Major factor which stagnate rural SME is Institutional Framework that is not in place (Estrin et al., 2006). However, the explanation for 'why it happens' is not clear.

Upananda

The key factors influencing success of SMEs in rural areas infrastructure-social as well as physical,availability of skills and other inputs.Other things equal , SMEs based on local material resources are likelyto be more successful than based on imported raw materials. In any case I agree with Upananda about the significance of adequate institutional framework.

The key factors or challenges are: infrastructure such as storage, roads and transportation, lack of skills, outdated technology, no access to financial services and markets, etc

Findings of research by students at Punjab School oF Economics,Amritsar suggests that subcontracting arrangements with reputed large firms may help to overcome many of the constraints.

Various factors affect SMMEs. Although they differ with the different orientations and definitions of small businesses, these factors relate to access to markets, the entrepreneurial orientation of rural markets, availability of inputs, business management skills, operational issues that require training, financial issues, resource availability issues and inadequate institutional support. Having said that, the government can prop-up Institutional Frameworks to salvage this sector which contributes a massive share of employment, assists in poverty reduction and contributes significantly to economic growth

Tshepo, We have founded the South African SME Observatory at the Centre for Development Support of the University of the Free State. I would suggest contact with the Centre to learn about the research that has been done and how this may impact on your needs. Anita Harmse is a good contact person.

Dear Tshepo,

In Sri Lanka, 'why rural SMEs are stagnated or failed ' has been addressed. According to the study's findings, rural contexts are governed by informal institutions. these have evolved to reduce or mitigate uncertainty, but not the risk. Majority of studies have used risk and uncertainty interchangeably. But it is not the case in rural settings. As result, they failed to identify subsequent innovative opportunities. The other factor is decision making context. These contexts are evolved to give rise, very often, to opportunities under uncertainty. Please refer, Alvarez ( 2007) for assumptions on entrepreneurship.

Upananda

an observation - what happens if they do not want to grow but are happy to exist in servicing just the local economy - findings from work i have carried out suggests that SME's particularly micro enterprises have little or no interest outside their local (this area can be defined) region