In most rural regions in developing countries, agriculture is the primary driving force behind rural development. Globalisation and also the needs of domestic markets present a number of challenges, but also offer new opportunities, for rural regions and agriculture. Developing the rural economy is therefore a key building block in sustainable poverty reduction.

Small-scale, large-impact economic circuits
Most of the world's poor live in rural regions. Sustainable economic development harnesses a region's available potential – its agricultural and other resources – to improve living conditions for the local population. The development of non-agricultural activities is heavily dependent on a prosperous farm sector. These can generate small-scale economic circuits which expand purchasing power and encourage growth in other economic sectors as well.

At the same time, the world markets present other challenges for developing countries, such as rising quality demands and standards. There is a close correlation between market opportunities and competitiveness on the one hand, and access to information, services, agricultural inputs, and marketing and processing capacities on the other. In most developing countries the state is withdrawing from the provision of services. This gap has to be filled by the rural communities themselves, the private sector and civil society. However, independent initiative and self-organisation need support.

REED – rural economic development has a name
Based on its many years of experience and comprehensive know-how, GTZ has developed a rural development strategy known as Rural Economic and Enterprise Development (REED). This advisory approach involves public and private sector institutions, civil society groups and the target groups (often women, young people and minorities) receiving training and education. The outcome of the process is a strategy which is "owned" by the local development partners and is capable of linking small-scale economic circuits with national and international markets. 

The approach involves

• identifying economic potential in rural regions,
• developing normative frameworks (privatisation, competition policy, property rights, etc.),
• clarifying the roles of the state, civil society and the private sector in the delivery of infrastructure and services; promoting partnerships,
• increasing the competitiveness of rural production and creating markets,
• promoting local communities' self-organisation capacities,
• fostering business skills in the rural regions, combined with training for individuals and rural institutions.