S4 ENTREPREEURSHIP NOTES

BY EMMY LOVE

TABLE OF CONTENTS

Unit 1 INITIATION TO ENTREPRENEURSHIP................................................... Page 3

Unit2 BUSINESS IDEAS AND OPPORUNITIES ………. Page 8

Unit 3: ENTREPRENEURSHIP AS A CAREER…………………. Page 16

Unit 4: SETTING PERSONAL GOALS……. Page21

Unit 5: LAWS IN BUSINESS OPERATIOS………………………Page 28

Unit 6: ROLE OF STANDARDS IN BUSINESS……………………..Page37

Unit 7: BUSINESS MANAGEMENT………………………………...... Page41

Unit 8: FINANCIAL MANAGEMENT……………………………. Page44

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Unit 9: FINANCIAL INSTITUTIONS……………….. Page61

UNIT 1: INITIATION TO ENTREPRENEURSHIP

1.1 Meaning of entrepreneurship, entrepreneur, and intrapreneur

Entrepreneurship: Refers to the process of identifying business opportunities and utilize the
available resources in the environment.
An entrepreneur An individual who starts, creates and manages a new business.
Intrapreneurship: is the process (practice) of creating new within an existing company.

Intrapreneur: An employee who starts a new initiative for their company which setting up a new
business (is a person who introduce new ideas, new products and services within an existing enterprise.)

Enterprising person is one who sees opportunity in all areas of life

Manager: is a person who is responsible for managing an organization.

1.2 Entrepreneurship process/Entrepreneurial process/priotize any five stages of entrepreneurship process.

Step 1: Discovery: This the stage of entrepreneurial process at which the entrepreneur generates ideas,
recognize opportunities and determine feasibility of ideas, markets, ventures.

Step 2: concept development: This involves developing a business plan for a detailed study.
The selected business opportunity is now carefully analyzed to know all the requirements i.e raw materials,
finances, workers and equipment.

Step 3: Resourcing: At this stage, people apply for loans and assistance, hire employees and identification of
potential investors. The entrepreneur is trying to gather the resources from his/her environment.

Step 4: Actualization: The stage in which the entrepreneur operates the business and utilizes resources to
achieve its goals and objectives. The real production and marketing take place in this stage.
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Step 5: Harvesting: The stage in which the entrepreneur decides on business ‘future growth or demise. He/
she may decide to inherit the business, changing, closing or merging with other companies.

Or
Discovery / Idea generation

Concept development/ Opportunities evaluation

Harvesting/ Growth of business

ENTREPRENEURSHIP PROCESS
Actualization / Company formation
/Business launch Resourcing/ Raising and allocating
resources

Difference between an Entrepreneur and Intrapreneur

Entrepreneur Intrapreneur
An entrepreneur is independent An intrapreneur is dependent

An entrepreneur raises funds Intrapeneur not raise funds.

An entrepreneur own bsness. Intrapreneur is employed.

An entrepreneur take profit Intrapreneur not take profit

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 An entrepreneur bear all risk An entrepreneur bear few risk

Difference between an Entrepreneur and Manager

The various qualities an entrepreneur should possess.

● Financial discipline: It takes time to get to profitability for any entrepreneurial venture
(enterprise).

● Persuasive and networking: What do successful entrepreneurs do? They reach out to
mentors with more experience and extensive networks to seek valuable advice.

● Goal setting and planning: Successful entrepreneurs are driven to achieve ambitious
targets.

● Hardworking: Entrepreneurs are hardworking people who always focus their minds on
their work. In fact they work even on public holidays, weekends, including day and night.

● Creativity and innovation: An entrepreneur must be good at coming up with new ideas,
identifying new opportunities, new markets for his/her goods and services, new
production techniques, new products.

● Information seeker: An entrepreneur must be updated on any business opportunities,

problems and challenges. He/she must look for information from various sources such
media (newspapers, magazines, Internet, television, radios)

● Self-confidence: An entrepreneur should be confident that he/ she is able to achieve

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 what he/she sets himself or herself to achieve.

● Risk taking: an entrepreneur should be able to take over moderate risks in business,
these include risk of starting a business, risk of losses, risk of selling on credit. This
does not mean that they are reckless.

● Opportunity seeking: An entrepreneur is a person who is able to spot business

opportunities even where other people cannot see. He/she takes a challenge/problem as
luck for business creation.

● Persistence: An entrepreneur has a passion for what he/she does.

challenges of being an entrepreneur.

● Risk of losing invested resources
● Adequate skills and knowledge
● Raising capital for the business
● Uncertain income
● Long and irregulars’ hours
● Lack of capital.
● Limited level of technology.
● Poor entrepreneurial skill.
● Lack of business and technical skills, etc.
● Hard work:
1.3 CREATIVITY, INNOVATION AND INVENTION
creativity: is an act of thinking new things, coming up with ideas, new ways of looking at opportunities and
new approaches to solve problems. There are two kinds of creativity that is innovation and invention.

Invention: (Is creating something that did not exist before). refers to creating something for the first
time that has never existed.
Innovation is the development of new products, ideas, markets, devices, processes for
something that already exists.

Relationship between creativity, innovation and invention

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Innovation: This refers to the development of new processes, methods, products, and services for something
that already exists. putting creative ideas into action is innovation.

Invention is creating something that did not exist before.

[Link] relationship between Creativity and Innovation is like the relationship between recycling. Is creating
new product from old materials. ( waste bottle and melted and transform new plastic product.) and
upcycling (re-use) transforming items into something of higher value without degrading the original
materials.( turning plastic bottles into carpet fiber and turning wheel of van into decoration, put it flowers. ).

Types of innovation and creativity

Types of Innovation:
– Radical innovation: It is an intellectually jump, which change a whole area
– Vertical innovation: This involves the mobility of ideas at a system level
– Product innovation: This is basically done to improve or changes the products from the way they have
been existing to appear in a different form
– Service innovation: This is done to make improvements in the services being offered by the business.

– Process innovation This is aimed at improving the method of production being used by the business.

– Market innovation: it is concerned with changing the marketing strategies that are used by the business.

Types of creativity:
– Divergent creativity: Divergent thinker discovers multiple options for addressing problems.
Brainstorming, predicting, and imagination activities are all examples of divergent thinking
– Convergent creativity: This involves focusing on only one idea or single solution.
– Lateral creativity: This involves generating new ideas and problem solving as it leaves the already used
behind and looks for completely new options.
– Aesthetic creativity: This is about producing and discovering things which are pleasant, harmonious and
beautiful to our senses.
– Systems creativity: The ability to see how things are interrelated and form a larger whole.
– Inspirational creativity: It is concerned with the perception of receiving insights from others. Inspiration
can be an idea that comes suddenly.

Different types of invention are explained as below:

Invention is creating something that did not exist before. Inventions are of three kinds: scientific-
technological (including medicine), socio-political (including economics and law), and humanistic, or cultural.

– Scientific-technological inventions: This involves invention of things in connection to technology and

science fields like medicines and vaccination, communication devices or tools. For instance, railroads,
vaccination, atomic bomb, computing, the internet, and the smartphone.
– Socio-political inventions: These comprise new laws, institutions, and procedures that change modes of
social behavior and forms of human interaction and organization. include; the Rwandan parliament, the Red

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Cross,
– Humanistic inventions these involve new ideas that contains the potential of its own realization in the form
of cultural practices, domain of linguistics, intellectual movements, and forms of creative cooperation. In the
for example, comedy, the novel
1.4 An entrepreneur as a creative person

A creative person refers to an individual who has the ability to bring something unique into existence.
generates a range of possibilities to solve community problems.

All entrepreneurs are believed to be creative people. Examples of successful entrepreneurs

1. Bill Gates, founder of Microsoft that makes Microsoft Windows, Microsoft Office and Internet
Explorer.
2. Steve Jobs, co-founder of Apple computers that makes Macs, iPods and iPhones and Apple tv.
3. Mark Zuckerberg, the founder of Facebook and bought WhatsApp.
4. SINA Gerard, the founder of Urwibutso Enterprise that deals with food processing.

A business entrepreneur is someone who starts and runs a business.

A creative entrepreneur is someone who uses their creativity to solve problems and create value.

Factors that influence an entrepreneur to be creative

Factors that influence people’s creativity. These are grouped into social, economic, political and
environmental factors.
• Buying habits (consumer tastes and preferences). This can put entrepreneurs to be creative in order to suit
the preferences of customers.
• Disposable income levels. This will increase the demand for goods on the market which puts entrepreneurs
on pressure to think creatively in order to address the increased demand
. Education level. People’s education level determines their consumption behaviors which may influence
producers to be creative
• Health conditions in the society. The outbreak of some diseases in society makes entrepreneurs think of
creative solutions in order to address such challenges. Such as COVID pandemic,
• Government policy on taxation and tariffs. Lowering taxes motivates people in the business sector and
increases creativity among people.
• Security. This gives people enough freedom to exercise their skills and increase people to be creative.
. Experience. The more you experience the more creative you become. These experiences define your ideas
and creativity which are presented through your work.

. Fearlessness/risk taking. Fearlessness is a major factor in one’s creativity. A person who does not fear to
take risks tends to be more creative.

The benefits of creative thinking are

● Become better problem solver

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 ● Connect with your community
● Save more money: the more we become creative the more we save
● Expended sense of time
● Self-awareness and expression
● Freedom through taking up risks, try new things and remove limitations as a result.
● Stress relief: reducing stress level and improving quality of things
List of possible ways to creatively solve the challenge /strategies of creative problem solving/steps/
techniques
The different ways to creatively solve the challenges it depends on challenges
√ Identify the goal. (before you solve the problem understand the problem you are trying to sove)

√ Gather data

√ Formulate challenge questions

√ Explore ideas

√ Come up with solutions

√ Create an action plan

√ Take action

UNIT 2: BUSINESS IDEAS AND OPPORTUNITIES

Key unit competence: To be able to generate appropriate business ideas using SWOT analysis.

A business refers to any economic activity done expecting to get profit.

Or A business is any activity undertaken with the aim of getting profit.

A business idea is a thought about the possibility of a business.

Or A business idea refers to any thought that an entrepreneur may come up with as a result of scanning the
environment with the purpose to develop a business activity. like clothing and textiles, food processing,
online buying, internet and computer services, food delivery services, photography and videography,
horticulture business.

A business opportunity is an identified situation that can be turned into a real and profitable business. or
refers to favorable situation or chance that creates a possibility to implement your business idea.

Match the following opportunities below with appropriate business ideas.

.Business opportunity Business idea

[Link] is outbreak of COVID pandemic Producing and selling hand sanitizers

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[Link] declaration of taxes online as a Operating internet café
new policy by government

[Link] tourists visit my community Operating coffee shop

4.A new school established in my community Supplying scholastic materials

[Link] supply point established in the Setting up a restaurant

community

2.1 Qualities (characteristics) of a good business idea

A good business idea has the following characteristics:

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 2. They solve real problems.
3. It is highly profitable.
4. Be legally accepted.
5. Be socially accepted.
6. Satisfy the needs of society.
7. Should have competitive advantage.
8. Should be unique.

2.2 Sources of a good business idea/opportunities

Before you start a business, you must decide on the business you want to be engaged in. You must have
a business idea.
The sources of business ideas are as follows:

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 1. Personal skills and experience.
2. Interviewing people about their needs and complaints
3. Observing social and political changes
4. Family members influence and friends.
5. Visiting other businesses and entrepreneurs.
6. Information from the media like news papers, magazines, radios, television, etc.

Identify any five factors can increase business strengths.

● Good brand image

● Good location of the business

● Brand loyalty

● Better quality product

● Superior packaging

● Enough capital

● Increasing sales

The five factors can influence business Opportunities.

● An expanding market

● Merge with a competitor

● Discovery of better-quality raw materials

● Favorable government policy

● Reduce the number of competitors

● Political stability and security.

2.3 Factors influencing choice of a business idea/opportunity

The factors influencing choice of a business are:

1. Inheritance: They inherited their businesses from their parents.

2. Level of profitability: Some people decide to do certain kinds of business based on what
they think is very profitable.
3. Availability of resources: Some people are doing certain businesses because they had the
resources for such businesses.
4. Customs and traditions: Some people do certain businesses because of certain customs
and traditions.
5. Government policy: People normally end up doing businesses that are encouraged and

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 promoted by the government and that are legal.
6. Religious beliefs: Religious beliefs influence what business you can do and what you cannot.
7. Copying existing businesses: Most people start businesses by copying existing businesses.
What effects do you think would happen if you did not consider those factors?
√Lack of profit

√Lack of resources

√providing unneeded products,

√conflicting with the social norms,

√conflicting with the government,

2.4 Evaluating business ideas

A business idea evaluation typically involves studying market conditions, establishing a target market and
analyzing the projected costs of the new venture.

Factors for evaluating business ideas

– Legal consideration: The new idea should be in line with the legal regulatory framework for example, an
idea to sell drugs may not be viable because it is illegal in Rwanda.

– Potential customers: An entrepreneur has to assess potential and actual market for the goods and
services. There must be a clearly defined market if the opportunity is to be considered.

– Self-Analysis: When you do get an idea about the kind of business you want to take up, you should also
consider your ability to manage resources. You need to examine your talents, goals, and desires

-Network: Having a good network connection with the customers, partners and investors can save a lot of
time and reduce costs.

– Differentiation: If there are a lot of competitors in your business, then you need to identify what makes your
idea unique.

– Financial requirements: Evaluating the resources needed for the business idea is crucial.

There are five basic types of business ideas:

1. Bringing an existing idea into a new market i.e. custom suits for a younger male demographic
2. Improving on an existing idea i.e. Modern produced computers imitate the idea of the computer inventor,
Charles Babbage
3. Merging of two or more ideas i.e. A university that provides both education and restaurant services
4. Completely new idea i.e. Invention of a computer by Charles Babbage
5. Taking advantage of an opportunity using an existing idea, in an existing market i.e. Opening a shoe store
in area where other shoe stores already exist.
State the main questions you would ask the customer to help youproperly evaluate his business ideas.

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Main questions you would ask the customer to help you properly evaluate his business ideas.
• Is your business legal?

• What are the entry barriers?

• What problem is going to be solved?

• How much capital to start with?

• What are your strengths and weaknesses?

• Who are your competitors?

• Are there any opportunities and threats?

• What are the requirements to start?

• What is your Unique Selling Proposition (USP)?

• What is your exit strategy?

Evaluate business ideas Using SWOT analysis

The SWOT analysis is a tool of analysis that can be used by a business person to asses the
strengths, weaknesses, opportunities and threats of the business.
SWOT analysis is used to identify the important internal and external factors that affect a business.
O
1 S : Strengths:These are internal factors that increase the chances of success to the [Link]
strengths are factors that are helpful in achieving its objectives.
Examples of business strengths:

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 oEnough capital.
oSkilled manpower.
oHigh quality products.
oInnovative capacity.
oBetter technology.

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 oExcessive competition.
oHigher taxes.
oEntry of new and bigger firms in the market.
oScarcity(shortage) of raw materials.
oLowering prices by competitor

Propose any four tips or techniques you can use to maintain your strengths so as to keep outcompeting the rivals.
√ Be truthful. It probably goes without saying, that if you are not truthful during this process, the entire
analysis won ‘t be effective.

√ Allow for feedback. make sure your employees are comfortable offering their feedback.

√ Stay focused. You want to hear many viewpoints, keep the group on task.

√ Keep your list of strengths handy. Keep your list in an accessible spot. You analyze all of the data that you
collect over the next few days at the end of the week.

Example: A SWOT analysis of a bakery

Internal factors Strenghts Weaknesses

●Enough capital. ●Inadequate (little) capital.

●Skilled manpower. ●Small sales team.
●Better quality ●Bad location of the business.
products. ●Poor marketing skills.
●Superior packaging. ●Few customers.
●Increasing sales. ●New on the market and not
●Strategic location. yet known.
●Experienced
management.

Opportunities Threats

External factors ●Increase in hotels and ●New bakeries being set up.
restaurants. ●Higher taxes.
●Merge with a ●Scarcity of raw materials.
competitor. ●Lowering prices by
●Reducing number of competitors.
competitors. ●Reduction in the population
●New external markets. thus reduction in the market.
●Peace and security. ●Excessive competition.

Basis of identifying business opportunities

Business opportunities will be identified basing on:
-Prevailing consumer/customer needs/people needs
-Available resources/based on resources in the community
A consumer: is a final user of the product. whereas a customer buys the product for business purposes. Types of
customers such as loyal customers, wandering customers, need based customers, discount customer, credit
customer and types of customers based on their age, profession, gender, location, hobby, beliefs.
Needs: a basic thing that an individual must have in order to survive.
Abraham Maslow's hierarchy of needs

Human needs have different categories. The most useful categorization was developed by Dr Abraham
Maslow, an American Psychologist. You can explain the Abraham Maslow's hierarchy of needs using a
triangle.
 5. Self-actualization needs: This the maximum
level of human needs. At this stage, people want
to engage in activities that benefit their
communities e.g sponsoring activities like games
and many others
4. Esteem needs: These include the need for status, respect,
independence, responsibility

3. Social/ Psychological needs: These include the need for love,

affection, family, relationship,

2. Safety needs: involve in protection from danger and a provision of a secured

environment, like protection, security, order, law, stability, etc.

1. Physiological needs: basic needs to human life and one cannot survive
without them, they include: food, drinks, air, shelter, sex, sleep

Discuss the different techniques and resources of business ideas/opportunities in your community.
-Personal interest in searching for new things/Hobbies,
-Franchises (improving upon an existing idea),
-Mass media (newspapers, magazines, TV, Internet),
-Business exhibitions, Surveys and research, Customer needs, advice, complaints, preferences,
wishes, etc.,
-Changes in society,
Based on different people’s needs in your village, develop any five business ideas you can generate
from the above needs.
Business ideas you can generate from people’s needs
Business opportunities based on the available resources/sources of business ideas based on
resources available in your community.
Resources refer to endowments that may exist in an area or a locality.
-Human resources: both skilled and unskilled labor
-Material physical resources for example minerals, water, trees, animals, building, etc
-Time: having time available for carrying out a specific activity
-Technology: the machines, equipment, tools and the general know how
-Information i.e. knowledge about different business activities
-Financial resources the physical money or near money that can be used to acquire all the
required business input.

UNIT3: ENTREPRENEURSHIP AS A CAREER

A career refers to a job or profession that someone does for a long period of time in his or her life.
Like doctor, accountant, entrepreneur or engineer.

Career choice refers to the selection of a vocation or job that someone wishes to do for wellbeing.
person can choose to be an engineer, pilot, teacher, doctor, nurse, lawyer

Entrepreneurship as career: refers to when a person makes a decision of utilizing his/her skills or
resources to identify challenges/problems in the community and start something that is beneficial to
himself/herself and to the community.

The following are some of the entrepreneurship career fields because one can generate different
business activities from them/ career opportunities that people today are engaged in starting
with those in your home area.

Career opportunity/career Entrepreneurship careers/Job careers

field
Education field starting a stationery shop dealing in scholastic materials,
making uniforms, starting a private school, operating a school
canteen, operating training center.
Medical or health field starting private clinics, pharmacies, counseling services,
medical stores.

Agricultural field People can choose a career related to livestock farming and
crop growing (cash crop growers). Examples of such careers
would include selling animal drugs and pesticides, selling
flowers and seedlings among others

Engineering field such as running a construction company, software

development, selling of electronics, repair shops, web
designing and graphics among others.

Commercial and choose a career in the field of commerce and manufacturing

manufacturing field such as buying and selling crops, crop processing activity, tax
declaration services, business advisory services among others

Transport field career in the field of transport and such as transporting

people on bicycles, motorcycles, taxis, operating travel
agencies, designing transport related technologies among
others

Legal field (law) choose a career in the legal field such as barrister, contracts
lawyer, law assistant, legal advisor, legal secretary, legal
receptionist among others

Finance field career in the field of finance such as managing forex bureau
operators, making business plans for mortgage loans, finance
consultancy businesses, business advisory, tax advisors,
financial statement analysts, credit analysts among others.

Hospitality field career in the hospitality field such as hospitality services

coordinator, guest experience manager, director of HR &
training, guest services coordinator, kuvuga amazina y’inka,
comedian, musicians, artists, tour guides among
Security forces field choose a career in the security field such as selling security
equipment like CCTV cameras, sniff dogs, garments
(uniforms), starting private security training and service
companies, policeman, soldier

Media field choose a career related to comedy shows, creating YouTube

media channels, video, and film production libraries, selling
newspapers, photographing, starting a radio station.

Why do we need to conserve our environment as a source of career opportunity?

● Because without the environment, there is no career. Environment includes all

that surrounds us such as existing businesses, information, existing products,
community needs, local resources, situations, among others which are the
sources of our career.
● To have enough time to succeed in our career we need a conducive environment
such as natural, legal, economic, political, and therefore all kinds of environment
are important to our future and opportunity generation.

various factors which motivate people to start a career in business.

● Need for Self-employment and getting job satisfaction and flexibility of your
work.

● Need to generate more Income and increase economic growth.

● Need to develop entrepreneurial skills and attitudes.

● Freedom from the dependency on the jobs offered by others

● Need to acquire basic needs

 ● Unlimited financial gain

● Development of new markets

Employment options/career option /types of employment

There are basically two forms of employment:
1. Paid employmen: Paid employment is when you work for someone else who pays you a salary or
wage at the end of the month/ day/week... The salary is paid by the person, company or
government department that is employing you.
2. Self-employment/Entrepreneur/sole trade: This is where an individual privately
utilizes his/ her own resources to start and operate his/ her own business.

Benefits of being employed (Paid Challenges of being employe (paid

employment) employment)

- Income is specific and regular - Fixed income even when output

(steady income) increases
- Favorable hours of work: Fixed - Lack of independence
time of work - spare time for - Relatives cannot be made part of
leisure business
- Fringe benefits may Eg: medical - Limited freedom of expression
care, free transport, … - Limited decision making
- Pension on retirement - High level of job insecurity
- Defined specific tasks - Low level of innovation
- It is easy for the government to - Harassment from employer.
collect taxes. Eg; PAYE(Pay As
You Can) tax,

Benefit(Self-employment/soletrade,sole Challenges(Self-employment/
proprietorship) soletrade,sole proprietorship)
 - You become your own boss and - Risk of losses
therefore you are independent - Poor experience of doing work
- You determine your own time of - Lack of required resources.
work - Income is not very certain. It
- More income from profits varies depending on variation
- Higher status in society of profits
- High degree of job security - Long and irregular hours of
- Improved creativity and works: Most entrepreneurs
innovation work -on weekends, nights and
- Develop self-reliance to an public holidays.
individual - No define tasks
- Improved standards of living - No fringe benefits:
- It encourages provision of Entrepreneurs do not enjoy extra
goods and services to the public benefits from the company.
- It promotes efficient use of
business resources

Entrepreneurship career path

A career path is a sequence of jobs that leads to your short- and long-term career goals. Some people
follow a linear career path within one field, while others change fields periodically to achieve career or
personal goals.
Career trajectory is a path a person follows in pursuing professional growth throughout their
working life. Or the process that one goes through to qualify in a given work.
Entrepreneurship career path refers to all the jobs/ occupations that someone undergoes to become
successful in an entrepreneurship career.

Example: Education: Teacher—Curriculum Coordinator—Assistant Principal—Principal

Administration: Administrative Assistant—Executive Assistant—Office Manager

Retail: Retail Sales Clerk—Assistant Manager—Department Manager—Store Manager—

Regional Manager

Customer service: Customer Service Representative—Inside Salesperson—Outside

Salesperson—Major Account Salesperson—Regional Sales Manager

Example1. of entrepreneurship career pathing: Kagiraneza started vending Mandanzi from a bakery
in his village Later he was employed bakery and get money then after start his own bakery products
distribution shop. finally gave him more skills on how bakery products are made. Currently,
Kagiraneza own a bakery plant of his own as an entrepreneur

2. Vending mandazi (6 months) Worker in bakery(3years) Bakery product shop

owner(4 year) 5year Bakery plant owner years

Stages to follow when preparing to choose a career/ steps taken in choosing a career path

– Assess yourself/ Self-assessment: This involves looking at your skills, values,

interests, personality and analyzing where your strengths and weaknesses lie. Begin
by thinking about where you are now, where you want to be and how you’re going to
get there.

2. Occupational Research/list of potential occupations: Once you have understood

yourself, the next step is to investigate what options are available.

3. Information search/ explore the options: Get as much information as you can
about the selected career. This will help you collect a rich and diverse background on
those careers that attract you most.

4. Narrow down your list: This is where you think about what suits you best at this
point in time. You look at different aspects such as, your best work or training
options, how they match with your skills, interests and values, do they fit with the
current labor market? You want to know if the career is truly appropriate for you or
not.
5. Set personal goals: A career goal can be a specific job you want to do such as
doctor or teacher. It can also be a particular field you want to work in, such as
medicine or education.
6. Create a career action plan: Here, you plan the steps you need to take to put your
plan into action. It involves using all you have learnt about your skills, interests and
values together with the information you have gathered about the career you have
chosen.
7. Obtain training: This is the final stage of choosing a career. Individuals train so as to
specialize in various areas under a specific field.
PDP is a clear developmental action plan which, once agreed with the individual’s supervisor, acts as
a “learning contract” between them. You may have your own preferences for formatting and
recording action plans: timetables, diaries, checklists, and other methods mentioned earlier. Be sure
to use any format recommended by your organization.
Why do we need to conserve our environment as a source of career opportunity?

Because without the environment, there is no career. Environment includes all that surrounds us
such as existing businesses, information, existing products, community needs, local resources,
situations, among others which are the sources of our career. To have enough time to succeed in our
career we need a conducive environment such as natural, legal, economic, political.

SOURCES OF CAREER INFORMATION/SOURCES OF CAREER GUIDANCE

-From Parents, friends and relatives
-Teacher role model
-From schools and institutions of higher learning
-From the media like Tvs, radio, etc.
-From potential workplaces like banks, transport companies, etc.
-From trade unions or labour unions
-From local libraries

FACTORS THAT INFLUENCES A PERSON’S CAREER

1. Parents
2. Schools and institutions attended
3. Peer pressure and friends
4. Personal interests
5. Financial expectation
6. Government policy

UNIT 4: SETTING PERSONAL GOALS

Key unit competence To be able to make a plan to achieve their personal goals

PERSONAL DEVELOPMENT- IDENTIFYING PERSONAL VALUES, SKILLS AND QUALITIES NEEDED

Personal development: This means an everyday activity aimed at enriching knowledge, acquiring new
skills to boost productivity, to improve self-organization and to master communication with people. It
can also mean all activities done to support human development.
Personal qualities: These are the characteristics, attributes or personality traits that make
up and reflect who you are.
Person values: These are those beliefs we hold most dear. They can be desirable goals
that motivate our actions and guide us through our lives.(are the ideal that we give attention
to and consider important to us. Ex honest, truthful, Courage, creativity, kindness, independence,
honest.)
Person skills: how a person interacts with other people and the surrounding environment.
(are the ability you possess to do certain things).
A goal is what you are trying to do or achieve.
A personal goal This is an objective that someone sets for a specific reason within a
specific timeframe
Goal-setting is the process of taking active steps to achieve your desired outcome.
GOALS TREE
1. Roots mean values and skills we need to achieve our goals
2. The stem (tree trunk) means people in our lives that give us strength e.g. friends, family church,
3. Branches mean our goals and what we want to accomplish in life
4. Leaves mean the resources we need like time, information, money etc.
5. Fruits mean our future achievements, what we enjoy, what we achieve as our goals
6. Thorns represent the obstacles and challenges that we meet along the way to achieving our goals
Imagine a family whose members are lazy, have no values and respect for other people. How can you
help such a family to improve their individual/ personal values and those of their family.
Ways of improving the family’s values on personal level.
● To be honest

● To be trustworthy.

● To be attentive.

● Tolerance

● Hardworking

● Respect

● Decision taker

● Creative

● Innovator

Identifying values, skills and personal qualities

We need Values TO BECOME...
We need Skills TO DO...
 IMPORTANCE OF HAVING PERSONAL VALUES
1. Help you to find your purpose
2. Help you to make decision
3. Increases self-awareness
4. Improve quality of life
5. Values can assist you in setting your goals
6. Help you to increase your confidence
7. Help you to choose the right career

Personal qualities in relation to entrepreneurship, personal development, engagement with society

and the workplace
Entrepreneurship Personal development Engagement with Workplace
society

Self-reliance be active listener be a good listener analytical

Accomplishment be truthful be courageous problem solver
risk taking belief in your self be honest goal oriented
Commitment work well with others. be responsible hard working
Caring adapt to change Accomplishment Friendliness
Determination Accomplishment Friendliness Commitment
Focus Friendliness Commitment Caring
confidence Commitment Caring Determination
creativity Caring Determination Focus
Determination Focus flexible.
Focus

key values and qualities that can make you to live with others in peace.

● Friendliness: This is the quality of being friendly to others by helping them.

sharing with them, being respectful and showing that I’m sorry whenever I wrong
them.

● Respect: This is the ability to appreciate, admire and have positive regards
towards oneself and others. We show respect by using kind words, being polite,
being honest, and by not being wasteful and so on.

● Caring: This is the state of displaying kindness and showing concern about
other.
 ● Intelligence: This is the ability of a person to acquire and apply knowledge,
understanding and skills.

● Honesty: This is the ability to be truthful and faithful to oneself and others. An
honest person is sincere, frank, genuine and straightforward.

● Self-reliance: This is the ability to depend on yourself rather than others to get
things done and to meet your needs.

● Accomplishment: This is something that has been achieved successfully

● Commitment: Is the state or quality of being dedicated to an activity

● Dignity: This is the quality of being worthy of respect.

Characteristic/qualities of good goals

good goal should be SMART.
SMART goals are:
S: SPECIFIC; A good goal should be clearly defining what you are going to do.
make a goal specific, consider the questions below:
M: MEASURABLE; A good goal should have the indicators to prove or show how and at
which level it is to be achieved.(goals should be measurable, provide tangible evidence that they
have been achieved. Ask those questions)
- How much?

- How many?

- How will I know when it is accomplished?

A: ACHIEVABLE (Attainable); A good goal should be possible and acceptable within an area
where it is being pursued (goals should be achievable.)

R: REALISTIC; A good goal should be within the abilities of the goal setter.( goal should be
within ability of goal setter. Am I willing and able to do it?)

T: TIME-BOUND: goals should be grounded within a timeframe. (starting and ending point).
Time is money! Make a tentative plan of everything you do.

steps in setting SMART goals

● Step1: Identifying priorities, The term priority is a goal ranked first among other
goals appearing in the order of their importance. One should list his/her goals in
the order in which he/she plans to implement them. After prioritizing your goals,
organize and plan your activities. Write down your activities.

● Step 2: identify the start and end points: This involves analyzing the current
position you are at and where you want to be in regard to setting a SMART goal.
It helps in baseline assessment

● Step3: Analyzing one’s skills and interest:In this step, one thinks about what he/
she enjoys and what he/she is good at. The skills set that one possess
determines whether individual has the ability to work towards the attainment of
the set goals.

● Step 4: Checking on the available opportunity The term opportunity is situation,

condition or circumstance favorable for the attainment of a goal.

● Step 5: Setting strategies to achieve the set [Link] is planned method

and action to achieve a particular goal usually over long period of time.
 ● Step 6: Identify possible obstacles: Obstacle is thing that blocks way, prevents,
hinders progress and makes it difficult to do something. At this stage, one need
to make a list of anticipated obstacles and note down how you plan to overcome
these obstacles.

Or

In order to set smart goals, the following steps in question form should be observed.

[Link] do l want to be in the next period of time say 4 months, 6 months, one year etc.?
Consider the example of a goal, I want to start a big business project after my
secondary studies i.e. after two years. This shows exactly what the person wants to be
in the next two years.

[Link] must I know to get there? Example to start my business, I will need to discover which
type of business to get involved in, I have to know how many are doing it, how they do it,
for whom they produce for (market),

[Link] steps must I take in order to know and be able to do these things?

Example I have to prepare a business plan i.e. production, marketing,

organization, financial, action plans etc. Obtain a trading license and a
business registration among others.

[Link] abilities and experience do I already have that are going to help me take these steps?
Refer to the qualities of an entrepreneur. Do you possess any?

[Link] obstacles might be on my way and how can l deal with them?

You have to list the challenges that you may meet on the way to achieving your
goal. This is because you don’t expect everything to go on smoothly.

6. What should I do first, second and so on?In setting goals, one has to specify
short term goals first then the long-term goals, a person can suggest short term
goals stating when it should be achieved and resources needed to achieve them.
Types of goals

-short term goals: is goal that you achieve using short period of time. (within one year)

-medium term goal: is goal that you achieve using medium period of time. (between 2 year)

- Long term goals: is goal that you achieve using long period of time. (above 2 year)

Analyze them and make them SMART if they are not.

No Not good SMART goal Good SMART goal

1 We want to increase sales by, We want to increase sales by 10% from 100.000FRW per
let’s say, 10% next quarter. month before the end of the year

2 I want to study abroad In 2 years, time I want to improve my grades to be able

to study entrepreneurship in India

3 I want to get in shape I want to keep in shape by attending 2 hours everyday in

a local gym in one year

4 I want to get a bicycle I will save 50.000FRW every month for 6 months to buy
a bicycle

.
Example of goals.

Achieving my goal

Long term goal; by end of 3 year, I want to graduate from junior secondary school.

Short term goal 1: by end of year1, I want to get grade B in all subject.

steps By when resources cost

th
I will study for 1h 10 nov2017 room none
every evening
Short term goal 2: by end of year 2 I want to get A In all subject. By when
th
I will engage and seek 14 nov2018 teacher none
extra help from my
subject teacher.

short term goal3; by endof3year, I want to find entry level position in my chosen career

steps By when resource cost

th
I will engage my 14 2019 Career counsellor none
school career
counsellor for advice.

Why set goals? Importance of setting goals.

- Goal help one to be what he or she want to be

- Goal increase confidence

- Goal provides sense of purpose

- Goals make one self-reliant

- Encourage decision

- Turn the impossible into possible

- Increase satisfaction.

The following are guidelines for different learning styles/ learning styles involved in setting a
SMART goal
If you learn best by speaking do the following:
- Choose an activity that requires a lot of talking
- Ask questions if you have not understood or you need clarifications
- Repeat things right after you hear them so as to better remember them
- Study with other people in order to share new information through talking.

If you learn best by listening do the following:

- Choose an activity that requires a lot of listening
- Call people on phone instead of writing to them
- Study with others so as to share via talking
- Ask people to explain things you don’t understand
- Read aloud information you need to study

If you learn best by reading do the following:

- Choose an activity that requires a lot of reading
- Get information through written words
- Have people write down directions for you to read
- Read instructions instead of being told or shown
- Take good notes and then read them later on

If you learn best by writing do the following:

- Choose an activity that requires a lot of writing
- Writ down the things you need to do and keep a written schedule
- Take notes when listening to instructions
- When you read underline important point and take notes as you read along

If you learn best by seeing/observing do the following:

- Choose an activity that requires a lot of observation
- Use charts, graphs, pictures, etc…
- Visualize words, pictures, telephone numbers, etc…in your mind
- Take notes of shapes, and colors of things that you need to remember
- Watch others do things you need to know how they are done
If you learn best by doing do the following:
- Choose an activity that lets you work with hands and move around
- Visit places so as to see how things are actually done
- When you want to learn how to do something new, watch someone actually does it ask him/her to
show you how it is done
- If given a choice, show others how things are done by doing it in front of them.

UNIT 5: LAW IN BUSINESS OPERATION

Law: a system of rules that a particular country or community recognizes as regulating the actions
of its members. Or is a rule made by an authority and that must be obeyed.

Business laws (commercial law): are laws that govern business operations. These laws protect the
consumers, the community, the environment and the businesses themselves.
Laws related to business

1. Consumer protection law focuses on guarding against unfair trade practices that harm buyers
in the consumer marketplace.
2. Public health law focuses on improving the health of the population by using effective deterrents
and punishment.
3. Weighing and measuring law ensures that sellers use acceptable weighing scales and
measurements when selling goods and services to customers.
4. The trading license act requires all businesses to obtain trading licenses before beginning
operations.
5. Environmental law ensures the protection of the environment at all stages of land use,
development, business startup and operations.
6. The land Act provides for the tenure, ownership and management of land.
7. Food and drugs law ensures that expired drugs and bad foods are not sold to customers.
8. Law of contracts enforces contracts between contracting parties
9. Commercial law relates to the buying and selling of goods and services

IMPORTANCE OF BUSINESS LAWS:

Business laws help to instill discipline in business operations

Protection of customers’ environment
They provide guidelines and regulate every area of the business
Its helps to eliminate the Traders using wrong measures and weights
Its helps to eliminate Manufacturers producing sub standards goods
Its helps to eliminate Business people failing to pay right taxes,
Laws protect the environment
Laws reduce conflicts among people

business laws that protect consumers

● Licensing law: In order to start and operate a certain kind of business; LICENSE
is required. A “License” gives an entrepreneur a permission to carry out a defined
business activity.
● Law of Contract: The law about making an enforcing contract. In business,
there is a use of many contracts and it is vital to know the laws of contracts.
● Patent law/ Trademark law: These are laws that deal with ownership,
intellectual property right, and inventions. They are necessary to protect the
 business and its products.
● Employment law: Employment laws are put in place to regulate working
conditions of workers. These laws explain such issues as hiring and firing of
employees, the rights of employees, payments and compensation, safety.
● Tax law: These laws deal with payment of taxes, tax exemption, tax refund,
filing of tax returns and other aspects of taxation.
● Environmental law: These laws are put in place to protect environment and
make sure the business activities do not destroy the environment.
● Commercial laws: Commercial laws relate to the buying and selling of goods
and services and regulating how it is done.
● Consumer protection laws: Laws intended to protect consumers from fraud and
from harmful products

LEGAL INSTITUTIONS RELATED TO BUSINESS IN RWANDA

[Link] COURTS
These are the courts specialized in handling cases relating to business conflicts in Rwanda. In
Rwanda, the supreme court is the highest court of the country.

As seen, the commercial courts have been established to handle business related cases and settle
business disputes. The handle claims that relate to the following:
Exports and import of goods
Business documents and contracts
Banking and financial services
Operation of markets
Purchases and sales of goods

[Link] (RWANDA REVENUE AUTHORITY)

RRA is the body that is responsible for assessing, collecting and enforcing tax laws.

RRA has an objective to collect government taxes and revenues and to enforce tax laws through its
different departments. RRA has the task of financing the national budget through revenue
mobilization. so as to:
● Finance development activities and poverty alleviation in the Rwandan society
● Empower the government of Rwanda to fund its own essential expenditure

3. RDB (RWANDA DEVELOPMENT BOARD)

Rwanda Development Board is an institution concerned with registering any form of new business
organizations. It is a principal government agency responsible for facilitating investors to realize their
investment projects in Rwanda Roles of RDB:

1. It gives technical support and logistics to both domestic and foreign investors

2. It promotes Rwanda tourism

3. It ensures good service delivery

4. It ensures entrepreneurship skills development

[Link] (Rwanda Commercial Registration Service Agency)

The RCRSA is an institution that serves the purpose of proving registration information to both new
and existing business.

[Link] (Rwanda Utilities and Regulatory Agency)

This is a government department that monitors and controls services and goods for example
transports, energy, agricultural products, telecommunication.
Mandate of the RURA
a) To set up necessary guidelines in order to implement the laws and regulations in force.
b) To protect and promote consumer interests
c) To promote the availability, accessibility and affordability of regulated services to all
consumers
d) To protect the rights and obligations of consumers and service providers

[Link] (Private Sector Federation AKA Lobby group)

legal forms of business enterprise / business unit/ form of business ownership/types of business
organization.

The following are the legal forms of business organization (in PRIVATE SECTOR):

1. Sole proprietorship
2. Partnership
3. Joint stock company
4. Cooperative

1. SOLE PROPRIETORSHIP

Sole proprietorship is a business started and owned by one person, the sole proprietorship makes a
decision alone takes all the business profit and in case of losses he/she suffers them alone. Eg:
Restaurant, Internet cafes, etc
Characteristics of a sole proprietorship:
● The trader owns the business alone
● He/ she is responsible for financing the business alone
● Decision making is by one person
● Limited government interference
● The business is very flexible
● Advantages (merits of sole proprietorship)
1. He enjoys profits alone
2. It requires little capital to operate
3. There is close contact between the owner and the customer
4. There is independence i.e. no need to consult any one when making decisions.
5. The sole proprietor is self-motivated
6. They have enough time for the business

● Disadvantages (Demerits)
1. Chance of expanding are minimal due to limited capital
2. The business may be closed when the owner is sick or dead
3. He suffers from long hours of work for holiday.
4. It is difficult to obtain loans from banks due to lack of collateral security
5. He cannot easily compete with large companies which may charge low prices
6. Personal attitude affects the business

2. PARTNERSHIP
A partnership is a business unit formed by two or more individuals (ranging from 2 to 20 people) with
the aim of making profits.

Characteristics of a partnership
It is owned by more than one person,
Profits are shared among partners
Capital is contributed by partners
Members are responsible for all business losses
The burden of running the business is shared by all partners
The admission of a new partner requires general consent.

Types of partners

1. Active partners
Partners who contribute capital and participate in daily running of the business
2. Dormant partners
Partners who contribute capital but do not participate in the daily running of the business
3. Minor partners
Partners who are below 18 years of age.
4. Major partners
Partners above 18 years of age
5. Real partners
Partners who contribute capital to the partnership share profits and losses and is also responsible
for the liabilities of the business.

6. Quasi partner
Partners who do not contribute capital to the business but allow their name to be used by the
business.

● Advantages of a partnership business

1. Encourages specialization (division of labor)

2. More capital is raised
3. Continuity of the business
4. Wise decisions are made
5. More skills applied and there is specialization
6. Losses are shared by all partners.

● Disadvantages of partnership
1. There is no secrecy in the business because all the partners have access to all business
documents and records.
2. Profits from the business are shared
3. In case an active partner dies, the business may be greatly affected
4. Misunderstandings can easily come up.
Partnership deed (Deed of partnership)

Partnership deed. It refers to the written document starting the terms and conditions of partnership.
The deed is useful in case of disputes and misunderstanding during the course of business.
The main contents of a partnership deed are:
1. Name of the business & its location
2. Name and address of each partner
3. Status of each partner. (dormant, active, minor etc)
4. Physical and contact address of the business
5. Purpose for which the partnership is being started
6. Capital to be contributed by each of the partners
7. Responsibilities, rights and duties of each partner
8. Salary and benefits payable to each partner
9. Duration of partnership-whether it is a permanent or a temporary partnership.

● Dissolution of partnership
Dissolution of partnership is the ending or termination of a partnership.
 1. If the partnership is temporary and the period, it was formed for has expired.
2. If there is misunderstanding between the partners
3. If the partnership business become illegal and put to an end by the law.
4. If one of the partners becomes mad or dies.
5. If one or more partners leaves the partnership.

3. JOINT STOCK COMPANY

A joint stock company is at times called a limited liability company or simply a company.
A joint stock company is a type of business formed and owned by a group of people called
shareholders who have a legal identify different from that of the business. The company is an
artificial person created by law with capital divided into transferable shares.

● Characteristics of a joint stock company

1. Legal personality: a company is an artificial person created by law.
2. Capital divided into transferable shares.
3. Long life: The death or retirement of a shareholder will not affect the company.
4. Great number of members
5. Can raise capital through shares

Types of joint stock companies:

1. Statutory companies: These are companies which are owned by the
State and are created under Act of parliament.

2. Registered companies These are formed by shareholders and

registered with the Registry of companies
under the Company’s Act.

√ Private Limited Companies √ Public Limited Companies

● 2 to 50 shareholders ● 7 to unlimited numbers of
● It doesn’t invite the public to buy shareholders
shares ● It invites the public to buy shares
● Not separate from its members ● Separate legal entity from its owners
● It can start immediately on ● Can’t start until it has obtained a
incorporation/ registration. certificate of trading.
 Similarities between Private ltd companies and Public ltd companies:
1. Shareholders have ltd liabilities
2. Continuity in case of the death of a shareholder
3. Greater status
4. Long legal formalities involved in establishing the
business

Advantages of a limited company

√ Boosting the economy: Companies pay more taxes

√ Shareholders are safeguarded against frauds
√ More job opportunities
√ Higher profit
√ Large scale production
√ Probability to raise huge capital

Disadvantages of a limited company:

Long procedures to start: The Company requires many documents to start.
Excessive government control
Delays in decision making because of several management levels
Lack of secrecy: It is necessary for companies to disclose and publish all information about
its operations to the public
Lack of motivation since the management is separate from the ownership.

5. CO-OPERATIVES
A co-operative enterprise or a society is a form of business made by a group of people who join
efforts in the production or distribution of goods and services with the purpose of sharing profits
among themselves. Or cooperative is organization owned by the people who work in it and share the
profit (with the purpose of benefiting members).

Features of a co-operative society

The association operates in a democratic way.

Each member has rights as per the partnership deed.

All members have one vote at important meetings.

Members can contribute to the running of the business.

TYPES OF CO-OPERATIVES:
 1. Consumer co-operatives: They enable consumers buy / acquire goods and services at a fair
cost.

2. Producer co-operatives: They aim at collectively marketing their products at competitive

prices.

3. Savings and Credit co-operatives (SACCOs): They carry out savings for their members and
also provide credit facilities to them eg: Umwalimu SACCO

4. Transport co-operatives

5. Worker’s co-operatives, etc

PROBLEMS FACED BY CO-OPERATIVE SOCIETIES IN RWANDA (challenges of cooperatives)

Disputes and misunderstanding between members

High competition from similar co-operatives

Lack of government support

Mismanagement of funds

Lack of storage facilities

CONTRIBUTIONS (IMPORTANCE) OF CO-OPERATIVE SOCIETIES TO THE SOCIO-ECONOMIQUE DVPT

a. Creation of employment opportunities

b. Increasing savings and investments

c. Encouraging people’s teamwork spirit

d. Increase of government revenue since they pay taxes

e. Improving social and economic well-being of people

f. Educating their member.

Examine the factors considered when choosing a legal structure for a business in Rwanda.
. Government regulations
 . Transferability and continuity of ownership interest
. Management control
. Profit and loss distributions
. Liability of business owner(s)
. Ease of establishing and terminating the business.
. Tax treatments

Difference between Company and Cooperative.

Company Cooperative
The key objective is to maximize profits To improve the welfare of the members.
limited liability of members of a company unlimited liability but generally limited.
Membership closes Membership is open

Votes depend on the number of shares holders Democratic as each member has one vote
by the member
Profits are shared in form of dividends in A minimum part of the surplus is put aside/reserved,
relation on the capital contributed shareholder while the 10% is shared/distributed to the members.

BUSINESS FORMATION AND REGISTRATION ACCORDING TO THEIR FORMS

You can register your business ONLINE or at the office of the Registrar General which is a
department within the RDB located in Kigali, the capital city of Rwanda.

Steps of registering a business in Rwanda.

Step 1: Register on the RDB business registration system
Step 2: Choose the business category to be registered
Step 3: Complete the business registration application
Step 4: Print Certificates
Step 5: Register, declare and pay all required taxes

Requirements for registering legal forms of business

Legal form of business Requirements
Sole proprietorship
- National ID number, personal details
- Contact details.
- Email account
-An application letter indicating personal names
=Place and date of birth
-Domicile and residence
-Nationality, sex, marital status, in case married, name of
 the spouse and their matrimonial regime
-Name of the business enterprise and trade mark if
applicable
-If applicable, trademarks deposited before the state

Partnership
- Notarized copy of the registration certificate ·
- Notarized copy of Articles of Association ·
- Notarized Shareholders resolution stating name, scope of business
- Copy of partnership deed

Joint stock companies

- Notarized copy of the registration certificate.
- Notarized copy of Articles of Association.
- Notarized Shareholders resolution stating name, scope of
business, - - management and shareholding details of the new
company

Cooperatives
- Copy of bylaws and Internal regulations.
- Define its domain of activity and objectives;
- To have the required number of founder members
- A copy of minutes for meetings
- To have a certificate issued by the Sector

Benefits of registering a business:

√ Obtaining licenses and permits

√ It helps a business to protect its brand: Trademarks are patented.

√ It safeguards the business name.

√ The business has continuity entity

√ It avoids penalties

Consequences of not registering the business:

Penalties and fines may involve

The government may close down such a business
Disputes between a business and the Government
 The business may not be in position to access funds from financial institutions for
investment

UNIT 6: ROLE OF STANDARDS IN BUSINESS

Standard: refers to a document established by consensus and approved by a recognized
body, that provides, for common and repeated use, rules, guidelines, or characteristics of
activities or their results, aimed at the achievement of the optimum degree of order in a
given context.
Substandard products: These are products which do not meet the customers’ needs.
Standard-compliant products: These are products that meet all the required characteristics
as set in the national, regional or international standards governing them.

Standardization: This refers to the process of developing and implementing technical specifications.
Difference between standard-compliant and substandard.
- Standard-compliant products have S-Mark while substandard products do not.
- Stand-compliant products have not yet expired while substandard ones include expired ones.
- Standard-compliant products have the right ingredients indicated while substandard products have
the wrong ingredients.
- Standard-compliant products are properly packaged in recommended materials while substandard
ones are not.

TYPES OF STANDARDS:
● Basic standards: These are essential facts or principles that have to be maintained in a
product or in a service provision.

● Product standards: these are established requirements/ qualities/ methods of testing,

grading and making a product to ensure that it will serve its purpose effectively.

● Test and measurement standards: This defines the process of measuring the properties of
performance of a product.
 ● Service standard: producing better quality to the customer.

● Process standard: Is way or procedures and method used to produce better product.

● Ethical standards: moral principles that if respected, promote values like trust, fairness,
kindness, good behavior,

● Design standards: They define characteristics or how a product is to be built.

IMPORTANCE OF STANDARDS TO AN INDUSTRY:

1. It leads to lower costs of production since errors have been minimized.

2. It helps industry products, services and personnel to cross borders.

3. They improve industry efficiency and remain competitive.

4. It helps to protect consumers, workers and environment.

5. It increases efficiency and productivity

IMPORTANCE OF STANDARDS TO CUSTOMERS AND SOCIETY:

1. Purchase of quality products

2. Customers are protecting from being over exploited by entrepreneurs

3. Improved choice

4. It improves standards of living.

5. Improved health

6. Increase customer confidence

IMPORTANCE OF STANDARDS TO THE GOVERNMENT:

1. Government earns revenue through tax

2. It protects its citizens from buying poor quality products

3. Standardization is a source of security

4. It promotes good relationship among countries

5. It is a source of job opportunities.

the process of establishing standards for new products in Rwanda/ the process of standardization
in Rwanda
1. Identification of need: This is sent to RSB to express the need for a given standard,
especially for new products.
2. Proposal for acceptance for the development of the new standard. At this stage the
Standards Project Committee analyses the justification provided by the Staff who carried out
the need assessment and based on the findings to be able to approve and advance to the
next stage.
3. Collection of reference materials and drafting At this stage, the required reference materials
are gathered including those which might be provided by the client.
4. Discussion of the draft standard by the Technical Committee (TC) Experts: The interested
parties participate in the technical committee meeting to deliberate on the content of the
draft standard.
5. Public Review: The draft standard agreed upon by TC experts is subjected to public review
for constructive feedback. Including other entrepreneurs who did not attend the technical
committee meeting)
6. Incorporation of comments in the draft, if any: At this stage, the final version of the
standards is compiled by the committee and submitted for approval.
7. Approval: This phase is for the approval of the draft standard by the RSB Board of
Directors.
8. Publication: The final version once approved, is published in the National Official Gazette
and becomes a national document to be implemented by relevant interested parties.

INSTITUTIONS INVOLVED IN INSPECTION OF ACTIVITIES IN DIFFERENT FIELDS OF

STANDARDIZATION IN RWANDA:
1. The Rwanda Standard Board - RSB

2. The agency of Ministry of Agriculture and animal resources

RARDA: Rwanda animal resources development authority

RADA: Rwanda agricultural development authority

RHODA: Rwanda Horticulture development authority

3. The ministry of health

4. Ministry of Infrastructure - MININFRA

5. Rwanda National Police – RNP

6. Rwanda Development Board – RDB

LEVELS OF STANDARDIZATION:
 International standardization

Regional standardization

National standardization

Certification is a third-party (accredited or authorized person or agency) attestation

following an assessment that attributes, characteristics, quality, or status of individuals
or organizations, goods or services, procedures or processes are in accordance with
established standards.
Certification mark: this is a symbol awarded by a certification body to mean that product has fulfilled
all requirements to be good quality.
Product Certification’s check that product conforms to specific characteristic and meet criteria of
certification. (after checking all steps and tests, the producer is awarded a standardization (S mark)
that can be displayed to the certified product.)
system certification: Rsb check that organization follow quality management systems.

Requirements for certification

√ The business should be registered by a competent authority such as RCA (Rwanda
Cooperatives Agency), RDB (companies) Rwanda Food Drug Authority (Rwanda FDA),
Rwanda Inspectorate, Competition and Consumer Protection Authority (RICA), and others.
√ The business should be operational with competent staff (Business ideas are neither
standardized nor certified), suitability of equipment and adequacy of premises
√ Operational documents (Documentation): Under this, all the documents related to the staff
competencies, reception of raw materials, and production, be prepared and well-filed. These
include but are not limited to Standards.
√ Readiness of the organization to pay the certificate fees
√ Calibration of measuring equipment

Product Certification Process In order to get S- MARK)

*Filling –in application form

*Certification fee payment
*To conduct audit of the production line and take samples.
*Product sampling and testing.
*Submission of audit report to client
*Closure of corrective actions (if any)
* Certification decision by independent committee
*Issuance of certificate of conformity.
*Surveillance audit.
*Market surveillance
*Re-certification (after 2 years)
System certification process
*Filling-in application form
*Certification fee payment
*Stage 1 audit (desk audit &on-site visit)
*Stage 2 audit (full audit)
*Submission of audit report to client
*Closure of corrective actions (if any)
*Certification decision by independent committee
*Issuance of certificate of conformity.
* Surveillance audit.
* System recertification. This is done after 3 years.
Importance of Certification
It builds confidence in customers

Helps organization in carrying out internal audits.

It also increases the efficiency of workers in the organization.

Reduces losses hence increasing profits

Increases government revenues through trade promotion

Increases product/service safety and consumer satisfaction

UNIT 7: BUSINESS MANAGEMENT
Business: this refers to any economic activity done with an aim of making profits.
Management; This is the process of getting things done by using other people and resources like
capital, raw materials and time.

Business management: This refers to the process of planning, organizing, coordinating and
controlling activities of an enterprise to achieve defined objectives.

Business organization: refers to an entity or a group of people, such as individuals or companies,

that collaborate to achieve common business goals.

Importance of management in business

1. Reduce wastes of resources

2. It helps to coordinate factors of production

3. It helps to portray a good image to the public

4. It helps to build commitment among workers

5. It helps to ensure discipline in the organization.

6. It helps to solve conflicts

7. It is essential in handling public relation

Managerial functions:

These are special activities that are designed for a manager to perform in order to achieve the goals
and objectives of an enterprise.
1) Planning: it is a process of selecting goals and determining who, when and how to achieve
them.
2) Organizing: this refers to the coordination and supervision of factors of production
particularly land, capital and labor. Organizing includes: Identifying tasks, assigning tasks to
workers and Developing work plans.
 organization chart is one of the tools managers use to organize the people in business.
3) Leading: this involves directing/ influencing or inspiring the work of organizational members
towards organizational goals.
4) Controlling: this refers to the evaluation of achievements compared to the plans and taking
measures towards success of organizational goals/objectives.
5) Budgeting: this refers to the transformation of all plans in financial statement showing the
revenue expected and the expenses assumed/ projected.
6) Motivating: Managers should inspire and encourage their worker.
7) Communicating: It is the function of the manager to pass on information
regarding responsibilities, targets to achieve, suppliers, customers, laws, and
regulations in the business organization.

Stakeholders in business
-Shareholders/partner

-Employees/workers

-Service provider/suppliers

-creditors

-Government

-Customers

-Owners

factors that entrepreneurs consider while choosing people to work with in a business
organization (Factors to consider when recruiting employees)
√ Sex of the employee

√ gender

√ Age of the employee

√ Cost of the employee

√ Experience

√ Qualification

√ Marital Status

√ Skills, vision
 √ hardworking

ORGANISATION STRUCTURE / Organisational chart / Organogram

Organizational structure This refers to the graphical representation of different
departments and their functions in an organization.
An organizational chart is a graphic representation of a firm’s hierarchy of authority.
Department: A department is also known as a section, Division or a single unit (special unit) within an
organization which has a specific function that help the entire firm to achieve its goals.
Examples:

There are many types of organizational charts.

-Hierarchical org structure This takes the shape of the pyramid-shaped organizational chart, this
flow of command starts from the top to lower levels.
-Functional org structure This is an organizational structure that begins with positions with the
greatest levels of roles at the top and moves down from there.
-Horizontal or flat org structure there are limited levels existing between the higher levels of
management and the staff-level employees. start-ups which usually have few departments.
-Divisional org structure This is an organizational structure for bigger organizations that have
various divisions. Such divisions have the capacity of managing and planning for their
resources.
Roles of an organizational structure/ The purpose of organizational structure
1. Facilitate the use of available resources
2. It facilitates a company to easily achieve its objectives
3. It leads to specialization and coordination
4. It maintains the relationship between all organizational resources.
5. It facilitates managers to arrange and locate different works

6. Ease flow of information

7. It reduces the work load.

The following are some the department that may be found in different organizations:

Types of departments Meaning and Functions

Administration department Undertaking the overall management of the business. Coordinating all
the departments to ensure that all activities are aimed achieving the
objectives and goals of the business.

Production department Responsible for turning inputs into finished products (outputs) through a
series of production processes. This department makes adjustments on
product design, determination of methods of production, converting
inputs into outputs.

Accounting & Finance / Preparing budget, receiving payments, keeping financial records, banking
Accounts department all the cash, paying taxes, Monitoring the movement of financial
resources and production of financial statements.

Human Resource / Personnel This deals with matters related to employees of an organisation.
Recruiting and training new workers, controlling workers, preparing job
department
description, discipline of workers, Managing the payroll, keeping staff
record, motivating workers and negotiating with trade unions.

Sales and Marketing department This department generates revenues by selling goods and services.
Conducting market research, developing and implementing market plans,
liaising with media, developing pricing strategies and marketing materials,

Research andDevelopment Deals with constantly research so that the business be able to develop
(R&D) department new products and services and also improve on existing products.

Customerservice department It supports customers who need help with the goods or services of the
business.
Procurement department This is responsible for acquiring goods and services necessary for the
business

Store department This is responsible for stocking all the necessary tools, raw materials and
equipments required to service the manufacturing process.

UNIT 8: FINANCIAL MANAGEMENT

Finance: Management of money and it includes activities such as investing, borrowing, lending,
budgeting, saving.
Financial management: Process of planning, directing, and controlling the financial activities of a
business organization to get maximum benefit from the resources.

Financial system: combination of people, institutions, businesses, and processes that facilitate
financial transactions.

Financial systems can be grouped into:

-Regional financial systems (banks, financial markets and financial services),
-Global financial system (International Monetary Fund, World Bank)
-National financial systems (Central banks, among others)

Importance of financial management

-Determining the profitability of the business.
-Repaying all borrowed funds
-Ensure proper usage of resources
-Financial planning
-Risk management.
-Cost management
-Investment decision
-Cash flow management

CAPITAL: Total amount of physical and financial resources that is needed by the entrepreneur to
properly implement a business plan.
Types of capital:
- fixed capital (fixed asset): Properties owned by the business that last longer in the business. Eg;
land, machines, buildings,
-current/ liquid capital (current asset): Properties that last a short time in a business. E.g.: Debtors,
stocks, cash at hand etc.
-working capital: This refers to the cash available for a business so as to help in a day-to-day
operation.
Working capital = Current assets – Current liabilities
-capital employed: This refers to the value of assets that contribute to a company’s ability to
generate revenues.
Capital employed = Total assets- Current Liabilities or fixed assets + working capital
- net worth/ net equity: This is also known as “Owner’s equity” It is capital +net profit-drawing
- loan capital/ borrowed capital: This is the amount borrowed by the business to start or manage the
business efficiently. (Total liabilities)

IMPORTANCE OF CAPITAL
- Capital is used by business to pay salaries, wages
- Capital is needed by business Paying for electricity, communication, internet etc.
- capital used to pay maintenance such as equipment, vehicles and machinery
- capital is needed to pay for the suppliers.
- Paying rent
- Paying insurance
- Paying taxes
Advantages and Disadvantages of different sources of capital
Source of capital Advantages Disadvantages

Personal savings -control . Limited amount of capital

- flexibility • Loss of personal sources

-low cost • Limit business growth

-long term benefit . Lack of professional advice and
-It promotes financial discipline support:

loans/borrowing - There are chances to get financial - Interest may be high

advices by the lender -It requires collateral securities/
- There are variety of sources/ Banks. Mortgage
- It is an encouragement to the borrower - Lack of independence
to work hard - Change in interest rate

Capital from -Business risks are shared -Personal issues and conflicts may
partners -Responsibilities and also tasks are affect the business
 shared - Some partners may wish to take
-Specialization over the business

-More capital is likely to be contributed - Most partners may not raise enough
capital

Trade -easy to arrange -hard to obtain for start up.

credit( Suppliers’ - increase your business reputation. -penalties and interest
credit)
-It reduces to storage costs - inflexibility of the business owner
-Create good relationship between -loss of supplier
entrepreneur and the supplier -legal action when you don’t repay.
- It allows continuity in the operations.

Retained profit.

-Inheritance
-Gift and
donation.

Meaning, types and calculation of Interest

The principal is the actual sum of money borrowed by the business or individual,
Interest: certain amount of money’ charged on borrowed money
Interest is typically expressed as a percentage of the principal loan amount, known as interest rate
NOTE: The interest paid or earned is determined by three factors: the amount of money borrowed,
the length of time for which it is borrowed and the rate at which interest is charged. Interest rates
vary/ differ from bank to bank .
Methods of Calculating interests
1. SIMPLE INTEREST
Simple interest is the interest paid basing on the principal amount borrowed.
Simple Interest is calculated using this formula:
Or
Where:
P = Principal amount borrowed or PV=Present Value
R = Rate of interest or I = interest payable
T = Time or duration of repayment or n= Number of periods

Example 1: Calculate the simple interest will be earned by the depositor and the amount he will
accumulate after 2 years, if amount deposited is 200Rwf for interest rate of 3% per annual (p.a).
Solution
P=200; R=3% T=2 years or PV=200 i=3% n=2years
The interest earned after 2 years
Simple Interest Or I =
S.I = 200 x 3% x 2 = 12

The accumulated amount (Future Value) after 2 years

FV(A) = P+I
A=200+12
A=212

Exercises
1) Calculate the simple interest on 250,000Rwf for 5 years and 6months at 6% p.a
2) Find the principal amount on which the simple interest is 4320 dollars for 8years at 5% per
annual.
3) Investor deposited money with the Bank, at the interest rate of 5% per annual. After 10years,
He will get 2,000,000 rwf. Find his investment?
SOLUTION
3. A=2,000,000
 I= 5% ~0.05

n=10 year

P=?
n
P= F/(1+i)
10
P= 2,000,000/(1+0.05)

P= 2,000,000(1.6288)

P=3,257,789.25
2. COMPOUND INTEREST

Compound Interest methodology is called interest on interest. Compound interest is calculated

on both the principal and the accumulated interest from previous periods. The interest earned in
each period is added to the principal, and the interest for the next period is calculated based on
the new balance. As a result, the interest earned on the investment or the cost of borrowing
increases over time. Compound interest is used for long-term loans and investments, and the
interest rate may be fixed or variable depending on the terms of the loan or investment. As: PV=
Present value or P= Principal FV = future value;
i= interest rate or r= Rate of interest
n= period or T = Time.
Compounded amount (A) =
T
Compound interest = A – P or CI= P(1+R) - P
Example 1
TEC Ltd deposited 980,000FRW with their bank for 2 years. If the bank offers an interest of 8% p.a
and allows for interest to be added to the principal so that it also earns interest, find the interest after
2 years.
Solution:
Calculate the compounded amount (A):
t
A = P(1+r)
2
= 980,000(1+8/100)
2
= 980,000(1.08)
= 980,000(1.1664)
= 1,143,072FRW
So, compound interest = Compounded amount - Initial amount (P)
= 1,143,072 - 980,000
= 163,072FRW
Example 2:A person has deposited a sum of 100,000FRW in the bank at a 10% interest rate for a
period of 5 years. How much interest will the person earn after 5 years if interest earned in each year
is added to the initial deposit, and the interest for the next period is calculated based on the new
balance.
Calculation:
Interest earned for the 1st year= 100000*1*10%= 10,000RWF
Total mount to generate interest for the second year= 100,000FRW + 10,000FRW= 110,000FRW

Interest for the second year = 110,000FRW *1*10%= 11,000FRW

Total mount to generate interest for the third year = 110,000FRW +11,000FRW= 121,000FRW

Interest for the third year = 121,000FRW * 10%= 12,100FRW

Total mount to generate interest for the fourth year = 121,000FRW + 12,100FRW= 133,100FRW

Interest for the fourth year = 133,100FRW*10%= 13,310FRW

Total amount to generate interest for the fifth year= 133,100FRW + 13,310FRW= 146,410FRW

Interest for the fifth year = 146,410FRW*10%= 14,641 FRW

Total amount collected after five years of investment
= 146,410FRW + 14,641 FRW= 161,051FRW

TOTAL INTEREST Earned in 5 years= 161,051FRW - 100,000FRW= 61,051FRW

OR
Interests of the 1st year + 2nd year+ 3rd Year + 4th Year + 5th Year

= 10,000RWF+ 11,000FRW+ 12,100FRW + 13,310FRW+ 14,641 FRW = 61,051FRW

Some can therefore use this formula:
T
CI= P(1+R) - P = 100,000FRW (1+0.1)5 - 100,000FRW = 61,051FRW.

EX1: PETER Ltd deposited 980,000FRW with their bank for 2 years. If the bank offers an
interest of 8% p.a and allows for interest to be added to the principal so that it also
earns interest, find the interest after 2 years. Find also the amount after the second year.
ANSWER
t
A= P(1+r)
2
980,000(1+8/100)
2
=980,000(1.08)
 980,000(1.1664)

=1,143,072 FRW
t
C.I A P OR A= P(1+r) -P

C.I 1,143,072 980,000 163,072FRW

EX2: John invested 90,000FRW into a business venture and spent an additional
10,000FRW researching the venture. The investor's total cost would be 100,000FRW. If
that venture generated 300,000FRW in revenue but had 100,000FRW in personnel and
regulatory costs, then the net profits would be 200,000FRW

ANSWER

Total investment = 90,000FRW+10,000 = 100,000FRW

ROI =

ROI = 200 %

N.B: When an entrepreneur needs to invest his capital, this would be advised to use compound
interest you will get more interest than simple interest While entrepreneur needs to borrow money
from bank, this would be advised to use simple interest is not expensive than compound.

Exercises
1. Analyze the following situations and decide which type of interest you would opt for and give reasons
for your choice.
a) You want to borrow 30,000FRW from a bank at a rate 10% per year for 2 years. (Please
use a simple interest)

b) You want to deposit 30,000FRW to a bank at a rate 10% per year for 2 years. (Please use the
compound interest)
2. Gakuba wants to borrow 500,000FRW from his area SACCO at a rate of 11% for 3 years.
Calculate the amount of interest Gakuba will pay using.
A) Simple interest
B) Compound interest
 Solution 2
Simple interest
Interest to be paid in 3 years: 500,000FRW*3*11%= 165,000FRW
Total Amount to pay back after 3 years = 500,000FRW + 165,000FRW = 665,000FRW

Compound interest
3
Total amount to be paid back after 3 years will be: 500,000FRW(1+0.11) = 683,815.5FRW
Advice:
Gakuba would be advised to borrow using Simple interest because it is the one that is not expensive.
Meanwhile 665,000FRW < 683,815.5FRW

Investment appraisal techniques/ methods of ranking investments (Capital budgeting appraisal

methods)
techniques used by companies and investors primarily to decide whether an investment is profit-
making or not.
-Break-even analysis
- payback period analysis
- return on investment analysis
-return on equity analysis
Break-Even Analysis
Break-even point: It is also a point where there are neither profits nor losses.
Break-even analysis: This is the tool used to determine the volume at which a company’s costs will
exactly equal to its revenue, therefore no profit made. Or uses the break-even point to determine that
point when projects will start making profits.
Contribution per unit-the sales price minus the variable cost per unit
Margin of safety-a measure in which the budgeted volume of sales is compared with the volume of
sales required to break even
Marginal Cost – cost of producing one extra unit of output.
Calculation of break-even point.
Break even can be calculated in terms of:
- Units, the amount or quantity of a product that needs to be sold or produced
- Value, the sales or revenue that needs to made in terms of money

Elements below are the components of Break-even point

-Variable costs
 -Fixed cost
-Contribution

Or

BEP in amount(value)= Or BEP=

Or BEP in units * selling price/u

Contribution Margin Ratio= the contribution margin, divided by sales price per unit

Profit= TR-TC
TR (Total Revenue) = (selling price*quantity) OR P * Q
TC (Total Costs) = TFC + TVC
TFC=TC-TVC
TVC=TC-TFC
CONTRIBUTION= Selling price per unit -variable cost per unit.
P = Selling Price per unit

V = Variable Cost per unit.

Q= Number of Units Produced and Sold

For example1, we can use the following data to calculate break-even point.

• Sales price per unit = $250

• variable cost per unit = $150

• Total fixed expenses = $35,000

Selling price X quantity = fixed cost + (quantity X variable cost per unit)

Presentation of break-even point on graph/ “BREAK-EVEN CHART” or “COST VOLUME PROFIT

CHART”
Example Total cost=$30,000
Total fixed cost=$10,000
Total variable cost= TC-FC = $30,000 - $10,000 = $20,000
Total sales or total production = $40,000

2.
Akariza Enterprise is planning to make plastic buckets. Her first trial production resulted in 6200
buckets sold at a unit price of 650FRW. The expenses of this trial production were divided up in the
following way. Total variable costs = 850,500FRW, Fixed costs = 520,600FRW
Use the above information help Akariza to make an investment decision by calculating:
i. Break- even point in units (Buckets)
ii. Break-even point in sales (FRW)
Answers:

Where:
Fixed costs = 520,600FRW
Sales price per unit = 650FRW
Total variable costs = 850,000
Total units (buckets)=6200
Variable costs per unit= total variable cost/ total unit = 850,000/6200=137.18 FRW
BEP QUANTITY= 520,600FRW/650-137.18= 1015.17 FRW

ii) BEP VALUE= 1015.17 rwfx6200= 6,294,054 rwf

3. A firm manufactures and sells a standard product known as “chocolate”. The selling
price per unit of the product is 1,500FRW. The variable cost of producing the product is
as follows: Direct material 400FRW per unit of the product Direct labor 150FRW per unit
of the product Variable overheads 50FRW unit of the product. The fixed costs incurred
by the firm per period is 1,800,000FRW

Required:

a) Determine the value of the variable cost.

b) Determine the BEP of the firm in quantity and in value.

c) The quantity to be produced if the firm is targeting a profit of FRW900,000.

d) What is the contribution per unit of the firm

ANSWER

Unit Price = 1,500FRW,

Direct material (per unit) = 400 FRW

Direct labour (per unit) = 150 FRW

Fixed costs = 1,800,000FRW

Variable overheads (per unit) = 50FRW

a) Total variable costs 400 + 150 + 50 = 600 FRW

b) [Link]

BEP in Quantity = 2000 chocolates

b) B.E.P in value = BEQ ×USP

= 2000 ×1500

BER = 3,000,000 FRW

c) Q = profit (π) + fixed costs (FC) /Price (P) – variable costs (VC) = 900,000 +
1,800,000 /900 = 3000 chocolates

Q=

Q=

Q = 3000 Chocolates

Or
 Sales = TVC + FC + Profit

But sales = USP × Quantity

1500 × Q = 600 × Q + 1,800,000 + 900,000

1500Q = 600 Q + 2,700,000

900Q = 2,700,000

Q=

Q = 3000 Chocolates

d) Contribution per unit produced (P-VC) Price – Variable cost = 1,500 – 600 = 900 FRW

4. Akariza’s enterprise makes plastic buckets. In 2022, her enterprise sold 6200 buckets
at a unit price of 650FRW per bucket. The expenses of this enterprise are divided up in
the following way.

Total variable costs = 850,500FRW,

Fixed costs = 520,600FRW

Use the above information to calculate.

i) Unit variable cost (UVC)

ii) Unit Marginal variable cost (UMVC).

iii) Break- even in units (BEP units).

iv) Break-even in values (BEP).

v) what decision would Akaliza take having computed the break even in units and sales.
ANSWER

i) Unit variable cost =

 UVC = = 137.18 FRW

ii) Unit Marginal variable cost (UMVC) = Unit selling price – Unit variable cost.

UMVC = 650 – 137.18 = 512.82 FRW.

iii) Break- even in Quantity (BEP units) =

BEQ = =1015.17 buckets.

iv) Break-even point in values = = 659,858 FRW

v) Given all the costs incurred in the project, Akaliza would be able to break even at
producing 1015.17 buckets that could give her revenue amounting to 659,858 FRW. This
means that any reduction for any single unit of inputs in her project would result in to
making losses and vice versa.
Importance of Break – even analysis

• Knowing the breakeven level helps you plan ahead and determine the amount of finance needed to
grow the company.

• it is much easier to make the strategic objectives more tangible and achievable.

• Break-even charts help your employees visualize your company’s progress towards profits goals.

• Help to know how to reduce overheads so that you achieve profits fast.

• Break-even analysis helps in determining the prices of products.

• Break-even helps in determining the production schedules.

• Break-even point helps a firm to plan the level of production that must be achieved for it to earn
profits.

Disadvantages of BEP

1. It only emphasizes the supply side (the costs only). It

doesn’t tell an entrepreneur about what sales are
likely to be for the product at various prices.

2. It assumes that costs are constant

3. It assumes that average variable costs are constant

 per unit output.

4. It assumes that the quantity of goods produced is

equal to the quantity of goods sold.

PAYBACK PERIOD (PBP)

Payback period It is the length of time a project takes to pay back the money which has been
invested in a company. Or is the time you need to recover the cost of your investment.
This calculation can be done into two ways, either using cash flows or using discounted cash flows.

Calculation of the payback period

Calculation of the payback period using cash flows the calculation of the payback period is best
illustrated with an example. Consider capital budgeting project A which yields the following cash
flows over its five-year life.

PBP=Y+A/B
PBP=initial investments(outlay)/sales revenue-expenses(cost)
Example2 These are the following indicators of GAKUBA’S business
• The total investment of his project is 300,000RWF

• Annual cash flow is 10,000RWF Per month

• How many times will take for GAKUBA to take back his amount invested?

Example3: An investment of 200,000Frw is expected to generate the following cash flow in six years:
Year 1: 70,000Frw
Year 2: 60,000Frw
Year 3: 55,000Frw
Year 4: 40,000Frw
Year 5: 30000Frw
Year 6: 25,000Frw
Required: Compute payback period of the investment. Should the investment be made if the
management wants to recover the initial in three years or less? (8marks)

ANSWER

Year Cash flow Cumulative cash flow

0 (200,000) (200,000)

1 70,000 (130,000)

2 60,000 (70,000)

3 55,000 (15,000) (A)

4 40,000 ( B) 25,000
 5 30,000 55,000

PBP= n+A/B
Y= 3years
A= 15000
B= 40,000
PBP = 3+ 15000/40,000
= 3.375years
= 3 years 4 months 15 days

Advantages of payback period.

• It is simple and easy to use

• It uses readily available accounting data to determine cash flows.

• The uncertainty of the future cash flow is reduced.

• It is an appropriate technique of fashion projects where the market demand tends to change
seasonably.

• The payback period quantifies the selection criteria in terms of the decision makers are familiar
with.

• Faster payback period has a favorable short-term effect on earnings per share.

Disadvantages of payback period.

• It does not consider the time value of money.
• It is not a suitable technique to evaluate long term projects where the effects of differential inflation
and interest rates could significantly change the results.
• The figures are based on project cash flow only. All other financial data are ignored.

3. RETURN ON INVESTMENT (ROI)

This is the measures of the gain or loss generated on an investment relative to the amount of money
invested.

Average annual profit = [(Total gains) – (Total outlay)] / Number of years.

Return on investment = [(Average annual profit * 100)] / Original investment.

ROI= Gain from investment-cost of investment/cost of investment x100

ROI= Net return on investment/cost of investment x 100

Example1: Using the data contained in the table bellow, compute the return on investment

Years Cash flow project A Cash Flow project B

0 (70,000) Rwf (70,000) Rwf
1 40,000 20,000
2 30,000 20,000
3 20,000 30,000
4 20,000 40,000
Total Gains 110,000 110,000

Solution
Profit (A&B) = 110,000 – 70,000 = 40,000Rwf
Average annual profit = 40,000 / 4 years = 10,000 rwf per year (the same for both projects)
Return on investment = (10,000 * 100) /70,000 = 14%
ROI is also calculated using the following formula:
%
Where ROI= Return on investments
PBIT= Profit before Interest and Tax
CE= Capital Employed (Equity + long term liabilities) or FA + WC
W.C=CA-AL
Example2: Kabatesi invested 90,000FRW into a business venture and spent an additional
10,000FRW researching the venture. The investor’s total cost would be 100,000FRW. If that venture
generated 300,000FRW in revenue but had 100,000FRW in personnel and regulatory costs, then the
net profits would be 200,000FRW
Solution:
Total investment = 90,000FRW+10,000 = 100,000FRW
ROI= 200,000 /100,000X 100% = 200%

[Link] ON EQUITY
The Return on Equity is the ratio of profitability of personal investment.

Or
O. E= Capital net profit – drawing
Net income= total gain –total out lay
Ex: net income 5000 rwf
Capital 3000 rwf
Profit 1000 rwf
Drawing 1000
Calculate ROE
O.E= 3000+1000+1000 =3000
ROE= 5000 * 100= 160
3000

UNIT 9. FINANCIAL INSTITUTIONS

Key unit competence To be able to use banking and non-banking institutions’ services

Financial institutions are the firms that provide financial services and advice to their clients. The
financial institutions are generally regulated by the financial laws of the government authority.
Financial institutions include commercial banks, microfinance institutions and savings and Credit
societies.
Types of financial institutions

Various types of financial institutions are as follows: Banking financial institution and non-banking
financial institutions.

● Banking institutions:

1. Central bank (BNR in Rwanda)

2. Commercial Banks or retails banks ( e. g BK, BCR, AGASEKE BANK etc.)

3. Investment banks (RDB: Rwanda development Bank)

4. Micro-finances institution and savings and credit societies e.g. UMURENGE SACCO, UMWALIMU
SACCO etc,)

● Non-banking financial institutions

1. Stock Brokerage Firms (CMA - capital market authority)

2. Insurance Companies (ex. SORAS, SONARWA, RADIANT, UAP etc.)

 3. Mutual funds: These refers to companies that offer services to people by investing their
money in various different business.

4. Social security fund

Roles of financial institutions in promoting entrepreneurial culure

Here are some specific ways in which financial institutions can promote entrepreneurship:

● provide business technical advice

● loans to the entrepreneurs (short and long term)

● safe custody of key business document

● keeping/handling customers saving and deposit

● regulation of the economy. (Minimizing inflation.

Functions of non-banking institutions include the following:

- They assist in the establishment and development of various sectors especially transport and
infrastructure in the country.
- Credit facilities to various entities
- Aim at the creation of wealth and economic development in the country.
- Support the weaker sectors or sections of society need to be strengthened

Services offered by various financial institutions

[Link] Central bank:

It is a government bank established and managed by the government to control, guide and assist
other financial institutions in the country.

Functions of the central bank are:

• Control the inflation and identify its level

• Lending money means inter commerce banks.

• Controls foreign exchange: It controls the demand and supply of foreign currencies.

• Advisor to government

• Printing money and money reform (Issues a country’s currency and replaces old notes and coins)

• It regulates and control activities of commercial banks.

2. Functions of commercial banks are:

Commercial banks provide the number of services to the people who use them and economy as a
whole.

• Money transfer services: They provide services that enable the transfer of money from one place to
another or from one account to another.

• Buying and selling foreign currencies: Commercial banks may buy foreign currencies from
individuals and businesses and give them local currencies use.

• Means of payment: They also provide convenient means of payment. Bank customers may use
cheques, other methods to conveniently make payments.

• Financial advice: Commercial banks provide financial advice to its customers in matters concerning
investment and financial management.

• Lending money and Credit facilities: Commercial banks provide credit facilities to credit worthy
customers who pay back at a later date with interest.

Requirements of applying for a loan in a commercial bank

● Bank account

● ID copy and locations

● Business plan

● Collateral security, a mortgage or a guarantee

● Witnesses

● 2 pass port size photos

● Bank statement

● Salary certificate if you are an employee

● Marital status certificate

3. Development Bank

These are banks or financial institutions that specialize in providing long term development loans to
their clients. Examples of developmental banks include East African Development banks (EADB) and
Rwanda Development Bank (RDB).

Functions of development banks

Promoting sustainable development: Development banks also prioritize sustainability and

environmental protection in their lending practices and seek to support projects that promote
sustainable development.
Mobilizing private sector investment: Development banks can also help to mobilize private sector
investment by providing guarantees
Offering technical assistance: Development banks provide technical assistance and advisory
services to support the development of new projects
Supporting innovation: Development banks also play a key role in supporting innovation by providing
funding for research and development in various sectors of the economy.
Providing long-term financing: Development banks provide long-term loans and credit to support
investment in various sectors of the economy, such as infrastructure, energy, agriculture, and
manufacturing
Facilitating economic growth: By providing financing for development projects, development banks
help to stimulate economic growth and create employment opportunities.

4. Micro-finances institution (MFI) and savings and credit societies e.g. UMURENGE SACCO,
UMWALIMU SACCO etc,)
These are institutions that offer financial services just like banks.
Functions of Micro-finances institution
-Mobilization of savings
-Provision of credit
-Financial education
-Provision of other financial services like insurance, money transfer
-Social function (work together)

5. Brokerage firms.
The stock brokerage firms are the other types of financial institutions that help both the
corporations and individuals to invest in the stock market. (e,g in Rwanda we have CMAC.
Capital market advisor cancel)
The services provided by the brokerage firms are;
• Insurance of your investment
• Money market and check writings.
• Intermediary services between investment borrowers and lenders etc.

Distinction between commercial banks and credit union or credit cooperatives

The credit union is co-operative financial institution, which is usually controlled by the members of
the union. The major difference between the credit unions and banks is that the credit unions are
owned by the members having accounts in it.

Products and services offered by financial institutions.

Products and services offered by financial institutions
1. Bank accounts: help us to properly manage our money

2. Advancing loans: Loans help us to develop our investments thereby helping us to grow the money
we have for the purposes such as retirement

3. Insurance: they provide financial coverage against a range of events like accident, death,
education, health,…

4. Mortgages: Financial institutions provide us some agreements whereby they lend us money to buy
houses and pay back at the end of a particular number of years

5. Money market: Banks and other financial institutions borrow, lend money buy and sell foreign
money.

6. Electronic banking (digitization) They also help people to operate online.

7. Mobile banking

8. Money transfers

BANKING DOCUMENTS

1. Withdrawal and deposit slips: These are pieces of paper that serve people to withdraw and
or deposit money from and or to the bank account

2. Money transfer slips: These are documents that once filled help you to transfer money from
one account to another persons’ account in the same bank or a different one.

3. Bank statement: This document is issued by the bank to its customers showing the list of all
transactions that have taken place during a given period of time. It shows the deposits made,
withdrawals and balance at a given period date.

4. Banker’s card: This is a plastic card that is offered by your bank that may act as a cheque
card or a debit card that helps to withdraw money from your account out of a machine. Eg:
ATM card: ATM stands for Automated Teller Machine. ATM is an electronic device that has
been programmed to enable bank’s customer to deposit, make withdrawal or transfer money
to other accounts. All this can be done without the help of a teller or cashier.

5. Banks cheques: A cheque is a written order given to the bank (drawee) by the account
holder (Drawer) instructing the bank to pay the stated amount of money to a named person
(Payee / beneficiary). A cheque is not money but just an instruction to the bank.

EX. Kayitesi bought a motor vehicle from Akagera Motors. Kayitesi has a current
account in Bank of Kigali. Kayitesi decides to pay Akagera Motors using a cheque. From
the statement above, state the; ANSWER

a) Drawer…………
KAYITESI
 b) Payee…………AKAGERA MOTO

c) Drawee bank……BANK OF KIGALI

BANK LOANS

A loan is a sum of money that you borrow with the expectation of paying it back either all at once or
in installments over time, usually with interest.

Personal loans: These are loans that are give to an individual who usually wish to borrow small
amounts of money and able to repay in a couple of years.
TYPES OF LOANS

1. Open-ended loans (Revolving loans) are loans that you can borrow over and over.
Eg: lines of credit are the most common types of open-ended loans
Open-ended loans are also known as Revolving loans since they able to turn in cycle.
2. Closed-ended loans (Term loans): are one-time loans that cannot be borrowed again once
they’ve been repaid.
Closed-ended loans are also known as Term loans. Common types of closed-ended loans
include mortgage loans, auto loans, and student loans.

3. Secured and Unsecured Loans

Secured loans are loans that rely on an asset as collateral for the loan. Interests rates for secured
loans may be lower than those for unsecured loans. The asset may need to be appraised to confirm
its value before you can borrow a secured loan.
Unsecured loans don’t require an asset for collateral. These loans may be more difficult to get and
have higher interest rates.
4. Credit card: is a type of payment card that allows the holder to borrow funds from financial
institutions (typically a bank) to make purchases or pay for the goods and services. or It may
be a convenient mode of payment as it allows you to buy goods and services without using
cash
5. Over draft :An overdraft facility allows you to write cheques or withdraw cash from your
current account up to the overdraft limit approved. It occurs when an individual or business
spends more than is available in their bank account, resulting in a negative balance.
Factors to consider when looking for a lending institution

-Interest rates:
-Loan terms:
-Fees and charges:
-Collateral requirements:
 -Customer service:
-Convenience:

PROCEDURES FOR LOAN APPLICATION

-Eligibility criteria like income and employment history.

-Determine the type of loan you need:
-Check the interest rate and other charges:
-Identify a lender
-Gather necessary documents
-Fill out the loan application form
-Submit the loan application
-Submit the loan application
-Sign the loan agreement
-Receive the loan funds
IMPORTANCE OF LOANS

Loans provide as many advantages as those that capital provides. They include:

1. To buy properties

2. To pay for the utilities

3. To pay for wages and salaries

4. To pay for other loans

5. To pay for rents