The Ethiopian rural situation reveals the growing interests in rural non farm income,rnincreasing evidence r~flects that rural people livelihoods are derived from diverse sourcesrnand are not as overwhelmingly dependent on agriculture as previously assumed.rnThis study allempted to identifY the major problems of rural non-farm enterprise operatorsrnthat hindered them from starting and running their businesses. Moreover, it also assessed thernprospects of these non-farm enterprises in the study area (Bededo and Harra kebeles). Arnstandardized questionnaire was employed to gather data from the nonjc/rm businessrnoperators at household level. Moreover, in-depth interviews and focus group discussionsrnwere applied to make thejindings of the survey more reliable and consistent. In addition, thernresearcher examined policy documents of some government and non-governmentrnorganizations (considered relevant to the subject of the study) to verifY whether they werernincorporated the RNFE development issues or not.rnThe study result revealed the non availability of supportive structures and processesrnincluding rural enterprise enabling policies, credit, tramport, infrastructures (mainly road,rnelectricity). The study also identified a gap in training (business and technical), andrnreasonably developed market capable of providing both a steady supply of inputs, forrnconsumption commodities and an outlet to enterprise outputs.rnThe research findings also indicated the existence of positive prospects in the area of RNFEs.rnSome of the cited prospects are: the expansion and construction of rural roads being startedrnby the government, the change in the approach of some NGOs in incorporating RNFE issuesrnin their development strategy, and the establishment of FTC in each rural kebeles. These arernas also mentioned as major contributing factors to the development of RNFEs.rnProhlems and Prospects of Rural Non-farm Entelprise Development