Most third world countries remain agrarian societies; indeed the urban development of
the last 30 years is a new phenomenon and urban settlements, however big, reproduce social
behaviours and allegiances inherited from their rural connection. This is why changes and
disruption in rural areas have consequences for a country as a whole. The
proletarianization of rural areas and the creation of an ever-increasing army of landless
labourers as a result of the introduction of capitalism and the destruction of the
traditional social fabric is one of the most fundamental agents of change in the rural and
urban landscape of most third world countries. The speedy rise of slums, favelas and other
sprawling urban shanty towns is directly linked to this poverty dynamic in the
countryside. It is estimated that between 1950 and 1970, migration from rural areas
accounted for 45 per cent to 55 per cent of urban population growth in the world. The
present trend of industrialization in the third world indicates that urban areas will not
be able to absorb the continuous flow of migrants from the countryside where social and
economic relationships have broken down. This conclusion implies that the agricultural
sector will have to generate productive employment for increasing numbers of people for
many years to come.
However, a renewed focus on the rural sector should not be advocated solely as a
temporary relief for the urban areas; on the contrary, restoring dynamism and pride in
rural life should be seen as a prerequisite to harmonious global development. Indeed, as
one early 20th-century thinker put it, 'the solution begins with the village, and when the
village is reconstructed, then the cities will be also'.2 Restoring stability and
enthusiasm in the countryside is an arduous task which requires a simultaneous focus on
both social and economic issues. However, the first prerequisite for social and economic
well-being is the provision of productive employment opportunities that will provide rural
dwellers with the means and confidence to 'reconstruct the village' as a place of peace
Two main sectors have a great influence on the carrying capacity of the rural areas:
- The small farm sector
- The informal small business sector
The trend in agriculture towards increased productivity of labour through mechanization
and new cultivation techniques implies that the labour absorption capacity of the small
farm sector will remain limited in the future. On the other hand, the informal sector,
which is made up of rural non-farm activity, will play an increasing role in rural
employment. Indeed, at the beginning of the 1980s, off-farm employment made up 43 per cent
of the labour force in Colombia, 28 per cent in Kenya and 37 per cent in Malaysia.3 This
trend has accelerated in subsequent years.
Characteristics of Small Rural Businesses
Despite the variety and size of small rural businesses which range from craftsmen
and small workshops to micro-agroindustrial businesses milling grain or making cheese
they have common characteristics:
- Small scale: they are usually family owned and operated; start up costs are covered
mostly through family savings and rely only rarely and marginally on a loan component.
- Labour intensive: production and service activities often rely on labour; equipment is
simple and a great deal of ingenuity goes into the respective processes.
- Minimal capital input: owing to a scarcity of capital and a lack of access to cheap
sources of credit, investment in equipment and working capital is very small.
- Local market orientation: most microenterprises find both their customers and suppliers
within a very localized area. Rarely does the scope of the activity extend beyond the
village and its environs.
- Resilience/flexibility: The preceding characteristics suggest that small business
activity is very resilient to change, whether for good or bad. In addition, it is well
adapted to the specific context and efficiently organizes the existing factors of
Role of Small Rural Businesses
Dynamization of Rural Areas
Integration vs disintegration: The most visible and far-reaching contribution of the
establishment of small businesses in a given region is the integrative forces that it sets
in motion. Indeed, small businesses have linkage potential that brings together, on a
local basis, demand and supply. In addition, small businesses have a multiplier effect
which stimulates the emergence of dynamic villages or rural towns which act like magnets
for the surrounding countryside. This newly-found stability can reverse the process of
depopulation and the disintegration of social and economic relations that plague rural
The development of employment opportunities through the emergence of small businesses
will have three main consequences:
Stimulation of Village Life
- Stem and reverse the tide of rural-urban migration.
- Provide employment to the poorer sections of rural dwellers who have been displaced by
the process of land concentration.
- Reduce this concentration pattern by providing off-farm opportunities to family members
of the small farm sector thus reducing the need for distress land sales in times of
A stable and active village life will usually settle around the small cottage
industries and agroindustrial businesses. The multiplier effect of the latter will not
only create new business opportunities but will also inject new dynamism into the
surrounding agricultural sector. The main consequence of this dual phenomenon will be the
strengthening and growth of a bustling market. In addition, closer integration will
stimulate more responsive patterns of social relations and a higher degree of cohesion and
identification in the community. This reinforcement of social ties will stimulate the
emergence of more representative and active local organizations and authorities.
Provision of Basic Services
The establishment of an active village life sustained by its own economic strength will
provide the appropriate conditions for the implementation and strengthening of basic
services. Indeed, the main prerequisites for the successful operation of basic services
such as utilities, health and educational institutions is the stability of the environment
and the potential of the settlement to act as a catalyst for the surrounding area.
One of the most promising potentials of small businesses is their capacity to stimulate
new, broadly based patterns of participation which transcend the established elitist
relations of production prevalent in rural areas. A larger portion of the population can
thus participate in the economic life of the area and contribute to the advancement of the
community. The emergence of new social relations emphasizing participation and
responsibility provides a fundamental landmark for sustainable development. The role of
women is especially visible in this sector, giving them new sources of income but also a
new position within the social framework of the community.
Stability of Income
One of the characteristic feature of agriculture is the seasonal nature of income
generation. Indeed, for most rural farming families, the bulk of yearly cash inflow occurs
at harvest time and the quality/quantity of the harvest will determine to a large extent
the well-being of the family for the year to come; this phenomenon is the same for the
community as a whole. Small businesses have the capacity partially to offset this natural
instability by providing both regular and alternate sources of income to both the
individual and the community. In addition, the existence of new, less volatile sources of
income will provide a further boost to fiscal revenue which can then be reinvested for
social and infrastructure purposes.
As we have seen, there are many positive outcomes that a rural community can derive
from the establishment of small enterprises. The most important is the contribution to the
reconstruction of village life, both social and economic, based on more participative and
responsible patterns of relationships. These new dynamic ties are the firm foundation on
which rural areas can create the conditions for providing well-being and welfare to the
rural population. However, besides this collective integration role, small businesses have
the potential to cater for and nurture the development of the individual.
Developing the Individual
The human is both the object and actor of sustainable development, thus development is
sensible only if it centres on the individual; it must be a process aimed at liberating
his physical, intellectual, social, affective and spiritual potential in order to increase
his capacity to contribute to the society to which he belongs: 'All men have been created
to carry forward an ever-advancing civilization.'4 Many factors contribute to the balanced
development of the individual and prime among them is engagement in work. Indeed, work in
a spirit of service 'has a value in itself, because it draws us nearer to God'.5 In
addition, the development of the individual involves transformation, and transformation is
reflected in one's behaviour and action. This process is achieved through 'fewness of
words and abundance of deeds'.6 Since business organization in its multitude of forms,
focuses and sizes is a means of action through excellence, it holds great promise for the
development of the individual.
Small business organizations are an ideal instrument for the individual to crystallize
his creativity, imagination and motivation. The combinations of skill, aspiration and
motivation that lie at the heart of a business enterprise are as numerous and varied as
the needs to be satisfied.
One of the human's fundamental characteristics is the need continually to surpass his
own self, to meet new challenges and new struggles. 'Life is after all a struggle.
Progress is attained through struggle, and without such a struggle life ceases to have a
meaning . . .'7 Business is one of the most useful vehicles for this spirit of initiative
Small business also has the great potential of enabling the individual to experience
responsibility within the wider context of the environment in which they both operate.
Both the entrepreneur and the employer witness this sense of responsibility, albeit at
different levels. In addition, small business provides an excellent framework for
participation in decision-making through the process of consultation. Consultation
provides an ideal forum for the expression of diversity and the practice of team work.
Because they are integrated into the surrounding environment, participants in the small
business sector experience an acute sense of belonging and usefulness to their community.
A strong identity and sense of purpose are two vital assets on the road to transformation
and full development of human potential.
The combination of these four potentials can trigger a virtuous circle where
transformation, improvement and service become primary objectives of the individual's
existence; the context of the business organization offers him the means to express and
manifest this newly found purpose.
As we have seen, the emergence of a small business sector in rural areas can be very
beneficial to both the collective and the individual. On the one hand it contributes to
the development of an active community life while, on the other, providing the individual
with a space to grow and develop autonomously. The main challenge to the practitioners of
development trying to implement a small business promotion scheme in any given rural area
is how to transform this latent potential into reality. Although there are numerous
possible answers to this challenge, it is the application of management practice within
these small businesses that will determine whether or not this promising sector can live
up to expectations.
In a broad sense, business organizations are instruments; they are the means through
which an objective is achieved. As any other instrument, they are absolutely neutral. It
is the human being through management that give the business a direction and sets the
guidelines to achieve the objective.
Definition of Management Practice
The role of management practice is to organize and set in motion available resources or
factors of production in order to achieve/solve a given economic or social
objective/problem. The factors of production include labour, land, raw materials,
technology and capital, to mention only the most important ones. This definition implies
that the two major focuses of management practice are the setting of operational
objectives and the application of the technique to achieve them. The former is the 'where'
while the latter is the 'how'. Any human action is made up of these two fundamental
elements: an objective and the means to achieve it. Let us now review the features of
desirable management practice.
Characteristics of Management Practice for Small Rural Businesses
In order to reap the full benefits of small rural business schemes, certain factors
should be emphasized in the management practice set up and followed by the entrepreneur.
A forum for dialogue and participation in decision-making should be set up by the
manager. This will enable him to improve significantly the reflection and input for the
decision-making process while securing the motivation, responsibility and dedication of
A successful management practice must integrate at its core the cultural specificities
of the local circumstances. In this sense, management models which may have been very
successful in other contexts may prove incapable of catering for important aspects of life
in a specific environment.
Integration with the Local Economy
The most potent agent of development in a given context is a business organization
whose backward and forward linkages are rooted in the local/regional economy. Indeed, this
integrative character will concentrate the multiplier effect to the surrounding area
thereby consolidating social and economic ties within the community. A management practice
which emphasizes this process should be encouraged.
Because of its novelty as a rural mode of production, the small business sector of the
rural economy does not suffer, unlike agriculture, from the constraints of a
traditional/antiquated system of social relations of production. On the contrary, the
small business sector has the opportunity to enlarge the spectrum of participation and
integration to rural groups that were more or less marginalized from the dominant social
and economic relationships. Thus management practice should encourage the recruitment of
employees based on competence rather than gender, social or economic considerations; in
this sense, discriminatory practices regarding the employment of women should be fought
The formulation of a vision for the business is one of the most fundamental components
of management practice. This vision must incorporate not only objectives internal to the
business itself but also provide an explicit sense of purpose for the business within the
community. This latter aspect requires the formulation of a vision at the collective level
by all social and economic agents of the community, which implies understanding and
accepting that the collective vision overrides the individual business's internal
objectives. The commitment of each member of this small business sector to participate in
the construction of this vision and conform to its content is a core component of
desirable management practice. A strong and representative community-based authority is
mandatory in order to serve as a catalyst and enforcer of this collective vision.
The Search for Excellence
This concept should be one of the main guiding principles implemented by management
practice. It is through the application of this notion that any business activity will
produce the greatest benefits to the community, increase the reputation and prosperity of
the business and foster the development of the individual.
Business management practice should stress the responsibility of each social and
economic agent for the general well-being of the community/society to which it belongs.
The scope and spread of the community or society with which one identifies will depend on
the content of the prevalent value system. Regardless of size, management should take an
active role in participating in the establishment of social services/utilities and
encourage involvement of its own work force in socially related activities.
People as an Asset
Management practice should recognize at its base that labour is not a cost to the
business but, on the contrary, its main asset and as such needs to be nurtured and cared
for. This reversal of attitude means accepting that the human is a multifaceted being
whose needs are not only material, intellectual and physical but also social, affective
and spiritual. It is the balanced satisfaction of these needs that will foster the
dedication and allegiance of a person to his or her business organization and to the wider
community while promoting the full development of his or her potential. This implies the
implementation of practical measures from management, a theme which is, unfortunately,
beyond the scope of this paper.
A general application of this practice would produce several positive effects. First,
it would reduce, if not eliminate, the tensions between capital and labour which absorb so
much of the energy that could be dedicated to more productive and constructive purposes.
Second, it would promote a higher degree of dedication to and identification with the
business by the employee. The principle of profit sharing can also be applied between the
business organization and the wider community in which it operates. Indeed, the prosperity
of any given rural business is based as much on the existence of demand within the
community as it is on the work of its employees. Thus part of the profits should be
redistributed to the community through fiscal methods but also using a voluntary
mechanism. The latter has the great advantage of creating a spirit of responsibility and
solidarity. The concept of profit sharing applied to management practice would be a great
step forward in establishing higher standards of economic and social justice.
Conditions for the Application of Management Practice
Although there are certainly many more ideas which should lie at the core of any
management practice of small rural businesses, the application of these proposals and the
benefits they will achieve will depend to a large extent on two main factors:
A Favourable Environment
- deliberate inducement policies at the macro level
- the inspiration underlying management practice
In order for a small business sector to emerge and apply socially responsible
management practices in the rural areas, several conditions must be established.
- Deliberate policies promoting the development of the small business sector should be
implemented by the local/regional and national planning authorities. Such an inducement
package should address such crucial questions as:
- Fiscal measures to stimulate small businesses actively to hire employees, to distribute
part of their profits to social ends, to integrate locally and so on. This is a very
powerful tool when well used.
- The provision of easier and more adaptable access to external finance sources.
- The provision of counselling and advice services which can accompany and follow up
- The provision of adapted professional training facilities focusing on the local mix of
factors of production.
- The provision of technical research facilities capable of working hand in hand with the
small business sector on process improvement.
- The provision of infrastructure, utilities and services necessary for the emergence of
A New Value System
- Authorities at all levels local, regional and national should provide the
conditions that foster the smooth development of future entrepreneurs. This
forward-looking role is one of the most fundamental played by public planners since
businesses by their nature concentrate more readily on short term objectives linked to the
survival of their ventures. Thus the public sector should contribute to the creation in
rural areas of appropriate and dignified conditions of life through the provision of basic
services such as health and education facilities while promoting active measures for
preserving the environment. This social and environmental focus of the public sector,
added to the combined economic activity of the agricultural and small business sectors,
will provide the conditions necessary for the development of the socially responsible
entrepreneurs of tomorrow.
- One of the great, creative and far-reaching contributions that can be made by the public
sector at the local, regional and national levels is the formulation and diffusion of a
vision statement which can mobilize all social and economic actors behind shared
objectives of development and the generation of the spirit that should underlie action.
The latter should stress values such as unity, integration and solidarity as prime
- The international context will also influence the capacity of individual governments to
implement these policies. Indeed, international organizations such as the International
Monetary Fund and the World Bank should soften their adjustment programmes to include
significant social measures to offset the social cost of the transformation and transition
process witnessed in the third world. More importantly, the recognition of the growing
interdependence of the world should induce the adoption of new patterns of North--South
relations where the medium term goal of a unified world outweighs the present short term,
competitive model of relationships. The realization of such a goal, plus a more unified
vision of purpose, will lead to a genuine acceptance of the need for a real transfer of
resources from the North to the South. Indeed, as was pointed out more than a century ago,
'The well-being of mankind, its peace and security, are unattainable unless and until its
unity is firmly established.
Since it is the individual who directs and orients business activities, he will
ultimately determine the impact of his activity on society as a whole. Thus, if human
actions, and more specifically businesses, are to reveal their full potential and
contribute to an 'ever-advancing civilization', an ethic is required that will provide the
framework within which management practice can be implemented. This ethic must, on the one
hand, provide a vision through which human beings can find a sense of purpose and, on the
other, establish a set of guiding principles or moral/spiritual values by which human
action can be guided. It is only through an alliance with such an ethical package that
management practice can hold to its promise of fostering real change and progress.
Source of This New Ethic
In order for this ethic to be operational, it must be reflected in the behaviour of the
individual. If it remains only at the level of ideas it will not be translated into
action. Victor Hugo once said that 'revolution changes everything except the hearts of
men', observing that despite its declaration of human rights, the French Revolution
exhibited the same oppression and lack of justice as the previous regime. Thus the
required ethic must be based on a transformation which begins within people's hearts and
recognizes love as the vital force behind human life and civilization. What other than the
teachings of the religions have demonstrated the capacity to transform people in such a
way that the most important advances of civilization have been achieved? A close analysis
of history shows that the greatest civilizations have been founded on value systems based
on love, justice and service derived from one or other of the great religions. This why
the European Bahá'í Business Forum believes that the challenge that confronts our
decaying society can only find a solution in the moral and spiritual wisdom and principles
of the great religions of the world, for 'the fundamentals of the whole economic condition
are divine in nature and are associated with the world of the heart and spirit'.9 Religion
provides us with an ethic that sets out guiding principles and a value system as well as
the power to transform our behaviour.
Guiding Principles for a New Management Ethic
The cornerstone of these guiding principles is the recognition of the spiritual as well
as the material nature of human beings and, as a consequence, that human civilization is
ruled by both spiritual and material forces. It is only through the equilibrium of these
two forces that real, long lasting prosperity will occur. 'Only when material and
spiritual civilization are linked and coordinated will happiness be assured.'10
Unity of Humanity
The acceptance of the concept of the oneness of humankind at the base of all decisions
by both individuals and the community implies the adoption of a whole set of new
behaviours. Such new behaviours will foster solidarity and cooperation rather than the
existing dominant forms of social relationships which emphasize conflict and competitive
attitudes. Such a new spirit of unity will need to be applied at all levels of social and
economic interaction, be it the business place, the community or the world. In addition to
fostering these new attitudes, this principle of the unity of humanity will also promote
the abolition of prejudice and discrimination, which have been such tremendously
destructive forces. Such behaviours as racism, which retards 'the unfoldment of the
boundless potentialities of its victims, corrupts its perpetrators and blights human
progress',11 will, by the adoption of this principle, be entirely rooted out.
Values Other than Money
The dominant value in our society is money. It is the expression of both the capitalist
model of competitive social and economic relations and of a world that increasingly relies
on material criteria to measure success or failure of any human endeavour. The search for
money has become an end in itself instead of serving a higher purpose. This material
motivation has pervaded a management practice that has been geared solely towards
maximizing profits for the business organization itself. All other purposes have been
relegated to the background. This profit maximizing approach leads to the reinforcement of
competitive behaviours where immediate benefits are emphasized even if achieved at the
expense of other groups of people and future generations. Recognition of the
interdependence of the human race and that the global challenges of our age require a
unity of purpose and action will lead to the addition of other objectives to the concept
of utility objectives such as protection of the environment, social responsibility,
promotion of diversity and the realization of the potential of the individual. The
maximization of such utility will then become the main challenge of management practice.
Long Term Vision
The competitive model of relationships based on profit maximization provides a short
term vision at the expense of the longer perspective on which sustainable development and
long lasting prosperity can be achieved. Indeed, the greatest responsibility and
contribution of today's economic and social agent is to promote a better world for future
generations. As long as present conflict-based relationships predominate, society will be
unable to free itself sufficiently from short term objectives to face and prepare for the
future. Every business, every manager must come to terms with the principle that future
well-being has its roots in the present.
Empowerment of the Individual
In most organizations, the exercise of power and decision-making has been concentrated
in the hands of a few. There is often a large gap between the few who take decisions and
the many who live with them. This pattern of decision-making, on the one hand, suggests a
lack of motivation and responsibility on the part of the many and, on the other, deprives
the decision-making process of valuable contributions. However, when the individual's
potential and his integration within a social organization or community are realized, he
is empowered. Without such empowerment, he can never take his destiny into his own hands
and assume full responsibility for himself and the community or group to which he belongs.
Within business organizations, the empowerment of the individual is achieved only through
the use of candid, dispassionate and cordial consultation where the 'shining spark of
truth' can emerge from 'the clash of differing opinions'12 and the expression of
diversity. Consultation promotes the mobilization of everyone around an agreed objective
and 'where a unified will exists, nothing can effectively oppose and hamper the forces of
constructive development'.13 The European Bahá'í Business Forum suggests that
consultation is the best vehicle for constructive and effective decision-making and
proposes a framework and spirit under which it can operate.
As we have seen, the potential benefits to be reaped from the emergence of a small
business sector can be very great. Indeed, agriculture alone will not be able to break the
poverty spiral and the process of depopulation witnessed in most rural areas of the third
world. The challenge of restoring pride in rural livelihoods and bringing back life to a
decaying social structure calls for new forms of activity, grass root participation and
responsibility led by a new spirit of cooperation and service. These new forms of activity
in the countryside should focus more and more on small non-farm activities structured as
business organizations where individual development coexists harmoniously with a
collective sense of purpose and vision. Successfully implementing this dual task is the
challenge facing management practice. There are many guidelines that management practice
can adopt to achieve this aim but the fundamental criteria for success will be the
adoption of an ethic that will provide the motivation and liberate the energy required to
translate these guidelines into action.
About the author
- 'Abdu'l-Bahá. The Promulgation of Universal Peace. Wilmette, Ill.: Bahá'í Publishing
- Selections from the Writings of 'Abdu'l-Bahá. Haifa: Bahá'í World Centre, 1978.
- Bahá'u'lláh. Gleanings from the Writings of Bahá'u'lláh. Wilmette, Ill.: Bahá'í
Publishing Trust, 1983.
- Tablets of Bahá'u'lláh revealed after the Kitáb-i-Aqdas. Haifa: Bahá'í World
- Compilation of Compilations, The. Prepared by the Universal House of Justice 1963-1990.
2 vols. [Sydney]: Bahá'í Publications Australia, 1991.
- Lights of Guidance: A Bahá'í Reference File. Compiled by Helen Hornby. New Delhi:
Bahá'í Publishing Trust, 2nd edn. 1988.
- The Universal House of Justice. The Promise of World Peace. Haifa: Bahá'í World
Michel Zahrai took his first degree in International Development at Clark University in
the United States and his Master's degree in Development Economics at the University of
East Anglia in England. After completing his studies he worked for four years with a
French non-governmental organization as the manager of a development project in Bolivia.
For the last three years he has been Controller, Europe, at the European headquarters of
an American multination corporation. Born into a Bahá'í family, 33-year-old Michel is
involved in the European Bahá'í Business Forum and the International Society for
Agriculture and Rural Development. He lives with his Bolivian wife and young family in