesses operate in the rural context and face many advantages and disadvantages. Social connections and networks are among the advantages the rural businesses face and on the other side widely dispersed clients, small markets, physical, technical and economic barriers, and located remotely from service centers are among the challenges such businesses face (Artur and Jane, 2015). Rural businesses are initiated and operated by rural entrepreneurs who play the role of establishing industrial and business entities in the rural sector (Hema and Padma, 2015)

2.2 Role of RBEs in Improving Socio-economic Development of Rural Areas

It has been believed by many social scientists and development experts that supporting entrepreneurship development and rural business enterprises within low-income rural communities is a viable development strategy to eradicate poverty and it is also noted by some experts in the development field that economic development to be effective, there must be new businesses development in low income rural areas (Kenneth, 2004). It is also noted that the informal rural businesses have the potential to contribute for the rural economic development through increasing income and reducing rural poverty (Yahia and Davide, 2012). Rural businesses have wider contribution for the rural economy both directly and indirectly. The direct contributions of rural business enterprises include the creation of local employment and local products and services and the indirect contribution includes the added value of primary business activities (Artur and Jane, 2015). Such indirect contributions of rural businesses for the socio-economic development of rural areas includes maintaining of the working-age population in a local area through the growing and diversifying private business base, sustaining the existence of other services (e.g. schools, health care, community centers, shops) and effective utilization and development of existing resources which can enhance local development and resilience (Morrison et al., 2012 and Magis, 2010 in Artur and Jane, 2015).

Study carried out on village enterprises in China revealed that such enterprises have played a significant role in the growth of the country’s economy (Xiaolan and Balasubramanyam, 2010). In the same way it was also evidenced that non-farm household enterprises in the rural areas contributed for the increase of incomes and reduction of inequalities between households (REMCO, et al, 2009). Private enterprises have immense contributions for the improvement of rural communities through their direct impacts such as employment creation and services and products delivery (Martz and Sanderson, 2006 and Eachus, 2014, in Artur and Jane, 2015).

The Ethiopian government agricultural sector policy and investment framework also recognized the importance of the rural businesses and clearly stated that rural farm and non-farm enterprises will create opportunities for improved incomes and employment for the Unemployed and under-employed people in the rural areas (MoA, 2010). It is also evidenced by other empirical studies that existence of diversified businesses in the rural areas contributes to the creation of more stable local economies in addition to its role of providing wide range of services and products for the rural people (Steiner and Atterton, 2014 in Artur and Jane, 2015). Evidence from India also indicates that entrepreneurship in the rural areas is emerging as a best solution to the problems of poverty, unemployment and backwardness which are widespread in the rural areas (Hema and Padma, 2015). Some studies show that rural businesses contribute to the local community development in different ways that include engagement and providing leadership across a range of community groups or committees, serving as source of fund for local organizations and events and in some cases serving as training opportunity providers ( Bruce and Halseth, 2004, in Artur and Jane, 2015).

Another phenomenon which deserves well recognition in this aspect is the increasing growth of diverse types of microbusinesses in the rural areas as the result of declining share of labor employed in agriculture which has its own implication on rural urban linkages (Woods, 2005 and CRC, 2008, in Gary and Viktor, 2015). The rural microbusinesses (rural business enterprises) play the role of facilitating and intensifying rural-urban linkages.

This fact is supported by the existence of higher number of rural business enterprises which include non-farm enterprises, formal and informal enterprises and on-farm businesses and it is also well evidenced that people’s livelihoods in rural Ethiopia also depend on non-farm enterprises which are owned by one in five of the rural households (CSA, 2013). There is also additional evidence that shows approximately 25 percent of all households in the rural areas of Ethiopia own one or more nonfarm enterprises and these enterprises have the role of facilitating rural urban linkages (Josef, et al., 2009). Petty trade, which is the most frequent non-farm activity in rural areas plays crucial role of facilitating rural-urban linkages (Zeleke, et al., 2006). It is also further noted that rural enterprises play important role in bridging the rural urban divide through their access to some of the urban features such as knowledge, information and markets while they get profited from their peripheral location advantage (Heike, et al, 2016). Moreover, lesson from rural-urban partnership project in Nepal shows that rural enterprises are successful in making positive impact on rural-urban linkages through facilitating and enhancing the exchange of commodities between rural and urban areas (Saiful, 2006).

2.3 Contribution of RBEs for R-U linkage

2.3.1What is Rural Urban linkage?

Rural-urban linkages have received increasing attention and there are efforts to make the concept more clarified. One of the focus areas of the efforts is establishing a clear definition for the concept. Thus, different definitions have emerged in the past decades which approached the concept from different dimensions. Through some of the efforts, rural-urban linkages are defined as the structural, social, economic, cultural, and political relationships between individuals and groups in the urban and rural areas. Rural-urban linkages can also be described as spatial and sectorial flows between rural and urban areas (Sule, 2013).

Recognizing the difficulty of defining rural and urban areas as separate entities due to the increasingly blurring borders and functions, the United Nations Centre for Human Settlements and the European Union Committee of Spatial Development adopted the concept of RULs to emphasize the visible and invisible interdependence between the two areas (Zewudu & Malek, 2010). According to Zewudu & Malek (2010) RULs can be seen as economic, social and political links between the rural and urban areas which include flows of goods, capital, people and information. Flows of goods represents flow of food for urban population, labor for non-agricultural activities in the urban areas, and raw materials for industries in urban areas and on the opposite direction, it represents flow of manufactured and imported goods from urban to rural areas, Flow of capital includes remittances from migrants, urban-based investments in rural areas, and credit from urban-based institutions, Flow of people refers to movement of people between rural and urban areas, either commuting, or migrating temporarily or permanently and Flow of information represents flow of information about resources or raw materials from rural to urban areas, about markets and prices for agricultural and rural goods and about employment opportunities in the urban areas for potential migrants (Zewudu & Malek, 2010).

Rural–urban linkages are also described as flows of agricultural and other commodities from rural areas to urban markets to serve the demand of both local consumers and external demand at regional, national and international markets; and in the opposite direction, flows of manufactured and imported goods from urban to rural areas (Sunday & Mfanafuthi, 2010 ). Sunday & Mfanafuthi (2010) emphasized that such linkages include backward and forward linkages between agriculture and manufacturing and services by playing the role of meeting the demand of production inputs in the rural areas and the demand for agricultural raw materials for processing in the urban areas. It is further argued that synergy between agricultural production and urban-based enterprises plays pivotal role to the development of more vibrant local economies and, to the reduction of inequality (Sunday & Mfanafuthi, 2010). Linkages between rural and urban areas can also be described as reciprocal flows of people, goods, services, money and environmental services and in certain conditions these are facilitated by geographical proximity and lead to interdependence between the two areas (Berdegué & Felicity, 2014). According to (Berdegué & Felicity, 2014) this interdependence between the rural and urban areas can form intermediate rural-urban territories which can embrace a number of rural localities and some towns and small and medium cities. The spatial aspect of rural-urban linkages is also identified as important driver of economic activities and it is also established through empirical findings that sectoral aspect of rural urban linkages that links the demand from rural consumers for urban enterprises and the dependence of agricultural producers on urban markets (Okpala, 2003).

Sectorial flows represent the flows of goods and services from the rural and urban sectors and the demand from rural consumers is crucial for urban enterprises and agricultural producers rely on urban markets (Sule, 2013) . Some sources also presented the rural and urban linkage as interactive, independent or competing relationships and noted that such relationships change over time (Adrian and Tenaye, 2015). The most common types of linkages that are produced from the connection of both rural areas and urban centers are production linkage, consumption linkage, marketing linkage, public service linkage, environmental linkage, tourism linkage, infrastructural linkage, demographic linkage and financial Linkage (Tegegne, 2001 and White, 2005)

2.3.2 Significance of Rural-urban linkage

Until recent decades, development policies and related researches have been limited to a simplified concept of rural and urban areas and this thinking has led to treating the concept of rural as a remote farming area and the concept of urban as crowded cities (Joachim, 2007). Furthermore, this has resulted in isolated treatment of issues affecting those areas, which failed to recognize the important interlinkages that exist between the two spaces (Elizabeth, 2009). But in reality, rural areas and the urban ones coexist along a continuum with multiple types of flows and interactions between them (Joachim, 2007). But currently more recognition is being given to the importance and significance of rural-urban linkages among the development policy discourse, and the traditional approach that treats urban and rural areas separately to address their development issues is well challenged (Tacoli, 2003 and Mohammed, 2007). Sule (2015) stated that Rural–urban linkages involve sectoral linkages in such a way that demand from rural consumers is crucial for urban businesses and urban markets are also very important for rural agricultural producers. Other empirical evidences also show that Rural-urban interactions are important elements of the livelihood strategies of both rural and urban households in the form of flows of people(migration), natural resources, goods and products, services, information and money (Tecoli, 2002 in Gete et al, 2006). Thus, rural–urban linkages are important for the livelihood strategies of both rural and urban households which are interdependent on one anther (Tacoli, 2004 in Ira Das, et al, 2013). The positive impact of rural-urban linkages on local economic development is expressed as ‘virtuous circle' where rural and urban development are mutually dependent (Junior, 2004). But often rural and urban development efforts try to consider the rural and urban areas in isolation (Gete, et al, 2006). In addition, it was also emphasized that the neglect of the urban aspects of rural economy had undermined the development potential of rural areas (Mohammed, 2007).

In the previous decades, policies tend to reflect this division along spatial and sector lines, as they gave more focus to the urban sectors at some times and for rural sectors at other times and it has later been acknowledged as wrong way of approaching issues affecting the areas which coexist along a continuum with multiple types of flows and interactions between them (Tacoli, 2003). Rural and urban areas conceptualized as isolated entities in the traditional ways distort the view of the reality of social processes and leads to inefficient policies and investments (Berdegué & Felicity, 2014). The treatment of the rural agricultural based sector and the urban manufacturing and services based sector in isolation misses the important linkages that exist between the activities in the two areas and leads to inefficiencies and causes growth-inhibiting inequality (World Bank, 2006). Developing better understanding on the opportunities and constraints of rural urban linkages will have crucial role for the attainment of sustainable development in both rural and urban areas through the adoption of appropriate economic and social policies and programs (Sule, 2015). Furthermore, rural–urban linkages are important tools to understand the complexities of people’s livelihoods and the strategies which involve mobility, migration and the diversification of income sources and occupations at micro-level (Sule, 2015). Enhanced rural-urban linkages will have the benefit of creating more and better jobs both in the farm and non-farm sector and as nonfarm sector in the interface of rural-urban linkages is particularly very important for rural women the significance of such linkage is very prominent for poverty reduction in the rural areas (Berdegué & Felicity, 2014).

There is a very close and complex linkage between rural and urban areas that is expressed with the interdependence of one on the other as rural areas require market to sell their products, to obtain inputs and to access off farm employment opportunities from urban system and urban centers can play the role of spreading innovations to rural areas that will lead to economic and social transformations (Zeleke, et al., 2006). The livelihoods of the majority of rural households, including smallholder farmers do not depend on only rural areas and in the same way majority of urban households do not drive their livelihoods from urban areas only (Berdegué & Felicity, 2014). It is also noted that rural producers depend on the demand created by the urban-based markets and on the same way it is the urban-based markets that create demand for the rural producers through linking them to regional and international markets at macro-level(Tacoli, 2006 in Sule 2015). In other cases there is mere recognition of rural urban linkages without giving good attention, as in the case of OECD study which recognizes the importance of the linkages and interactions between urban and rural areas for economic development, but didn’t give due attention to the role of these linkages for sustainable development (Sule, 2013)

More recently, there is a growing attention on the importance of focusing on the mutual interdependencies rather than treating rural and urban areas in isolation because the livelihoods of rural and urban households rely both on rural and urban-based resources as well as the exchanges between the two areas (Chowdhury, et al, 2005, Elizabeth, 2009). From the ongoing debates around rural urban linkages, it is very clear that access for better market for smallholder rural producers or access to better quality and lower price products of rural origin for the majority of the poor across the world is unthinkable in the absence of enhanced rural-urban linkages in the food systems of the world (Berdegué & Felicity, 2014) . Rural-urban linkages do not have equal effects on the development opportunities for all groups of people and spaces and the consensus is that they have generally more positive impact for smallholders due to better access to services and to markets, for rural women due to improved access to nonfarm enterprise, labor and temporary and circular migration opportunities, and youth due to the same reasons as for women (Berdegué & Felicity, 2014) . Regardless of the ongoing debates on the subject, rural-urban linkages are lived reality for people engaging on diverse tasks that include on and off farm activities, living in the rural village, and visiting local and even distant towns for shopping, marketing, and other services (Douglass, 1998, in Berdegué & Felicity, 2014).Thus, it is highly important for the rural regional planning experts to incorporate this reality into development frameworks and promote mutual benefits for both households living in the villages and towns.

Because of the growing strong evidences from varies sources on the mutual interdependence of rural and urban areas, the treatment of them as separate and conflicting spaces started to change in the late 1990s and the change more intensified in the early 2000s, particularly with the merging of the livelihood and place-based or territorial development approaches (Barca, 2009; Orszag et al., 2009 and 2010, in Berdegué & Felicity, 2014). The change is also due to the growing body of literature on the opportunities and benefits offered by rural-urban linkages and on the mutual beneficial relationships among the rural and urban spaces (Tacoli, 2006, in Sule 2013). People who are more motivated on the improvement of opportunities and well-being for the rural people have taken up the issue of rural-urban linkages from the start while the experts on urban development have been convinced very late on the subject derived first by problems of urban congestion and unmanageable growth and later, by debates on the interactions between cities and the environment (Henderson, 2002; Brülhart and Sbergami, 2009 and Lozada et al., 2006, in Berdegué & Felicity, 2014).

This days there is no doubt about the increasing recognition of the importance of rural urban linkages which is attributed growing understanding of the changing nature of rural people that includes diversification of rural economies and rural livelihoods strategies at household and community level, Urbanization and the agricultural transformation under the general context of structural transformation in developing countries, growing importance of secondary cities, growing integration of the different forms of contemporary agriculture with manufactures and/or services and the growing literature on value chains, large improvement in connectivity of rural areas, both physical (roads) and through ICTs and persistence of migration and its consequences both for rural and for urban development (World Bank, 2007a and Canziani and Schejtman, 2013, in Berdegué & Felicity, 2014). Currently there are a number of governments and international development agencies have convinced on the key role of rural urban linkages for attaining equitable development and committing themselves to advance the agenda. As discussed by Berdegué, et al (2014), the following are the major evidences of advancing the agenda of rural urban linkages among these governments and agencies. UN-Habitat, UNEP, International Federation of Surveyors (FIG) and the IIED produced a report on Urban-Rural linkages approach to Sustainable Development’ in the Inter-Regional Conference on Urban-Rural Linkages held in 2004 . OECD launched a publication on Rural-Urban partnerships on its 9th OECD Rural Development Policy Conference held in October 2013 (OECD, 2013). The United Nations Advisory Committee of Local Authorities (UNACLA) in its 2013 report which laid out five principles on job creation and local productivity, one of the principles focuses on rural-urban linkages (UNACLA, 2013). The second International Federation of Surveyors (FIG) regional conference which was held on the theme of Urban-Rural Interrelationship for Sustainable Environment was organized with the aim of promoting issues of urban rural interrelations and to enhance awareness on the issues which are multifaceted (FIG, 2004). IFAD also recognized the significance of rural urban linkage and categorized the issue among its four future focus area because of its recognition of the critical role of the issue for sustainable development of both urban and rural areas (Pers comm Adolfo, 2014, in Berdegué & Felicity, 2014).

Some countries such as Colombia, Indonesia, Kenya Mexico and South Africa have recognized the importance of rural urban linkages and considering it in their policies and programs. Mexico has revisited the earlier definitions on what is urban and rural by considering a territorial perspective and the interrelationships among the two areas (Mission Rural, 2014). The development plan developed by Indonesian government which is termed as Medium Term Development Plan (RPJMN) for 2015-2019 puts rural-urban linkages as a key strategy for regional development (Mulyana, 2014). With the declaration of the 2010 Constitution, Kenya changed its unitary system and adopted a devolved system of governance developed a plan for local economic development and regional cooperation across the counties by giving due emphasis to both rural areas and urban centers which are interdependent on one another (Pers comm Ivan, 2014, in in Berdegué & Felicity, 2014). The conditional cash transfer program of Mexico also has clearly endorsed rural-urban linkages as key part of the program’s strategy. South Africa also gave emphasis to the importance of intermediate cities for the country’s overall development recognized that rural development policies should consider the role of intermediate cities for the development of rural areas (Mulyana, 2014).

There is also growing trend in the recognition and giving emphasis to rural urban linkages in the policies and programs promoted by Ethiopian government. When we see some of the major policy documents of the country, SDPRP gave less attention to rural-urban linkage as it clearly stated that the policies and strategies adopted by FDRE to guide overall development focus on rural and agricultural development (MoFED, 2002). Another document formulated after SDPRP was the Plan for Accelerated and Sustained Development to End Poverty (PASDEP) adopted for 2005/06-2009/10 and continued to focus on ADLI, started to give recognition to the interlinkages between rural and urban areas. It was not urban or rural biased and clearly mentioned the need to strengthen rural-urban linkages to take full advantage of synergies from the different forms of interactions that exist between the two areas (Tegegne, 2005, in Berhane, 2016). PASDEP affirmed its sufficient emphasis for rural-urban linkages through the strategic provisions in its key pillars which include its commitment for promoting integration of markets, facilitating free flow of labor between the urban and rural areas, and creating better access to income generating opportunities between the towns and surrounding rural areas ( Teshome, 2006). The specific instruments used to achieve this ambitions were creating improved rural access roads, promoting the growth of and expansion of small rural towns, creating improved telecommunication access, the improving access to education and technical and vocational training opportunities in the peri- urban areas; promoting microfinance and access to micro credit; and the greater emphasis on rural electrification(MoFED, 2006). PASDEP further aims to strengthen rural-urban linkages in order to maximize growth and its impact on poverty reduction, and to take full advantage of the synergies as it is emphasized in the fourth pillar of the strategy to promote rural-urban linkages through Small-Towns Development Program, which will provide support services, including development plans, basic services, and market infrastructure development (MoFED, 2006). To encourage the development of agriculture and the rural economy in general so that it can ensure supply of industrial inputs and thereby reinforce linkages to urban areas, one of the emphasis area in Ethiopian GTP I was improving accessibility to transport that connects the rural and urban areas(MoFED, 2010). During GTP II(2016 to 2020), further focus was given to strengthen the linkages between the rural and urban areas through encouraging labor intensive manufacturing industries and using agricultural products as inputs to contribute for the job creation and the enhanced rural-urban linkages(NPC, 2016)

Ethiopian government clearly recognized the importance of ensuring effective rural-urban linkages and started to take clear actions to speed up the overall national and regional development process (Berhane, 2016). A report produced by Ethiopian Economic association on the Ethiopian economy recommended the development strategies to be geared to promoting rural development through enhanced rural-urban linkages and complementary development (Ethiopian Economic Association, 2005) Therefore, there is a need to establish better understanding of the relationships between urban and rural areas including the different varieties of interactions and the factors affecting them (Okpala, 2003). In general it has been widely seen that stronger rural-urban linkages promote the creation of more and better farm and nonfarm jobs and improved relationships between the two spaces (rural and urban) contributes for improved investment, production and consumption linkages that are beneficial for the rural and the urban economies and the people living in the two areas (Berdegué & Felicity, 2014). Berdegué & Felicity (2014) further argues that rural areas with weaker connections to urban locations have lower participation in the nonfarm economy and the size and quality of the jobs created are very lower and the nonfarm activities that can be facilitated by the rural-urban linkages is particularly important for rural women. The majority of the employment created by rural-urban linkages is informal one and takes place in household based microenterprises and has a strong effect on poverty reduction (Berdegué & Felicity, 2014). Regardless of their higher importance for the socioeconomic improvement of rural people, rural urban linkages can have an impact of increasing income inequality, which can be driven by lack of access that disproportionally affects poorer households and persons mostly in the rural areas (Junior Davis, 2004 and Berdegué & Felicity, 2014).

2.3.3 The Contribution of RBEs in facilitating R-U linkage

Nonfarm income activities including rural business enterprises in the rural areas facilitate the transit of important resources such as labor and capital functionally and spatially from agricultural sector to nonagricultural activities and thereby contribute for the enhancement of rural urban linkages (Zewudu & Malek, 2010). The critical and increasing level of land shortage and accompanied population growth forced people to adopt diversified income alternatives including non-farm activities apart from agriculture in the rural areas (Seraje, 2007). As it is noted by Seraje (2007) the adoption of diversified non-farm activities by the rural people within their villages or in nearby towns has an important implication for both rural-urban linkages and improvement of the livelihoods of the rural poor. Rural businesses are among the non-farm activities practiced by the rural people with the aim of diversifying their livelihoods and income has significant role in facilitating rural-urban linkages as it is evidenced in the rural-urban partnership project in Nepal that documented the role of rural economic enterprises in successfully making positive impact on rural-urban linkages through facilitating and enhancing the exchange of commodities between rural and urban areas (Saiful, 2006). Among the actors of rural business enterprises, women play active role in non-farm activities than men because they face more constraints in other domains of their economic affairs including agriculture (Josef, et al., 2009). Small traders in many rural areas play a critical role in connecting producers to markets, particularly where small and fragmented production flows are not sufficiently profitable to attract large-scale business organizations (Zeleke, et al., 2006). Furthermore, petty trade is one of the most frequent non-farm activities in which significant number rural people engage and these are crucial for facilitating rural-urban linkages (Zeleke, et al., 2006).

Rural enterprises create bridging in the rural urban divide through their access to some of the urban features such as knowledge, information and markets while they get profited from their peripheral location advantage (Heike, et al, 2016). Such enterprises with their rural–urban linkages develop sensibility for urban market demands and trends, valuate rural assets and combine knowledge from rural and urban sources for innovation (Heike, et al, 2016 ). Through analysis of these facts (Heike et al 2016) noted that less attention has been given to the role of rural enterprises as economic agents which can play the role of connecting rural and urban areas and create linkages between them. In Ethiopia it is noted that rural–urban linkages remain weak because of insufficient trade links between the urban and the rural areas (Aynalem & Assefa, 2010).

2.4 Conceptual Framework

Diversifying rural people’s livelihoods through developing rural enterprises contributes for improving socioeconomic condition of rural people. Rural enterprises contribute for improved incomes, employment and generally the quality of rural peoples’ life as part of improving the socioeconomic condition. They also deliver goods and services of urban nature that enhances the quality of life in rural areas. Empirical evidences witness this fact as rural businesses have the potential to contribute for the rural economic development through increasing income, creating local employment and reducing rural poverty (Yahia and Davide, 2012). They also contribute for the development activities in their communities in terms of contributing fiancé, working in the groups or committees and providing training opportunity (Artur and Jane, 2015)

Rural enterprises also play important role in bridging the rural urban divide and they are also successful in making positive impact on rural-urban linkages through facilitating and enhancing the exchange of commodities between rural and urban areas (Heike, et al, 2016). Small traders in many rural areas play a critical role in connecting producers to markets, particularly where small and fragmented production flows are not sufficiently profitable to attract large-scale business organizations (Zeleke, et al., 2006).

Chapter Three: Methodology

3.1 Site Selection and Description of the Study Area

The study was carried out in Ankober District, North Shewa zone, Amhara region, Ethiopia. The district was purposely selected for the study taking its convenience for the researcher in terms of resource availability. The district capital is called Goro Bela and it is located at 171.5 Kms away from Addis Ababa (A.A) and 41.5Kms from Debrebrehan, the zonal capital. The total population of the district is 84,205, out of which 40,568 are female (Amahara region BoFED, 2013). The town is connected to the zonal capital with all-weather gravel road. There is also all-weather gravel road that cuts through most of the Kebelles ^[1]. The major source of livelihood for the district population is mixed farming (crop and livestock production). Petty trading, wage labor, fire wood and charcoal selling are also among the livelihood strategies of the people in Ankober (Ankober District, 2016). The District has 22 Kebelle Administrations: 19 rural and 2 urban (Amahara Region BoFED, 2013).

Figure 3. 1 Map of Ankober District (Image has been removed for copyright reasons)

3.2 Research Strategy and Design

The research used mixed method by employing both quantitative and qualitative strategies. In relation to the research design, the research used cross sectional survey design. The quantitative data was collected through structured questionnaire and interview while the qualitative data was collected from purposely selected key informants and focus groups using open ended key informant interview guiding questions and focus group discussion guiding questions. The key informants were selected from government offices at District and Kebelle levels. Focus group discussants were selected from the different groups of the rural business owners.

3.3 Data Type and Sources

The study used primary data of both qualitative and quantitative in nature. Qualitative data from key informants and focus groups was used to complement the quantitative data for further enriching of the fact about performance of rural enterprises in in Ankober district. In addition to the primary sources that included sample business enterprise owners, key informants and focus groups, data was also collected from secondary sources including the district offices. Quantitative data from primary source was collected from 105 representative sample rural business owners selected randomly, 5 key informants from district offices and Kebelle level experts, and 4 FGD participants from the rural business owners. Secondary data was collected from district Revenue, and Trade and Investment office about the number of RBEs, their performance and factors affecting them.

3.4 Target Population and Sampling Design

The research used a mixture of probability and non-probability sampling techniques based on their relevance and appropriateness. Accordingly, purposive sampling was used to select the study area, which is Ankober district. The target population for the study was formal (registered and licensed) rural business enterprises operating in Ankober district. There are totally 144 registered rural business enterprises in the district in different business types as detailed in table 3.1 below. The researcher used online sample size calculator by using 5% margin of error and 95% confidence level to determine the sample size. By using this calculator 105 rural business enterprises were selected for the quantitative survey. Furthermore, a probability sampling proportional to size of the sub groups was used to take samples from each of the sub groups. Individual respondents were selected randomly from the list of the businesses using simple random technique. For the KII, 5 people who have close relationship with the business enterprises were interviewed. These include 1 cooperative promotion agent working at Kebelle level, 1 development agent working at Kebelle level, 1 expert from district cooperative promotion office, 1 expert from trade and investment office and 1 expert from Small and medium enterprises office. For FGD, 4 groups (One from shop owners, one from café/restaurant owners, one from Grain mill owners and one from grain traders) each of which comprising 8 people were used and the group discussants were purposely selected based on their longer experience on rural business. The ratio of female and male was maintained to 1:1 in the FGD groups. Thus, the data was collected from 105 rural business enterprise owners, 5 KIIs and 4 FGDs.

Table 3. 1 Target Population and Sample Selection

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Source: Ankober District Trade and Industry Office, 2017

3.5 Data Collection Methods

The researcher collected primary data from 105 sample rural business owners using enumerators who were selected from the local area. The researcher selected enumerators from the local area (Ankober District) and trained them well and conducted pre-testing of the questionnaire with the enumerators to check their understanding of the questions. The enumerators used for the data collection have at least diploma level education. The questionnaire was translated and administered in local language (Amharic) to ensure easy understanding by the respondents. The response rate of the survey was 100%. The researcher himself collected qualitative data from the key informants and FGD groups using KII and FGD guides.

3.6 Data Processing and Analysis

After the collection of both primary and secondary data, the data was carefully cleaned, coded and classified and made ready for analysis. The quantitative data collected through survey was entered in to SPSS version 16 which was used to analyze the quantitative data. The researcher used descriptive statistics such as frequencies, percentages, means and standard deviation to analyze the quantitative data collected from the sample business enterprises. The qualitative data collected from KIIs and FGDs was analyzed using techniques such as content analysis, categorization and identification of patterns and connections within and between categories.

3.7 Validity and Reliability

3.7.1 Validity

Ensuring validity is among the most important criteria for research. Validity refers to how well a research actually measures what it intends to do, or to what extent the result reflects the reality it claims to represent (The Association for Qualitative Research, 2017). That means how the conclusion drawn is closer to the reality. This research used qualitative data sources such as focus group discussions and key informant interviews and secondary data from the district office in addition to the quantitative survey carried out on representative samples of rural business enterprises. Thus, these data from different sources helped to strengthen the validity of this study. Furthermore, receiving comments and feedback from advisors and collogues is another important way looked for validity. The survey questionnaire was pre-tested to ensure the understanding of enumerators and collecting real data.

3.7.2 Reliability

Reliability is defined as the ability of a measure to result in the same result when repeated or carried out more than once (Salkind, 1997, in Beshir, 2008). It is about using standard methods and procedures in carrying out the research work. To ensure the reliability of this research work, standard methods and procedures were followed. In terms of sampling, random sampling was used to identify representative sample size and respondents. Data collection was done using standard tools incorporating comments and feedbacks from advisors.

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^[1] Lower administration unit below District and above village