Topic outline

  • General

  • Introduction

    Changes in schools
    This text book is part of the reform of the school curriculum in Rwanda: that is changes in what is taught in schools and how it is taught. It is hoped this will make what you learn in school useful to you when you leave school, whatever you do then.

    In the past, the main thing in schooling has been to learn knowledge – that is facts and ideas about each subject. Now the main idea is that you should be able to use the knowledge you learn by developing skills or competencies. These skills or competencies include the ability to think for yourself, to be able to communicate with others and explain what you have learnt, and to be creative, that is developing your own ideas, not just following those of the teacher and the text book. You should also be able to find out information and ideas for yourself, rather than just relying on what the teacher or text book tells you.

    Activity-based learning

    This means that this book has a variety of activities for you to do, as well as information for you to read. These activities present you with material or things to do which will help you to learn things and find out things for yourself. You already have a lot of knowledge and ideas based on the experiences you have had and your life within your own community. Some of the activities, therefore, ask you to think about the knowledge and ideas you already have.

    In using this book, therefore, it is essential that you do all the activities. You will not learn properly unless you do these activities. They are the most important part of the book.

    In some ways this makes learning more of a challenge. It is more difficult to think for yourself than to copy what the teacher tells you. But if you take up this challenge you will become a better person and become more successful in your life.

    Group work
    You can also learn a lot from other people in your class. If you have a problem it can often be solved by discussing it with others. Many of the activities in the book, therefore, involve discussion or other activities in groups or pairs. Your teacher will help to organise these groups and may arrange the classroom so you are always sitting in groups facing each other. You cannot discuss properly unless you are facing each other.

    One of the objectives of the new curriculum is to help you find things out for yourself. Some activities, therefore, ask you to do research using books in the library, the internet if your school has this, or other sources such as newspapers and magazines. This means you will develop the skills of learning for yourself when you leave school. Your teacher will help you if your school does not have a good library or internet.

    To guide you, each activity in the book is marked by a symbol or icon to show you what kind of activity it is. The icons are as follows:

    Thinking icon

    This indicates thinking for yourself or in groups. You are expected to use your own knowledge or experience, or think about what you read in the book, and answer questions for yourself .

    Practical Activity icon

    The hand indicates a practical activity, such as a role play on resolving a conflict, taking part in a debate or following instructions on a map. These activities will help you to learn practical skills which you can use when you leave school.

    Writing Activity icon

    Some activities require you to write in your exercise book or elsewhere.

    Group Work icon

    Group work means that you are expected to discuss something in groups and report back on what your group discussed. In this way you learn from each other and how to work together as a group to address or solve a problem.

    Fieldwork icon

    Field work is an enjoyable and practical part of Social Studies. For these activities, you will need to go out of the classroom to study parts of your environment, such as the way that rivers flow, or the distance between landmarks in your school grounds or any other tours in relation to the activity.

    Discussion icon

    Some activities require you to discuss an issue with a partner or as part of a group. It is similar to group work, but usually does not require any writing, although some short notes can be written for remembrance..

    Computer/Internet Activity icon

    Some activities require you to use a computer in your computer laboratory or elsewhere.

    Pairing Activity icon

    This means you are required to do the activities in pairs and exchange ideas

    Listening Activity icon

    The listening activity requires learners to carefully listen to the teacher or fellow learner reading a passage, poem or extraction on the subject and then answer the questions

    Observation Activity icon

    Learners are expected to observe and write down the results from activities including experiments or social settings overtime.

    Good luck in using the book.
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  • Unit 1 : Initiation to Entrepreneurship

    My goals

    By the end of this unit, I will be able to:

    • Explain the concept of Entrepreneurship
    • Differentiate an entrepreneur, manager and intrapreneur
    • Describe the qualities of an entrepreneur
    • Differentiate creativity, innovation and invention
    • Describe the stages of entrepreneurship process
    • Identify and elaborate on the types of entrepreneurs
    • Explain the meanings of entrepreneurship based on creativity and/ innovativeness.

    Consider the passage below

    After completing his S.3 at Kayonza Secondary School, Bikorimana thought of starting a small project that will help him get money for school fees at advanced level using the knowledge of entrepreneurship he learnt in the three years. He started a small bakery project with financial support from his parents. Before starting this project he first researched about the market for: cakes, bread and chapat. He discovered that the whole village had one supplier of these items and in many shops, such items were lacking (this became his business opportunity). He needed capital (money, tools raw materials like wheat flour, oil etc). Because he had little money, he prepared a budget focusing on sources of revenue and projected expenditure, labour (employing at least two workers), land in a favourable place for business and his role in combining all factors of production in best combinations so as to make production possible. Amidst all these challenges, Bikorimana was able to start and operate his bakery project within Kayonza trading centre. He named his business Biko Bakery Supplies. He is now able to borrow loans from the village co-operative bank, pay tuition (school fees), support his family and offer jobs to his friends using the profits generated. He has a plan of extending his project to Kigali by opening up a branch.

    Activity 1

    1. What skills do you think Bikorimana acquired from O’level entrepreneurship that motivated him to start his bakery project?
    2. Why did Bikorimana decide to start his own business?
    3. What did it take for Bikorimana to start a bakery project?
    4. Is Bikorimana an entrepreneur? If yes, explain why. And how best can you describe him?

    From the above passage we can conclude that being an entrepreneur takes an extra effort. All the activities undertaken by entrepreneurs such as Bikorimana so as to start production is called ‘entrepreneurship’.

    Entrepreneurship education and its meaning.

    Entrepreneurship education provides students with basic knowledge and skills required to create and manage their own businesses successfully using the available resources from the surrounding environment in order to develop themselves and their country’s economy as a whole.

    Entrepreneurship education focuses on realisation of opportunities.Entrepreneurship education can be oriented towards different ways of realising opportunities:
    a) The most popular way is regular entrepreneurship, i.e opening a new organisation eg (starting a new business)
    b) Another approach is to promote innovation or introduce new products or services or markets in existing firms.
        This approach is called corporate entrepreneurship or Intrapreneurship, and was made popular by Gifford Pinchot.
        Newer research indicates that clustering is now a driving factor. Clustering occurs when a group of employees break
        off from the parent company to form a new company but continues to do business with the parent.
    c) A recent approach involves creating charitable organisations (or portions of existing charities) that are designed
       to be self- supporting in addition to doing their non-profit work. This is usually called social entrepreneurship
       or social venturing.

    Activity 2

    Comment on the following terms and give possible examples.
    1. Intrapreneurship
    2. Clustering
    3. Social entrepreneurship
    4. Regular entrepreneurship.

    An entrepreneur

    The word entrepreneur is derived from a French word “Entrepredndre” meaning to undertake. It is used to mean, a person who takes the risk of starting a new organisation or introducing a new idea, product or service to the society.

    According to J.B. Say, “An entrepreneur is an economic agent who unites all means of production; land, labour and capital which are used to produce goods and services. By selling commodities in a goods market, he/she pays rent to land, wages to labour and interest to capital and remains with a profit.

    According to Richard Schumpeter, “An entrepreneur is an individual who introduces something new in the economy; a method of production not yet tested by experience in the branch of manufacturing, a product which is new in the market from a new or old source of raw materials using new or existing methods of production.”

    All the definitions highlight: bearing of risks, combining factors of production, innovation and introduction of new methods and products and bringing about economic change as a function of entrepreneur.

    Therefore, an entrepreneur is a person who has the ability to see and evaluate business opportunities, gathers necessary resources and uses them to initiate and manage the identified business; takes risks in the business with the aim of making profits.

    We have seen examples of local entrepreneurs (Kharim and Bikorimana). Do the following exercise.

    Activity 3

    Identify at least five (5) prominent entrepreneurs in each of the following categor y.
    1. Your village/town community
    2. Rwanda today
    3. In East Africa currently
    4. In Africa today
    5. In the world currently starting with the richest

    NOTE: In each of the above entrepreneur category specify the following;

    (i) State the different opportunities identified by each.
    (ii) Explain why they qualify to be called entrepreneurs.
    (iii) How did they take the initiative to make use of the identified opportunities?
    (iv) Specify the resources used to successfully operate and run their business activities.
    (v) Why do you think they started those activities? Did they achieve those goals or targets?The question that non-producing/manufacturing businessmen or traders and merchants should be regarded as entrepreneurs is very common.

    NB: The most important characteristic of entrepreneurship and people who become entrepreneurs is assuming or taking risks
    with an aim of making profits. Any person who assumes risks of any business and owns that business enterprise is an entrepreneur  irrespective of the size and mode of operation of the business.

    How does a person become an entrepreneur?

    A person can become an entrepreneur in the following ways;

    • Initiating or starting up his or her own business/enterprise.
    • Inheriting an already existing business and assuming or taking risks.
    • Buying an already existing business and assuming its risks.
    • Buying shares in an already existing business and assuming ownership and risks in that business.This is common in joint stock companies where shares are sold to the public.

    Entrepreneurship concept and meaning

    Different scholars have defined entrepreneurship as below:
    Arthur H. Cole in his book, Business Enterprise in its social setting; defines entrepreneurship as “the purposeful activity of an individual or a group of associated individuals undertaking to initiate, maintain and increase profits by production or distribution of economic goods and services”.

    Higgins in his book, The Economic Development defines entrepreneurship as “the function of foreseeing investment and production opportunities, organising an enterprise to undertake new production process, rising capital, hiring labour, arranging the supply of raw materials, finding sites, introducing new techniques, discovering new resources or raw materials and selecting top managers for the day to day operations of the enterprise.

    Grey Watson; defines entrepreneurship as “the process through which individuals identify opportunities, allocate resource and create value”.

    From the above definitions, it can be observed that entrepreneurship;
    • Involves the ability of a person to identify business opportunities.
    • It involves mental attitude of risk taking, resource organisation and expectation.
    • It involves one or more individuals.
    • It involves creativity, being innovative, initiative and inventive.
    Therefore, entrepreneurship is the process of identifying business opportunities from a locality, organising necessary resources, and using them to start an enterprise to produce goods and services, market them while covering risks with the aim of making profits.

    Entrepreneurship is also a way of thinking and acting that focuses on identifying opportunities, apply action with analysis, and is driven by a passionate individual or team.

    Reasons for studying entrepreneurship

    Activity 4

    In groups of four members, discuss this question.Do you think entrepreneurship should be taught in secondary schools? Yes/No (tick one)Choose a group member to make a class presentation on your choice above and the views.

    Entrepreneurship being an important subject with a lot of benefits, its better to be studied at all level and some of the few arguments in favour of this include the following among others;

    Entrepreneurship is practical not theoretical. Why then, should the subject be taught in schools? The following are reasons for studying Entrepreneurship:
    • To enable learners acquire basic knowledge and skills necessary to start, operate and manage enterprises ranging from micro, small, medium to large scale businesses
    • It helps to create entrepreneurial thinking culture of job creation among learners. This shall reduce on the mentality of seeking for white collar jobs.
    • To enable learners know that business is a career like other professions for instance: teaching, accounting and many others etc.
    • To impart knowledge and skills to learners to stimulate creativity hence self-employment. This will in turn lead to exploitation of idle domestic resources within the economy.
    • To improve on the standards of living of the learners in particular and citizens as a whole. This is possible if learners engage in productive businesses that provide commodities which the economy demands.
    • To build self-confidence and awareness among learners that they can identify their potential and also help them to analyse the environment in relation to what they want to do in future. For example a person who takes pleasure in cooking for others can start a catering business.
    • To lay a foundation for learners who intend to join tertiary institutions for professional courses; for example commerce and economics.
    • To reduce the dependence syndrome on the government. This is through encouraging creativity among individuals to start up self-employment.
    • To boost household incomes through encouraging creativity and production for both domestic consumption and export; hence reducing poverty and unemployment.

    Case study

    Kharim is a graduate who recently graduated from National Institute of Science and Technology of Rwanda with a degree in Computer Programming. He has developed an application that he believes will make him earn a living. He performed very well and was called by Airtel Company Rwanda for a job, he accepted and worked for one month and after he thought to leave Airtel Company so as to start his own project of designing new software. He wants to challenge himself and work the way he wants without answering to a boss. He is using a small inheritance to fund the start-up with little contributions from his grand parents. As an entrepreneur, Kharim is not only starting a business, but is risking his personal wealth to establish it.

    Kharim is also trying to convince some friends from school to form an entrepreneurial team with him. An entrepreneurial team is a group of people who help spread out the risk of a new venture and also bring in different talents and skill sets to it. Kharim has a friend who majored in Web designing and another in marketing. He is hoping they may come along with him and bring their skills. He is building the right team so that they can co-operate, and achieve more together than they would individually.

    Examples of entrepreneurs

    Kharim hopes that his entrepreneurial gamble will pay off as well as the gambles of other well-known entrepreneurs, for example:

    • Bill Gates, founder of Microsoft, that meakes Microsoft Windows, Microsoft Office and Internet Explorer.
    • Steve Jobs, co-founder of Apple computers, that makes Macs, iPods and iPhones, as well as Apple TV.
    • Mark Zuckerberg, the founder of Facebook.

    Activity 5

    1. What lesson can be taken from Kharim’s experience?
    2. What are some of the risks associated with pursuing a business venture like that of Kharim?
    3. Identify at least two entrepreneurs in your location.
    4. What business ventures are they involved in?
    5. What skills are needed to undertake the above venture?
    6. What resources did they have to mobilise to start their business venture?
    7. Suggest possible sources of income to start a venture like that of Kharim.
    8. Explain briefly the relationship between an entrepreneur and entrepreneurship.


    Who is an intrapreneur?

    Activity 6

    n groups discuss the following:
    1. Who is an intrapreneur?
    2. Have you seen any intrapreneur in your home area?
    3. Explain any three differences between an entrepreneur and an intrapreneur.
    4. Explain any 3 importance of Intrapreneurship to the business community.

    An intrapreneur is a person within a large corporation/enterprise who takes direct responsibility for turning an idea into a profitable finished product or service through assertive risk taking and innovation. Great ideas and products can result from letting your employees think, experiment, and try using new technology and production techniques. This is different in each company but what is important is to embrace the idea of engaging employees, and to choose a system for applying that vision in a way that fits your company culture.

    An intrapreneur is also an inside entrepreneur, or an entrepreneur within a large firm. He/she uses entrepreneurial skills without incurring the risks associated with those activities. Intrapreneurs are usually employees within a company who are assigned a special idea or project, and are instructed to develop the project like an entrepreneur would. Intrapreneurs usually have the resources and capabilities of the firm at their disposal. The intrapreneur’s main job is to turn that special idea or project into a profitable venture for the company.

    Example: If an employee working in Tigo company Rwanda suggests and introduces the use of tigo cash for Tigo customers to access funds on their bank accounts i.e can withdraw and deposit money using tigo cash then such an employee is an intrapreneur and has to be paid for such inventions by Tigo company Rwanda.

    Activity 7

    Now that you have mastered a true picture of who an intrapreneur is, divide yourselves in groups of five members each and do the following.
    1. List the various roles you think an intrapreneur plays within an enterprise.
    2. Discuss the various importance of intrapreneurship in a business.
    3. Give some of the benefits to a business for embracing intranuership.Choose a group
         member to   present your answers to the class.

    Importance of intrapreneurship in a business organisation

    There are lots of reasons why intrapreneurship is important. Among others:
    1. Growth: Intrapreneurship helps organisations generate new business growth.
    2. Innovation: Intrapreneurship provides an environment to support and sustain innovation over        
    need to set the context for innovation; the right people, the right processes and the right environment. Innovation and intrapreneurship are entwined,
    i.e., they are tied together. You need both to be successful.
    3. Leadership: Intrapreneurship is one of the best ways to attract and retain your most entrepreneurial leaders. Intrapreneurship requires a new set of competencies and behaviors. Intrapreneurial leaders think and act differently, they have different motivations and aspirations, and they prefer working in different work environments. It is this differentiation that makes them perfect candidates to lead new growth initiatives.
    4. Change: Intrapreneurship enables organisations to effectively accelerate and manage change. Intrapreneurial leaders are change agents. They blaze new trails. They become the very change they wish to see. Not just driving change, but modeling change so others can change as well. Change is one of the least understood and under developed management disciplines. Risk adverse cultures and resistance to change impede an organisation’s ability to grow.
    5. Engagement: Intrapreneurship helps employees stretch and grow while keeping them engaged. Intrapreneurship provides a platform to engage employees in work that is challenging and meaningful. Intrapreneurs are highly engaged in their work. Their passion and determination inspire others to get involved and try new things. As they grow, the organisation also grows.Intrapreneurship has become a critical imperative for all organisations and a survival strategy for others. Organisations that have embraced intrapreneurship have had many benefits:

    • Have achieved higher financial returns
    • Increase the spread of efficiency and effectiveness of technology
    • Leads to expansion of the organisation and increased productivity
    • Leads to better decision making and strong leadership
    • Strategically guide an organisation to growth
    • Have achieved more and more innovations
    • Have higher levels of employee engagement.

    Activity 8

    1. Make research, copy in your books and complete the table below:Differences between
        an entrepreneur and an intrapreneur
    2. Identify (5) females and (5) males in your community who are regarded as intrapreneurs.
    3. How have they benefited from their innovations?
    4. How is an entrepreneur different from an intrapreneur and a manager?

    Relationship between an entrepreneur and entrepreneurship

    The term entrepreneurship is often used interchangeably with the word entrepreneur yet the two are different. Entrepreneurship is a set of activities carried out by the entrepreneur.

    The relationships and differences between an entrepreneur and entreprenurship are an enterpreneur is a visualiser, organiser, decision-maker, innovator, riskbearer, motivator, creator, leader, manager, initiator, planner, technician, communicator and administrator in an enterprise. While entrepreneurship on the other hand is a vision turned into reality. This involves organisation of resources and production, decision-making, initiating the enterprise, innovation of new products or production techniques and risk bearing in an enterprise; planning for technical know-how, production process, communication and administration of the enterprise.

    Entrepreneur vs Manager

    The term entrepreneur is often used synonymously with Manager yet these are conceptually different. It is true that an entrepreneur is a manager of his own enterprise but not all managers are entrepreneurs

    Difference between an entrepreneur and manager

    Qualities/characteristics of an entrepreneur

    Activity 9

    In groups of four members, discuss these questions.
    1. Do you have a role model in entrepreneurship who inspires you to join business? YES/NO?
    2. State and describe true characteristics that your role model mentioned above possesses
    3. Study the photo below and discuss with examples what you think is in the mind of an entrepreneur.

    An entrepreneur has to possess all of the following traits/characteristics/attributes:
    • Hard working
    • Goal setting and planning
    • Financial discipline
    • Creativity and innovation
    • Information seeker
    • Persuasive and networking
    • Self-confidence: An entrepreneur should be confident that he/she is able to achieve 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. It is said that “winners never quit and quitters never win” so amidst all problems and setbacks met in life and in business, an entrepreneur should not give up.

    The following philosophers are food for thought about true traits of entrepreneurs. Study and think about such thoughts. Are they practical?


    Benefits and challenges of being an entrepreneur

    Activity 10

    n groups of five, do the following:
    1. Study the following illustrations and identify more benefits of being an entrepreneur.
    2. Discuss the various challenges of being an entrepreneur, use a case of entrepreneurs in your home area.


    Stages of entrepreneurship process

    Activity 11

    In groups of five, discuss the question below:What do you think are the stages of entrepreneurship process?
    (use your school library for more clarification).

    Study the stages of entrepreneurship development and answer the questions below.
    a) How many stages/steps in entrepreneurship process are identified above?
    b) Explain briefly why?
    c) In groups explain what discovery stage is, give examples.

    • Discovery. This is a stage of entrepreneurial process at which the entrepreneur generates ideas, recognises opportunities, and determines the feasibility of ideas, markets, ventures, etc.    

    d) Explain briefly what the above illustration demonstrates and give possible examples.

    e) Explain what the above diagram explains about resourcing and give relevant examples from within Rwanda.

    f) Explain more about actualisation stage giving examples.

    g) Explain the harvesting stage and give relevant examples.

       Types of entrepreneurs


    Activity 12

    Visit your school library and do the following in groups of four.
    1. Entrepreneurs can be grouped into different types. Identify and explain the different types of entrepreneurs and
        give an example of each type in their community.
    2. Each group should present your findings to the class.

       Various scholars have identified different types of entrepreneurs. The classification below was developed
        by Clarence Danhof. Its called Danhof ’s classification of entrepreneurs.

    • Innovative entrepreneurs: These are creative entrepreneurs who introduce new products and new production techniques of the market through gathering available information and experimenting new combination of factors of production. Such entrepreneurs always see and exploit opportunities for introducing new products, production methods or new markets. These are common in developed countries.
    • Imitative entrepreneurs: These are also referred to as adoptive entrepreneurs. These entrepreneurs do not innovate new products and services. They imitate or adopt existing commodities and start their enterprises exactly in the same manner. These are common in developing countries.
    • Drone entrepreneurs: Are also called conservative entrepreneurs, they do not accept or imitate changes and they decline to utilise available resources to make changes in production processes even when their businesses are making losses and consequently are out competed and their businesses collapse.
    • Fabian entrepreneurs: These entrepreneurs tend to be very cautious in adopting and accepting changes and innovations. They do not adopt environmental methods of production and business. Fabian entrepreneurs only adopt new methods if they realise that their businesses will fail if they don’t adopt new ideas.
    In addition to categories by Danhof above, below are more classification of entrepreneurs:
    • Business entrepreneurs: These are also called trading entrepreneurs. They undertake buying and selling as their core business activity
    • Industrial entrepreneurs: These are entrepreneurs engaged in converting raw materials into usable finished products.
    • Agricultural entrepreneurs: These are engaged in agricultural activities. For instance they deal in activities such as growing of cash and food crops, rearing animals, dairy farming, poultry etc. They use modern methods of production and use of exotic breeds and non- exotic.
    • Induced entrepreneurs: These entrepreneurs are attracted into entrepreneurs activities by policies and incentives provided by the governments, NGO’s etc. Incentives like: loans, tax holidays, and land tenure system.

    Types, benefits, challenges of creativity, innovation and invention

    Activity 13

    Analyse the examples below and answers questions that follow:
    A scientist who develops a theory to explain human behaviour.
    A musician who writes original songs that are enjoyed by many people.
    A writer who writes a book that provide new ideas for fundraising.
    The iPod
    MP3 players
    itunes software
    1. Which examples reflect creativity and innovation?
    2. What do you understand by these terms?
        a) Creativity
        b) Invention
        c) Innovation

    Activity 14

    Make research and discuss the following
    1.The various types of creativity
    2.Benefits of creativity and obstacles to creativity

    Creativity is the development of ideas and products that are both original and valuable.

    What I know
    We all know how essential innovation and invention is to business success.
    For example if Apple Corp. had not innovated, we would not have iPhones.

    If Microsoft had stopped innovating when they released DOS, we would never have seen Windows operating systems.
    If manufacturers had stopped innovating, we would all be driving Model T’s and calling each other on candlestick phones
    that need operator assistance; there would be no television to watch and you wouldn’t be reading this text book because
    the computers would never have been created.

    Creativity: This refers to the application of a person’s mental ability and interest to discover something new.
                        Creativity is the    ability to think and act in ways that are new and novel.
    Innovation: This refers to the development of new processes, methods, devices, products, and services for something
                         that already exists;.

    Types of innovations

    Activity 15

    Study each of the following type of innovations.

    Invention is creating something that did not exist before.

    Relationship between creativity, innovation and invention

    Activity 16

    Using a table discuss the relation and differences between creativity, innovation and invention.
    Creativity is the ability to think and act in ways that are new and fresh. In our minds, there are two kinds of creativity: innovation and invention. Innovation is thinking creatively about something that already exists (e.g., the tape recorder, Walkman, and CD player are all innovations on the phonograph). Invention is creating something that did not exist before (e.g. the phonograph). A phonograph is a device that records or plays sound from cylinder records.

    A business example clearly illustrates the difference. If a team bases its plans on the way a business has operated in the past, they are open only to innovation, such as increasing efficiency. However, a team that is inventive will ask itself: Can we create a different way to operate; one that will make a different way of doing business. Therefore, the three terms are related in a way that both innovation and intention originate from creativity.

    Activity 17

    Group exercise, interviewing an entrepreneur
    Form groups and interview two entrepreneurs. You should have a wide selection of the types of entrepreneurs you choose. Use the Clarence Danhof classification. Every entrepreneur selected must be the original founder of the business or the current owner; and should not be your close relative. Prepare a report on each entrepreneur interviewed. The report should cover two primary areas. First, discuss the background and characteristics of the entrepreneur, such as the history and the nature of the business. Secondly, discuss the lessons learned from the entrepreneur and state what you can personally take away from the experience. Your group will choose one of the two individuals that you have interviewed and make presentation on the individual.

    Unit summary

    • Entrepreneurship is the process of identifying opportunities and acting upon them to create something new or improve on something in existence.
    • An entrepreneur can be a person who has the ability to see and evaluate business opportunities, gather necessary resources and then takes action to start a business and ensures its success
    • Intrapreneur is a person who while remaining within an organisation uses entrepreneurial skills to develop a new product or line of business as a subsidiary of the organisation
    •  A manager is a person who drives the work of others in order to run a major business efficiently and make a profit.
    • Stages of the entrepreneurship process
           (i) Discovery
           (ii) Concept development
           (iv) Actualisation  
           (v) Harvesting
    • Qualities of an entrepreneur: Risk taking, innovative, creative, goal setting and planning, opportunity seeking.
    • Types of entrepreneurs: Drone Entrepreneurs, Imitative Entrepreneurs, Innovating Entrepreneurs, Fabian Entrepreneurs.
    • Benefits of entrepreneurship: Employment, use of available natural resources, provision of goods and services.
    •  Challenges of being an entrepreneur. Making losses, over working, etc.

    Unit assessment

    1. Define the meaning of each of the following terms giving examples
       a) Entrepreneurship
       b) An entrepreneur
       c) Intrapreneur
       d) A manager
    2. Given the following stages of an entrepreneurship process
        (i) Discovery                   (ii) Concept development
        (iii) Resourcing               (iv) Actualisation
        (v) Harvesting
        Explain each stage and give an example.
    3. a) Distinguish between the following

          b) Distinguish between the following

    4. a) Discuss the various qualities an entrepreneur should possess.
        b) Choose two best entrepreneurs in the world today that act as your role models; one male and one female.
             (i) ....................................................................
             (ii) ..................................................................
    c) Explain briefly how the above entrepreneurs have demonstrated the following characteristics basing on
        your knowledge  about them.

    5. Discuss the various types of entrepreneurs that you know and give examples from your community.
    6. Explain any four attributes of each of the following types of entrepreneurs
        a) (i) Innovative entrepreneurs
            (ii) Imitative entrepreneurs
            (iii) Drone entrepreneurs
            (iv) Fabian entrepreneurs
    7. Describe briefly the relationship that exists between creativity and innovation and give an example in each.
    8. a) State and explain any three types of the following in your understanding
            (i) Innovation
            (ii) creativity
        b) Discuss any three;
            (i) challenges of creativity and innovation.
            (ii) benefits of innovation and invention.

  • Unit 2 : Career Opportunities

    My goals

    By the end of this unit, I will be able to:
    • Identify work I am interested in doing and give reasons for my choices.
    • Identify the main sources of information that can help me choose what kind of future work to prepare for.
    • Explain the meaning of a career trajectory/path.
    • Explain the benefits and challenges of being employed and self- employed.

    Activity 1

    In groups of five, discuss these questions:
    1. Identify any career of your choice and explain what the term ‘career’ means.
    2. Identify the minimum education required 3. Identify the major subjects necessary
    4. Identify the course you are supposed to take at the university
    5. Find out the various ways through which you are promoted and use this information to construct a career trajectory.

    Career Concept

    A career is an undertaking a person gets involved in; in pursuit of their future or life goals.
    It also refers to what one wants to become in the future, for instance a doctor, accountant or engineer.
    There are certain factors that attract us to certain kinds of work. Choosing a role to do means choosing a career.
    A career can also be defined as a profession for which one has trained in, as an undertaking or as a permanent calling.

    Activity 2

    Study the photographs below:
    1. Identify the type of careers shown in each photograph above.
    2. Identify the subjects one needs to study so as to pursue each of the above careers.
    3. Invite some of the people who do the careers identified above in your community and discuss with you:
        a) the skills and experience needed for each to be done successfully,
        b) the various benefits and challenges in each career.

    There are many careers one can choose from. Broadly, these may be in the following categories; self-employment or paid employment. For instance, in self-employment category, you can be employed in business or finance sector as an Auditor or employed by a company/organisation as an auditor in the paid employment category.

    Choosing work to do

    Activity 3

    In groups of five, do the following;
    1. List the different sources of information for our career choices.
    2. Make a list of the different fields of careers that you can choose from.
    3. Discuss and make group presentations on the factors that influence the choice of careers.

    In most schools, there are career teachers whose responsibilities are to help students choose subjects they should
    study in preparation for the career they wish to take on in future. It is also common in some schools to have a careers day. People in different careers go to schools and interact with students. This enables learners to get first-hand information about careers they may be interested in.

    Career choice is very important for every person. It requires serious analysis and consideration.

    Choice of a career determines what we eventually become, what we do, how much we earn and our lifestyle.
    Even if we went to the same schools, we may sometimes end up taking different careers in future.

    The career we may take are in many fields for instance: Education, Health, Security, Forces, Law, Media, Hotel and
    Tourism, Commercial and Manufacturing, Media, Construction, etc.

    Many people decide their career when they are still in school. The choice of a career enables a student to choose subjects that are relevant to the desired career. For instance:

    • To be a journalist, literature and language subjects are important.
    • To become a medical doctor, science subjects are important.
    • To become an engineer, mathematics and physics are important subjects.

    Factors that influence career choice

    Activity 4

    Reflect on activity 2 and discuss with your friend the factors that can influence your career choice.

    Some of the factors that influence choices.
    • Family influence/Preference: Family back ground and or parents may influence directly or indirectly one’s career.Some parents urge their children to do subjects which lead them do to certain courses. In some cases children are influenced indirectly by the jobs their parents do or choose for them. For instance, if a parent is an economist, his/her children will be influenced to do economics at advanced level to follow the footsteps of their parents.
    • Friends and Peer Pressure: Some people want to be close to their friends and so, they end up choosing the same career   path. Peer pressure can also influence choice of a career because some people always want to fit in their peer groups,so they end up opting for the same career.
    • Schools and institutions attended: Schools and institutions influence careers either through subjects they do well or the school culture. It is common to find students of some schools becoming musicians while a majority of another school becoming businessmen, doctors, teachers, etc.
    • Role models: These are people we admire and want to emulate. Because we admire them, we end up taking their careers. This is, especially in musicians and football players. People tend to pick up star performers in the above mentioned fields to become their role models thus taking up the same careers.
    • Talent and natural ability: This is choosing a career basing on talent and ability. It is very good if one is able to identify their talents at an early stage.
    • Government policy: Government policy may also influence a career choice. For instance, when government gives scholarships to students doing particular courses, it indirectly influences people to join careers based on those courses. For example, if government sponsors the best performers at form six in national exam to go and study in America. They will either be doctors or engineers.
    • Demand in the job market: Demand for a particular area of specialisation may encourage people to take up that career. For instance many people have undertaken careers in information technology and human resource management in Rwanda due to high demand for such professions in the job market.
    • Income level and level of payment: Different careers have different levels of payment. This may be due to the nature of employment, level of demand and supply for its services, profitability of its products, employers’ and government policies, among other factors. People usually prefer high paying careers to low paying careers.

    Sources of career information

    Activity 5

    Reflect on activity 3 and discuss with your friend the various sources of career information
    • Schools: Schools are important sources for acquiring information about careers. Through career day events, learners interact with professionals, ask questions, and get to understand about their career of interest. It is important for learners to attend such events and ask as many question as they can.
    • Media, (Newspapers, radios, TV): The media includes: newspapers, radios, TV set, etc. Newspapers normally have columns and articles advising about different careers. Radio and TV broadcasters have talk shows about careers. Learners should get time to read newspapers as well as listen to radio and watch TV for career advice.
    • Potential workplace: Potential work place are useful source of information. If you already have a job and you are seeking for another for fear of being “right sized” by the present employer, then it’s better to seek information from those already employed by that organisation or you may check on their website.

    Career development plan steps

    Step 1 Where am I now? (What skills do you already possess?)
    Step 2 Where do I want to go? (What do you want for your career?)
    Step 3 How might I get there? (What steps do you need to take to get there?)
    Step 4 Who can help? (What resources might I use?)

    Print the career development plan and complete it using the processes and information above (career development steps).

    Career trajectory or path

    Activity 6

    Visit or invite any worker(s) from your school or community either a teacher, accountant, local leader or any other.
    Ask him/her to describe or explain to you the steps they went through to become or have the jobs they do. Also ask
    them what it requires or it takes to achieve/attain their various careers.
    a) From the discussion with the resource person,what do you understand by career trajectory?
    b) Identify any career you want to achieve in future and briefly explain the steps (career trajectory) you would go through
        to attain your career.

    A trajectory of a moving object is the path that it follows as it moves from the initial point or point of depature up to the end
    of the journey. The trajectory of a person’s career is the course that is followed over time.

    Career trajectory or path describes the process of preparing and joining a career and the stages one goes through up to the top. In short, career trajectory defines career stages.

    Career Pathing: Related to a career trajectory is career pathing. Career pathing is the process used by an employee to chart
    a course within an organisation for his/her career path and career development. Career pathing involves clearly understanding the specific knowledge, skills, personal characteristics, and experiences that are required for an employee to progress in the chosen career. There are different requirements for joining and the process of going through various stages also differs.
    Some careers have shorter trajectories while others have long trajectories. Getting to the top requires a person to pass
    through various stages.

    Different careers have different requirements for joining them one has to go through different stage before reaching the top. Perhaps one career that properly demonstrates career trajectory is the engineering Profession.

    Example of a career pathing: Gaetano worked with Fair Construction Company for 2 months as a college intern while
    studying engineering management at National University of Rwanda. After graduating with a Bachelor of Science degree,
    he joined Fair Construction Company full-time and worked on a job construction for a logistically challenging medical facility. After that assignment, Gaetano worked in the cost department, and then in business development before returning to the field, as a super intendant to work on a project.


    Activity 7

    Reflect on the career pathing example above, discuss the various steps that should be followed when preparing to
    choose a career.

    Self-Assessment: The first step begins with understanding yourself. A number of areas of self-knowledge are very important
    in laying a foundation for a career plan.
    • ࿤Occupational Research/list of potential occupations: Once you have understood yourself, the next step is to investigate what options are available. A successful career plan makes this investigation as comprehensive and exhaustive as possible.
    • Information search/ explore the options: For all the careers known to you, identify those that you have a possibility of taking up. Get as much information as you can about the selected career. The Internet provides a spectacular resource to research on almost infinite number of occupational choices. This will help you collect a rich and diverse background on those careers that attract you most. For instance, government statistics and related resources that track the growth or decline for a wide range of careers are a good source of information and are available on the Internet.
    • Narrow down your list: Once you have narrowed your research to a specific career, talk to someone practicing that career, about its elements, time demands, needed skills, and responsibilities. Such first-hand experience can be invaluable in determining whether the career is truly appropriate for you or not. If possible, work at the job – even as a volunteer – to further deepen your understanding of the career and what its rewards and challenges might be.
    • Set Personal goal: The first set of decisions focuses on your longer-term career goals. Do you want to eventually become part of management? Or do you prefer to remain in a line or staff position and focus on deeper knowledge in the specialty you have chosen? Where do you want to work? How much time do you want to spend working? Do you want self-employment or paid employment.
    • Create a career action plan: Career planning should link your effort to what you want in life. It is an unending process, as you must constantly evaluate all of the above steps. As time passes, your career or personal interests may change. If you are not attentive to these changes, you may find yourself continuing along a career path that is no longer fruitful or satisfactory. You need to be constantly alert to opportunities for personal growth and change that may require modification of your career plan.
    • Obtain training: Finally, you need to decide whether you are dedicated to lifelong learning in your career or whether you desire to learn the skills necessary to accomplish your job and then focus on personal interests. As a professional accountant, one goal may be to attain the Association of Chartered Certified Accountants (ACCA). To maintain your status as a professional accountant, you need to commit yourself to an ongoing program of education which provides you accounting competency.

    Activity 8

    a)Reflecting on your choice of subject combinations, give reasons why you chose that combination and who    
       helped/influenced you make your choice.
    b)What is career guidance?

    Obtaining career guidance

    Career guidance

    Career guidance is the act of assisting students and adults to successfully choose a right career for themselves, manage and develop it.

    Having the right and accurate information is important in the choice of a career. The choice should be based on accurate information. Career guidance can be obtained from various sources:
    1. Teachers
        Teachers provide the best source of career information to learners because they spend most of their time with learners             hence understand their strength, weaknesses, talents and skills. It is important for learners to consult their teachers at
           any time with ease for guidance about career development.

    2. Parents
        Some families have bias either against or in favour of certain careers and consequently encourage or discourage their
        family members to either take them up or leave them. Some people, therefore, choose to undertake certain careers
        because all their family members are taking the same career and are successful.
    3. Career guidance counsellors
        Counsellors are professionals trained to help people assess their strength and weaknesses, evaluate their goals and
        values, and determine what they want in a career.

    Employment options

    Activity 9

    Reflecting on your community;
    1. Identify the various activities/work done various people.
    2. Classify the people with their activities as those working for themselves and those working for others.
    3. How do you call those working for themselves and those working for others?
    4. Define employment/employment options.

            There are basically two forms of employment:

    Entrepreneurship is self-employment

                                          Joan Mutesi is self-employed. She owns a retail shop selling ladies
                                          shoes in Remera-Kicukiro District in Kigali-City province.

    An employment opportunity refers to any activity that an individual undertakes to earn a living. It involves an individual generating income as a result of doing such activities. Someone who is self-employed is the owner of the business, an individual who earns a living by working for himself/herself and not as an employee of someone else.

    Self-employment.This is where an individual privately utilises his/her own resources to start and operate his/her own
    business enterprise.

    In other words, a self–employed person, is an individual who gathers resources, starts a business, and manages it by him/herself. For instance, opening up a retail shop and managing it by yourself and also creating employment opportunities
    for other people, buying a car and driving it as a source of employment (taxi), etc.

    Benefits of self-employment

    Activity 10

    1. Study the illustrations below:
    2. Form groups and discuss about the benefits of being self-employed. Use the library and the internet for more information.


    • High social status: Entrepreneurs command respect from society because they are perceived to be risk takers who create employment opportunities for people in a given economy; and they also provide income to their employees, hence improvement in employees’ standard of living.
    • Self-employment and job security: There is high level of job security in self-employment. Entrepreneurs are certain of continuous employment until the collapse of their enterprise since they cannot dismiss themselves from work.࿤Independence and flexibility in decision making:Entrepreneurs enjoys higher degree of independence because they are their own bosses, control and pay themselves. They are in control and have authority to decide on both the present and future trends of the business.
    • Creativity and Innovation: Self-employment encourages creativity and innovation because entrepreneurs have independent decision making power and therefore have the opportunity to generate and implement new ideas in their own enterprises with ease.
    • Growth and Profitability: Increase in growth and profitability benefits the owner. Business enterprises under the control of entrepreneurs have the ability to grow and make more profits because entrepreneurs are their own pay-masters and take all the profits.

    Challenges of being an entrepreneur

    Activity 11

    1. What is self-employment?
    2. Form groups and discuss about challenges of taking business as a career. Make a presentation.

    • Risk of losing invested resources: Entrepreneurs bear risks by investing their resources in ventures whose success is not guaranteed and bear full responsibility in case of failure or losses.
    • Adequate skills and knowledge: Any business enterprise requires skills and knowledge to manage and supervise it’s functions. For instance; finance, marketing, production, public relations etc. This requires a person with adequate knowledge in almost every field mentioned above. It becomes a challenge if you employ skilled personnel in all the business departments and you have no skills to supervise them. The business may collapse due to mismanagement.
    • Raising capital for the business: Starting and expanding a business requires capital. It is characterised by unlimited liability because the owner’s responsibility towards business debt goes beyond his capital contribution. It is a challenge because business owners risk losing their private property in case of failure to pay the business debts from the business assets.
    • Uncertain income: The income of entrepreneurs are uncertain as it varies with the business performance. High income is not guaranteed, it depends on the business performance i.e. more growth and profitability means more income, and less profits means less income. Sometimes they may not get any income at all.
    • Long and irregulars hours: They have to devote as much time as possible to see the business enterprise succeed. This may result into overworking.
    • Lack of capital
    • Limited level of technology
    • Poor entrepreneurial skill
    • Lack of business and technical skills, etc.
    • Hard work: Leisure is foregone at the expense of business success, because of the broad responsibilities undertaken in the struggle to serve the business for its growth. Self-employed persons work for long hence less leisure time.

    Paid employment


    Activity 12

    Study the photographs below and answer the questions below.
    1. Define the term; ‘paid employment’ and how does it differs from self-employment?
    2. Is it good for you as a person? Suggest the benefits of paid employment using above photos.   
        Using your research and discussions as a group make a presentation.

    Additional information about paid employment

    It is where a person is paid a wage/salary on a daily, weekly or monthly basis for specific assignments or tasks given by the employer. It does not involve initiating employment but taking up ready employment in a running enterprises or in government, (in civil service). Examples include: soldiers, police men, teachers in private and public schools, etc.

    Benefits of paid employment

    • They are fixed and have a possibility of favourable hours of work. This avoids fatigue of the employees because they can be given short breaks or leave to release tiredness.
    • There is a steady income because they receive their pay/salary regardless of whether the business makes profits or losses.
    • Encourages specialisation. Tasks are divided and allocated to those who can do them best. This increases labour efficiency and productivity.
    • It makes it easy for the government to collect legal payments like pay as you earn, National Social Security Fund as it is easily deducted from the source.
    • Limited liability. In case of huge business losses and debts of the firm, the employees are not severely affected. Their duty is to perform the tasks allocated to them and wait for wages/salaries at the end of the stated period.
    • Fringe benefits. In paid employment, employees get a chance to enjoy other benefits which are not part of salary/wage. For instance; housing allowances, medical care, transport, purchase of company goods and services at a discount, etc. This leads to improvement in the standards of living of the employees.

    Challenges of paid employment

    Study the photographs below and answer the questions that follow

    Activity 13

    In groups study each photograph and identify the various challenges of paid employment. Identify other challenges that you may know of and make a presentation to your class.

    Some of the challenges of paid for employment may include:
    • Limited freedom of expression and decision making by the employee: Employees are given less freedom to decide on business operations which leads to low self-esteem.
    • Employees in most cases are exploited by employers: This is because the employer’s main concern is to minimize cost of production and maximise profits. So employees end up being over worked and paid less especially in developing countries where labour supply is high.
    • There is always a fixed income: The employee is subjected to a set and at times inflexible income regardless of input. Even if the organisation’s profits increase, there will be no proportional increase in the income paid by the employee.
    • There is high level of job insecurity: The job will depend on the employer’s interest, tastes and tendencies. Therefore the employer may be stopped from work at any time.

    Unit summary

    • Career Concept: It is an undertaking a person gets involved in.
    • Fields of career opportunities: Agriculture, education, health, security, media etc
    • Sources of career information: Schools, media, potential workplace
    • Career trajectory or path: Is the process that one goes through to qualify in a given work.
    • Obtaining career guidance: From parents, teachers, and career guidance counsellors
    • Self-employment: This is when someone uses his/ her resources to start and operate his/her own business.
    • Benefits of self-employment: High social status, job security, independent decision making, creativity and innovation, growth and profitability.
    • Challenges of self-employment: Risk of losing invested resources, raising capital for the business, uncertain income, long and limited level of technology

    Unit assessment

    1. a) Define the term career as used in the field of entrepreneurship.
        b) From which sources can we obtain information concerning work to do?
        c) Identify any 10 career opportunities that people today are engaged in starting with those in
            your home area.
    2. a) Visit two people in your locality who work in different careers for example “a doctor, teacher,
           and or an entrepreneur.”One should be female and another male,then do the following.
        (i) Ask the steps they followed to choose their present careers.
        (ii) Identify together the challenges that they face in their present careers.
    b) Discuss a career trajectory path.
    3. a) How can you define the term “career guidance”?
        b) Make a list of sources where career guidance can be obtained.
    4. Many people are confused today whether to engage in paid or self-employment. Advise them
        by  showing them a list of advantages and disadvantages of each of the following.
        a) Self-employment
        b) Paid employment
    5. a) Assess the benefits of being an entrepreneur.
        b) Discuss the challenges of being an entrepreneur.

  • Unit 3 : Setting Personal Goals

    My goals

    By the end of this unit, I will be able to:
    • Identify values, skills that employers want and my personal strength and weaknesses.
    • Explain characteristics of a goal (specific, measureable, realistic and time frame).
    • Identify steps to setting a goal and creating a plan for tracking it’s progress.
    • Describe learning styles. ࿤Identify strategies to better learning.

    Personal development


    Activity 1

    Study the figures above and answer the following questions.
    1.What do the figures mean or how do they relate to personal development?
    2.What do you understand by Personal development?

    Personal development in general means an everyday activity, aimed at enriching knowledge, acquiring new skills to boost productivity, to improve self-organisation, and to master communication with people. People who are concerned with self-growth are aware of their personal weaknesses and strive to make themselves better - in every department of life. The aim is to take the most out of life; to achieve maximum satisfaction and happiness.

    From the above, we learn that personal development involves:
    • Recognising areas in your personal life that you need to improve.
    • Learning by use of personal development tools and information available.
    • Taking action to actually learn by using the skills you have developed.
    Personal development in the context of institutions refers to the methods, programs, tools, techniques, and assessment systems that support human development.

    Activity 2

    1. The following exercise is a self-assessment. Read the statement and mark the column that best represents yourself
         and your situation using letter x.

    2. In Kinyarwanda Language, they say “Akabando k’iminsi gacibwa kare kakabikwa kure”, Meaning ‘One better
        thinks of the future while in the present’. Explain in detail what the above proverb means. Focus and relate your
        ideas to this chapter.
    3. How does the proverb, and the chapter, relate to real life situations?

    Identifying values, skills and personal qualities

    Values are internal. They deal with the internal development of a person; the mind and heart. A person becomes fair
    in thought, speech, action, job or work. Skills only, makes a person proficient. Values are a means of perfection of
    personality. To ‘become’ we need values. To ‘do’ we need skills.

    We all have different values and interests. Some people may not know their values well, this chapter will help you
    discover your values. It is always advisable for one to communicate their values and interests to friends, family members,
    fellow employees and to employers .

    Many values are similar, but employers might put more emphasis on values that will help them get their businesses ahead.
    It is important to be aware of the values employers want and you try to behave in a way that reflects those values.
    For example if employers value respect and honesty, then it is very important for employees to have respect
    and honesty.

    A belief is a feeling of being sure that someone or something exists or that something is true. It is a state or habit of mind in which trust or confidence is placed in some person or a thing. It is a way something is perceived.

    Examples of belief

    • He gets angry if anyone challenges his religious beliefs.
    • Entrepreneurs are born not made.
    • Entrepreneurial activities are so challenging and need a hard worker.
    • Starting a business with little capital(money) is impossible.
    How best can we define qualities? Kind, helpful, caring, understanding, patient, and loving are some of the words that
    come to mind when asked to list the qualities of a good person. One can tell that a person is good by what they do, such
    as performing thoughtful deeds. But true qualities of a person only show when they are alone. You may see people donating money to charity, greeting their teachers but deep inside, they may be filled with anger or they do not have love for what they are doing. They may just be showing off.

    Activity 3

    1. Think about the things you do on a regular basis. What values are reflected in your daily activities?(Things you are
         involved in or like to do show/reflect your values).
    2. In each of the following column, choose the top 5 values in each category that you think can best describe yourself,      
        family/friends and employers.


    Activity 4

    Referring to Activity 3;
    1. Discuss any personal qualities related to:
         a) Entrepreneurship
         b) Personal development
         c) Engagement with society
         d) Work in school
         e) Work place

    We are all Unique

    Activity 5


    In relation to skills, values, beliefs and qualities, explain what the above diagram illustrates.

    We are all unique in some way or another. This is because we have different values, skills, beliefs and possess different qualities. We may have some values in common but this also differs from one person to another.

    Let us use the activity below to show how we are unique.
    1. Fill in the table below. Let everyone select and tick where he/she belongs. Grade/rank the values depending on
        your perception (tick all values stated in the table). Strongly agree, agree somehow, disagree etc.

    Setting goals and making plans relating to career

    Activity 6

    1. What is a goal?
    2. Identify and explain various types of goals that you know. Give examples.
    3. Study the pictures below.

    a) Relate personal development and achievement of our set targets to a tree/trees.
    b) Explain what the following would represent:
        (i) Roots .....................................................................
        (ii) The stem (tree trunk) ................................................
        (iii) Branches ...................................................................
        (iv) Leaves .......................................................................
         (v) Fruits ........................................................................
         (vi) Thorns ......................................................................

    4. What would you tell a person about qualities of a good goal? What is your vision of success? Success vision is
        different for each one of us. For one person it could be working in an office setting, while for another it is being a
        successful businessman, or a successful farmer, etc.

    Concept of a SMART goal: (Specific, Measurable, Achievable, Realistic, Time bound).

    Activity 7

    Analyse the following examples of goals:
    • I will do very big businesses.
    • I will attend morning lessons.
    • I will become chief legal advisor of Tigo Rwanda next year.
    • I will milk 400 liters of milk from my one cow every day.
    • I will find a good job soon.
    1. Explain whether they are good goals or not.
    2. Make the bad goals into good goals.
    3. Explain what you understand by SMART goals.

    Characteristics of a good goal

    A good goal should possess the following qualities/characteristics.


    Steps to setting and achieving goals


    Activity 8

    1.Use the Figures 1 and 2 above to discuss the idea of goal setting and the steps to take to reach your goals.
    2.When setting goals, what is good to think about?

    Setting goals is more than deciding what you want to do. It involves figuring out what you need to do, to get where you
    want to go, and how long it will take you to get there.

    The first step to success is knowing where you want to go. The second step is having a plan to get there. Your goals are
    your roadmap, follow them and you will be on your way to success

    The steps listed below are posed in question form. In order to set smart goals, the following steps should be observed:
    1. Where 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 next two years .
    2. What must I know to get there? Example “To start my business I will need todiscover 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), prepare
        my Weaknesses, Strength, Opportunities available and Threats (SWOT analysis) and where to do the business from.
    3. What 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, organisation, financial, action plans etc. Obtain a trading license and a business registration 
         among others.
    4. What 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?
    5. What 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 away to achieving your goal. This is because you don’t expect everything to go on smoothly. A lot of challenges
        can be met. Refer to the above goal in the question, suggest possible challenges that can be met.
         Many of your responses   may be:
    • Inadquate funding (capital)
    • Small market size, may be because of strong competition
    • Strategic business location.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.
        To illustrate the above, let’s consider the example below:

         20th APRIL 2015


    Activity 9

    Steps to achieve my goal

    Identify your goals and complete the following table.(follow the example above).

    In setting long term and short term goals; steps, time frame and resources are needed to set SMART goals:
    • Identify priorities
    • Start and end points
    • Skills
    • Opportunities
    • Strategies
    • Obstacles    

    Learning new skills

    Activity 10

    1. Think about something you learnt or had to do for the first time during this year and last year; after which answer
        the following questions:
       a) What was it?
       b) How did you feel about the desire to learn something new?
       c) How did you learn it?.
    2. Form a group of three learners and share your learning experiences. Each learner should express his/her learning 
        experience, after which answer the following questions:
     a) Were your learning experiences the same or different?
     b) What made them different?
     c) Do people learn in the same way?
     d) How do people learn?
    This chapter focuses on learning styles, strategies of how to learn new skills based on one’s learning style, and setting
    learning goals. How we learn differs from one person to another. Its therefore very important to know how people learn differently. In a class environment we have fast learners, time takers and those who are between fast and slow. But all
    use different learning styles hence its important for a time taker to integrate the learning styles of a quick learner so as
    to be at the same level.

    People learn differently using the following styles


    Activity 11

    1. Study each of the above photographs and identify the learning styles illustrated.
    2. Basing on each of the following learning styles indicated above, check mark the style that applies to you.
        If you have three or more check marks, per style indicate your preferred learning style.

       Usually people combine learning styles so as to be able to comprehend or do something new. For example in learning
       how to drive a car, a person may need to observe someone else drive and then try it him/herself with the help of someone  
       who is experienced in drawing. It is therefore useful to be aware of learning styles that do not work well for you so that
       when learning something new you can be clear to others about how you learn best.

    Activity 12

    By referring to the learning styles below, check mark the style that applies to you. If you have three or more check marks
    per style indicate your preferred learning style.
    1. If you learn best by speaking, do the following:
    • Ask questions if you don’t understand something or need clarification
    • Choose an activity that requires a lot of talking
    • Repeat things right after you hear them in order to better remember them
    • Study with other people so that you can talk to them about the new information
    2. If you learn best by reading, do the following:
    • Choose an activity that requires a lot of reading
    • Get information through the written word
    • Have people write down directions for you to read
    • Read instructions instead of having someone tell you or show you how to do something
    • Take good notes and then read them later on
    3. If you learn best by writing, do the following:
    • Choose an activity that requires a lot of writing
    • Write down the things that you need to do and keep a written schedule
    • Take notes when listening to instructions
    • When you read, underline and take notes as you read along
    4. If you learn best by observing/seeing, do the following:
    • Use charts, graphs, pictures etc
    • Visualise words pictures,telephone numbers etc in your mind,
    • Take note of the shapes and colours of things that you will want to remember
    • As you read something imagine what it would look like if it were happening in real life
    • Watch other people do the things that you need to know how to do. You will be able to visualize their actions later on
    5. If you learn best by listening, do the following:
    • Choose an activity where listening plays an important role
    • Call people on the phone instead of writing to them
    • Study with other people
    • Ask people to explain things that you don’t understand
    • Read aloud information you need study aloud
    6. If you learn best by doing, do the following:
    • Choose an activity that lets you work with your hands and move around
    • Go on visits to places so that you can see how things are actually done
    • When you have to learn how to do something new, watch someone actually do it and ask them to show you how it is done
    • If given a choice, show others that you know how to do something by showing them how you do it

    Unit summary

    • Identifying values, skills and personal qualities: Problem solving, time management, taking initiative, affection, leadership, honest, respect.
    • Personal qualities in relation to entrepreneurship: Ethics, creativity, communication, caring, ambitiousness, friendliness
    • Uniqueness and diversity, skills and qualities assessment:Tolerance, respect, optimism, intelligence, involvement, empathy, creativity, commitment.
    • Setting long term and short term goals: Goal should be specific, measurable, achievable, realistic, and time bound
    • Learning new skills: Linguistic, logical, visual, bodily, musical, inter-personal, intra-personal and natural
    •  Learning strategies: Listening, reading, speaking, observation, doing, writing

    Unit assessment

    1. a) Giving an example, differentiate between values and skills.
        b) Identify personal values and skills that you possess and show how you have demonstrated such values in daily work
             you engage in.


    2. Identify the various values and skills that employers want.
    3. a) Define the term goal.
        b) Giving possible examples, describe any five characteristics of a goal.
    4. a) By giving examples, distinguish between short term and long term goals.
        b) Discuss the steps followed to set “SMART” goals.
    5. a) Make a list of your favorite learning styles.
        b) Identify any five learning styles of your friends that are different from yours.
        c) Copy and complete the table below


  • Unit 4 : Laws in Business Operations

    My goals

    By the end of this unit, I will be able to:
    • Explain the meaning of laws and business laws.
    • Discuss the importance of laws in business.
    • Identify laws that relate to business in Rwanda.
    • Identify different legal institutions in Rwanda.
    • Identify the different legal forms of businesses carried out in Rwanda.
    • Explain the benefit of business registration and the consequences of not registering a business.

    Activity 1

    If learners reach late at school or escape and go back home before time, for no good reason the disciplinary teacher may
    call their parents to come to school to talk about the matter. He/she may tell them to clean their classes or not allow them
    in class for some time as punishment. Suggest reasons why the school discipline teacher may do such a thing. Do you
    think it is good?

    Legal System in Rwanda

    The constitution is the supreme law in Rwanda. Any law or custom that conflicts with it is null and void.

    In Rwanda the highest court is the Supreme Court. Any person or legal entity seeking for justice can appeal a lower
    court ruling to the Supreme Court.

    Meaning of law. A system of rules that a particular country or community recognises as regulating the actions of its
    members and which it may enforce by the imposition of penalties.

    Business laws in Rwanda

    Activity 2

    In groups discuss why laws are important in businesses and suggest the laws related to the importance identified.

    Business laws have a purpose of regulating business operations. These laws protect the consumers, the community,
    the environment and the businesses themselves. The business laws currently applicable in Rwanda include:
    1. Consumer protection law. Under this law, the government protects the consumers from exploitation by ensuring that
        the products sold to customers are of the acceptable standards in terms of, price, quantity and quality. In Rwanda
        the Rwanda Utility Regulatory Authority and Rwanda Bureau of Standards are the institutions in charge of consumer  
    2. Public health law. With this law, the Ministry of Health is expected to check standards of hygiene for instance in
        restaurants, hotels, schools and all other public places and private homes. Representatives of the ministry are normally
        sent out to check, advise or even close any business that does not comply with the expected minimum standards. The major 
        elements they look at include: toilets, lighting, cleanliness and ventilation.
    3. Weighing and measures law. Under this law government ensures that sellers use acceptable weighing scales and     
        measurements when selling goods and services to customer. This is implemented through the National Bureau of
        Standards.The law also provides for quality standards to be observed by goods and services produced and provided
        by the entrepreneurs.
    4. The trading license act. This act requires all businesses to obtain trading licenses before beginning operations.
         It empowers  local administration to impose (levy) and collect trade license fees.
    5. Environmental law (National Environmental Act). The environmental considerations arise at all stages of land use, 
        development, business startup and operations that affect the environment. The government implements this act through
        the Rwanda Environment Management Authority (REMA).
    6. The land Act. This is a law that provides for the tenure, ownership and management of land.
    7. Food and drugs law. By this, the Ministry of Health controls businesses by ensuring that expired drugs and bad foods
        are not sold to customers. For drugs, the entrepreneur must get a separate permit from the National Drug Authority,
        such a permit will only be granted when the conditions set by the law is satisfied by the entreprenuer. This law seeks
        to protect customers by ensuring the quality and quantity of food and drugs.
    8. Law of contracts. The law about making and enforcing contracts.
    9. Commercial law. Commercial laws relate to the buying and selling of goods and services. It applies to the rights,
        relations, conduct of persons and businesses in Rwanda.

    Activity 3

    In Rwanda today we are experiencing many environmental challenges among which include: landslides, deforestation,
    severe soil erosion, pollution of the atmosphere, unplanned settlements without proper waste management, wetland reclamation, cultivating near lakes and rivers, use of pesticides and many others. All these activities are related to entrepreneurial activities. In groups, identify the laws that can be applied to overcome these challenges. How can
    entrepreneurs carry out their business activities while at the same time conserving our Mother Nature?

    Importance of business laws

    1. The trade license ensures that all businesses are registered and operate legally.
    2. They reduce conflict between traders or service providers and their clients (customers) since business laws create
         an avenue for peaceful and just conflict settlement.
    3. Environmental law protects the society from the harmful effects that would result from the operation of some businesses
        on the environment.
    4. The public health law ensures that there is proper hygiene and sanitation in public places such as hotels, entertainment 
        places, schools, etc. This protects us from infections.
    5. They prevent producers from producing and distributing poor quality products in markets.
    6. They also prohibit the business community from refusing to pay taxes due to them.
    7. The consumer protection law protects consumers from exploitation and exposure to harmful products.
    8. They prevent unethical competition and protect producers’ trademarks, intellectual rights etc.

    Different types of trademarks

    9. Business laws help the public to save because it protects the public from the exploitation of some profit hungry businesses. 
        This is a responsibility of Rwanda Utility Regulatory Agency.

    Legal institutions related to business in Rwanda

    Activity 4

    In groups identify and discuss about legal institutions that relate to business and suggest their importance in Rwanda.

    1. Rwanda Revenue Authority
        Rwanda Revenue Authority (RRA) is a body/institution that is responsible for assessing, collecting and enforcing tax laws.
        Rwanda Revenue Authority sensitises the public about the importance of paying taxes and the penalties of delaying, dodging
        and or refusing to pay tax.

    2. Commercial Courts
        These are courts specialised in the handling of cases relating to business conflicts in
        Rwanda.Commercial courts settle business conflicts between disagreeing parties for example:
    • Purchase of goods and services
    • Transport agencies࿤Miners and mining corporations
    • Export and import of goods and services
    • Brokers and jobbers
    3. Rwanda Commercial Registration Service Agency (RCRSA) This is an institution that serves the purpose of
        proving registration information to both new and existing business.
    4. Rwanda Utility Regulatory Agency (RURA) It is a government department that monitors and controls services and
        goods for example transport, energy, agricultural produce,

    telecommunication and broadcasting and the Authority has the following mandate:

    Activity 5

    Brainstorm on the role of Rwanda Utility Regulatory Agency (RURA) in business operations. Identify possible challenges
    the institution faces and suggest possible solutions.

    Mandate of Rwanda Utility Regulatory Agency (RURA)

    • To set up necessary guidelines in order to implement the laws and regulations in force.
    • To ensure compliance by public utilities with the provisions of laws and regulations governing the regulated sectors in an objective, transparent and non-discriminatory manner.
    • To ensure the continuity of service delivery by licensed or authorised service providers and the preservation of public interest.
    • To protect users’ and operators’ interests by taking measures likely to guarantee effective, sound and fair competition in the regulated sectors within the framework of applicable laws and regulations.
    • To protect and promote consumer interests.
    • To promote the availability, accessibility and affordability of regulated services to all consumers including low income, rural and disadvantaged consumers.
    • To promote efficient development of regulated sectors in accordance with government economic and financial policy.
    • To promote and enhance general knowledge, sensitisation and awareness of the regulated sectors including but not limited to:
    .Promote and protect the rights and obligations of consumers and service providers.
    ·Issuing permits, authorisations and licenses required for regulated sectors, in accordance with the relevant laws and   regulations.
    ·To monitor and ensure compliance by regulated network or service providers in line with their licenses, permits and concession obligations.
    ·To ensure fair competition in all regulated sectors.

    Activity 6

    Research about the role of Rwanda Development Board (RDB) in business activities carried out in Rwanda. Learners will share their findings in class.

    5. Rwanda Development Board

    This is a government institution that is charged with the responsibility of registering new businesses in the country.

    It plays the following roles, among others:
    • It gives technical support and logistics to both domestic and foreign investors.
    • It promotes Rwanda tourism by conserving natural heritage centers, wild life, water bodies, mountains, etc.
    • It promotes the development and thriving of private sector in Rwanda.
    • It also ensures good service delivery by sensitising nationals about good customer care, and entrepreneurship skills development.
    • It advises potential investors on the available business opportunities and areas of profitable investment.
    Forms of business enterprise/business unit/ ownership/legal forms of business

    Activity 7

    Research about legal forms of businesses in Rwanda. Define each form of business identified.

    There are several legal forms of business ownership from which an entrepreneur can choose what suits his/her enterprise.

    Business units are broadly classified into two groups, namely:
    • Public sector
    • Private sector

    A. Private sectors

    Activity 8

    1. Discuss the meaning of a private sector.
    2. Identify the activities of the private sector in your community.
    3. State the contribution of the private sector to the growth of Rwanda‘s economy.

    Forms of business

    • Sole trade (proprietorship)
    • Partnerships
    • Co-operatives
    • Joint stock companies

    B. Public sector

    Activity 9

    1. Describe activities and businesses which are carried by government officials in districts, sectors, Umurenge
        and Akagari.
    2. Identify government companies that provide services in the whole of Rwanda.Public sector businesses are
        businesses  owned by government. They include:
    • Nationalised industries.
    • Local government authorities like schools, hospitals etc.
    • Public corporations e.g. Rwanda Airlines, Rwanda Post and Telecommunications-(Rwanda Tel) etc.
    NOTE: Different legal forms of business ownership have varying business start up requirements.Indicated below is
                a detailed  explanation of each legal form of business ownership

    Indicated below is a detailed explanation of each legal form of business ownership

    Activity 10

    1. Use the meaning of sole and proprietor to find out the general definition of sole proprietorship form of business.
    2. Identify example of sole trade businesses around your school or near your homes.
    3. Discuss the characteristics of these businesses, their advantages and disadvantages.

    Sole proprietorship business/sole trader business

    This is a form of business ownership where a business is owned by one person/individual. Examples include: restaurants,
     video libraries, internet cafes, etc.

    Characteristics of a sole proprietorship business

    • The trader owns the business alone.
    • The trader is responsible for financing the business or raises capital alone.
    • Decision making is by one person.
    • Liabilities and profits are all incurred and enjoyed by one person.
    • Limited government interference.
    • Sometimes employs family members.
    • Business is very flexible, i.e. can easily change from one line of business to another.

    Advantages of a sole proprietorship business

    • Easy to start because it requires small amount of capital
    • Enjoys profits alone
    • Sole proprietor is self-motivated
    • Direct contact to his/her customers
    • Easy co-ordination of activities
    • Easy to change business/businesses flexibility
    • They have enough time for the business
    • Minimises costs of operation by employing family members

    Disadvantages of a sole proprietorship business

    • Unlimited liability: The business owner suffers all the losses alone
    • Limited capital: Normally sole trade is operated using small amount of capital contributed by the owner alone
    • No specialisation: The trader deals in a range of items all sold on very small scale
    • Personal attitude affects his/her business
    • Over works: The trader over works because he/she does not employ other people to help him/her in the operation of the business
    • Poor/low technology used: This is, in most cases for those operating on a small scale.
    • Limited goods and services.
    • The enterprise fails or collapses when the owner dies

    Partnership business

    Activity 11

    1. Who is a partner?
    2. What is a business?
    3. Suggest the meaning of partnership business.
    4. In your class can you find people you can play with a sport like, volleyball, or any other game of your choice?
        Now besides that, if you could have a plan to start a project of growing carrots at the school garden, who of your
        classmates would you wish to work with and why?

    Partnership is a business which is owned by more than one person; it ranges between 2-20 people with
    an aim of making profits.

    Characteristics of a partnership business

    • It is owned by more than one person usually 2-20 partners.
    • Profits are shared between the partners at the end of an agreed period of time.
    • All members contribute capital directly or indirectly to the business.
    • They aim at making profits.
    • All members are responsible for all business losses.
    • Before starting a partnership there is a general agreement prepared and signed by each member. This document is known as a Partnership deed. In case of disagreements between the partners, the partnership deed becomes a point of reference.
    • The burden of running the business is shared by all partners.
    • Transfer of ownership and admission of a new partner is by the consent of all partners.

    Types of partners in a business

    Activity 12

    Research about: active, dormant, real, quasi, major, minor, limited liability and unlimited liability partners.

    • Active partner: This one is also referred to as an acting partner or managing partner or working partner.He/she contributes capital and participates in the day-to-day running of the business. He/she is personally responsible for the business debt and has unlimited liabilities.
    • Dormant partner: He/she is also known as a sleeping partner or a financing partner. A dormant partner only contributes capital but does not take part in the day- to- day running of the business. The liability of such a partner is limited.

    According to capital contributed

    • Real partner. This is a partner who contributes capital to a business, shares profits and losses, and is also responsible for the liabilities of the business.
    • Quasi partner. He/she is also called a normal partner. A quasi partner is one who does not contribute capital nor take part in the running of a business but allows the business to use his name as a partner. These partners are usually people of high social status like celebrities, lawyers, ministers etc.

    According to age

    • Major partner. He is a partner who joins a partnership after attaining 18 years of age or above. He/she is liable for all the debts of the business.
    • Minor partner. A minor partner is one who has not yet attained 18 years of age.

    According to the liability

    • Limited partner. Is one whose liability towards the debts of a business is limited to the sum of capital he/she contributed.
    • Unlimited partner. Also called a general partner. Is a partner who has unlimited liability i.e. he/she is liable to all debts of a firm. His/her personal property can too be sold to clear company debts.

    Advantages of a partnership

    • Division of labour. Each partner takes up challenges that they are capable of performing well.
    • A lot of capital is generated as compared to sole proprietorship.
    • Losses and profits are shared equally.
    • Talents are put at better use (pooled together) .
    • Easy to join.
    • Easy decision making.
    • Top secrecy is respected (easy to keep the secrets of the business).
    • The incentives/ bonuses given motivate the shareholders.

    Disadvantages of a partnership

    • Unlimited liabilities
    • Disagreements are common
    • Mis-handling of property and business resources
    • Risk of being liquidated
    • Delayed decision making due to the many parties (members)
    • Profits are shared hence reducing the income of each member
    • When a party dies in most cases the partnership has to be dissolved

    Partnership Agreement Deed

    Activity 13

    You and your classmates intend to form a patriotism club in your school. The patron of your school Mr. Ibyizabirimbere advises you and the other members to write down the values and principles you will have to respect and follow in your club. Suggest examples of these values and principles for your club.

    A partnership deed is a written agreement stating the terms and conditions of a partnership.

    This is necessary in case of disputes or misunderstandings that may arise during the course of the business.

    Components of a partnership deed

    • The business name and location
    • Names and addresses of partners
    • Line of business
    • Nature of partnership (temporary/permanent)
    • The beginning and duration of the business
    • The amount of capital contributed by each member
    • Bank account and other details
    • How withdraws will be carried out
    • How profits and losses will be shared
    • Salary and wages to active partners if there will be any
    • Duties and rights of partners
    • Procedures for settling disputes amongst members
    • Preparations of business books of accounts
    • Procedures for dissolving the business

    Sample Partnership Deed

    THIS DEED OF PARTNERSHIP IS MADE on this 12th day of January, 2015 by and between
    Mr. Abera XYZ hereinafter referred to as Party on the FIRST PART (which expression shall deem and include his heirs, executors, administrators, representatives, assigns and agents), AND Ms. Bahati XYZ Party on the SECOND PART (which expression shall deem and include his heirs, executors, administrators, representatives, assigns), AND WHEREAS the above named partners have decided to start a partnership business of Recruitment Services in the name and style of M/s SSS with effect from day of January, 20.......on the terms and conditions hereinafter mentioned and have desired to reduce the terms and conditions into writing.

    1. THAT the PARTIES referred above shall carry on the business of Recruitment Services in the PARTNERSHIP FIRM
         under the name and style of M/s SSS hereinafter referred to as the FIRM XYZ, But by their mutual consent may start
         and carry on any other business or businesses under any other name or names at any other place or places.
    2. THAT the business of the PARTNERSHIP pursuant to this DEED of PARTNERSHIP shall be deemed to have
         commenced  with effect from day of January,
    3. That the capital required for the business of Partnership shall be contributed time to time by the PARTIES in such
         manner in  all respect as may be agreed to between them and such capital may be paid interest as may be mutually
         agreed from time to time at the rate or rates not exceeding 12% (Twelve Percent) per annum.
    4. That all PARTIES referred to above shall be Working Partners and shall attend diligently to the business of the
        Partnership and carry on the same for the greatest advantage of the Firm.
    5. That all the WORKING PARTNERS may be paid Salary from ......... day of Feb. 2015, for the work of the FIRM as may
         be  agreed mutually from time to time between the PARTIES in accordance with the provisions of the Income Tax Laws
         as well as business

    necessities and other factors, subject however, that the monthly Salary to each such Partner shall not exceed as under:

    a) Mr. Abera                                                                   Rwf.120,000 per month
    b) Ms. Bahati                                                                 Rwf.120,000 per month

    6. That all business expenses shall be borne by the FIRM.
    7. That the Profits or Losses, as the case may be, of the Partnership business shall be divided
         among the Partners as under :

    NAME OF WORKING PARTNER                    SHARE OF PROFIT                       SHARE OF LOSS
    a) Mr. Abera                                                     50%                                                  50%                                      
    b) Ms. Bahati                                                    50%                                                  50%

    8. That the duration of the PARTNERSHIP shall be at WILL subject to Clause “10”
    9. That any Partner may retire from Partnership after giving a notice to the other Partner (s) of not less than one month
        in writing and at the expiry of such notice period he shall be deemed to have retired.
    10. Upon mutual understanding, each Partner or his duly authorised agent shall have free access to the account books
         of the Partnership and shall be entitled to take copies or extracts from any or all such books and records of the
        Partnership business.
    11. That no Partner shall have the right to sell, mortgage or transfer his share of interest in the FIRM to anyone else
          except to his heir or heirs or any one of the existing Partners or to their heir (s). In the event of heir (s) selling his/her
        shares to anyone else, the existing Partners shall have a right or pre-emotion in respect of such share (s) sold.
    12. That the Partners shall keep or cause to be kept the books of account of the FIRM at the principal places of its
         business and make all entries therein, and that all such books of accounts kept shall be closed on 31st March
        every year or in the case of any necessity on any other date as the Partners may mutually decide.
    13. That no Partner shall do any act or thing whereby the FIRM or FIRM property may be prejudicially effected.
    14. That the terms of the Partnership Deed may be altered, added to or cancelled by the written consent of the Parties
           to this deed.
    15. That the partners can open a bank account for the firm, in any bank and bank account shall be operated by
          the partners jointly or individually, as the case may be.
    16. That the partners shall not take any loan from any person/Financing Company, bank or any other Government
           Department in any case, without the written consent of each other.
    17. That in the case of any dispute arising out of this DEED between the Parties of this DEED; it shall be decided by
          Arbitration as provided for under the Rwandan Arbitration Act.IN WITNESS WHEREOF the Parties hereto have set
         and subscribed their respective hands to this present day, month and year first written above.

    1.                                                           Mr. ABERA
                                                           (Party on the First Part)

    2.                                                            Ms. BAHATI
                                                           (Party on the Second Part)

    Activity 14

    Form teams to write a sample partnership deed for a business of their choice. They should consider all the components of a partnership deed.

    Dissolving a partnership business

    Activity 15

    In activity 13, you suggested values and principles for your patriotism club, assuming all members respect these values and principles, why do you think your club may close?

    Dissolution of a partnership is the ending of a partnership or the termination of a partnership

    Reasons that may lead to the dissolution of a partnership
    • If it was a temporary partnership
    • If the partnership becomes illegal and put to an end by law.
    • If there is irreconcilable misunderstanding between partners.
    • If the business becomes bankrupt.
    • If one of the partners becomes mad or dies.
    • If one or more partners leave the partnership
    • If there is no mutual agreement between partners.

    Joint Stock Companies

    Activity 16

    Rugoli is an academics prefect at her school. She is also the chairperson of the entrepreneurship club at her school. Rugoli
    and some of the club members wanted to start a project of making necklaces, craft shoes, and other art and craft items at
    their school. Students, teachers and parents are their target market. The project needs 300,000 Rwf as capital. Rugoli and
    her members cannot raise capital individually but jointly. If they succeed they expect to earn much profit from their business.
    On the day of going back home after examinations, Rugoli requested each member to return with 1,000 Rwf from home as capital for their business, and promised them that they will share the profits of the business when they start operating.
    1. From the statement above, what do we call the 1,000 Rwf that Rugoli asked her club members to bring from home?
    2. Which benefits will this club enjoy in case they succeed in starting their dream business?
    3. Suggest challenges that this club is likely to face.

    Joint stock companies are called so because people join their capital in form of shares to form joint organisation.
    They have legal entity i.e. they are recognised by the law and quite separate from members who compose them.
    This is why they have limited liability.

    Characteristics of a Joint stock company
    • They are a separate legal entity
    • Limited liability
    • Can sue or be sued
    • They own property
    • Raise capital through shares
    • Members enter into contracts
    Types of joint stock companies
    There are two major types of joint stock companies namely:
    • Statutory companies
    • Registered companies

    Activity 17

    1. Research about the difference between statutory companies and registered companies.
    2. Identify examples of statutory and registered companies in Rwanda.

    A) Statutory companies
        These are companies which are owned by the state and are created under an Act of parliament.
        The parliament chooses and  appoints the board of directors who run the business.

    B) Registered companies

        Activity 18

         Research about a private limited company and public limited company. Identify their differences.

    These are companies that are formed by shareholders and registered with the registry of companies,
    under the Company’s Act.
    The directors of these companies are elected by shareholders themselves on a democratic policy.
    NOTE: In general, registered companies are further classified, based on the nature of ownership, namely:
    • Private Limited company
    • Public Limited companies
    Differences between private limited and public limited companies
    • A private company has a minimum number of shareholders of two and a maximum of fifty, while a public company has a minimum number of seven and no maximum
    • A private company does not invite the public to buy shares but the public company does
    • In a private company shares cannot be transferred without the consent of other shareholders, while in public companies shares can be bought and sold freely on stock market
    • The private company does not publish its balance sheet while the public company is required by law to publish its balance sheet annually and also send a copy to the registrar
    • A private company is not separated from its members while a public company is a separate legal entity from its shareholders
    • The private company can start business immediately on incorporation, while a public company cannot until it has obtained a certificate of trading

    Activity 19

    Discuss the advantages and disadvantages of limited liability companies in Rwanda.

    Advantages of a limited company
    • Limited liability
    • It facilitates the collection of huge resources due to a big number of shareholders
    • The company enjoys continuity. It continues to exist even if all its members die. Therefore there is no interruption of business
    • Transferability of shares; i.e. a member can freely transfer his/her shares without the consent of other members
    • Professional management is possible due to the vast resources This gives the company the capacity of engaging expert managers with the required skills in the manning of the business venture.
    • It is a separate legal entity i.e. It is separate from the owners and hence it can sue and be sued on its own
    Disadvantages of a limited company
    • The company needs a number of documents and takes a long procedure to start operating
    • Excessive government control i.e. rules and regulations
    • Lack of motivation and personal touch as there is a separation between the management and the ownership
    • It is associated with corruption, fraud, and embezzlement of funds
    • There are delays in decision making because of several management levels
    • Lack of secrecy as it is required by law to disclose and publish all information about its operation to the public

    Formation of joint stock companies

    Activity 20

    Research about legal documents that are needed for the formation of a joint stock company in Rwanda.

    Any person desiring to form a Joint-Stock company is required to go the office of the registrar of companies with the following:
    • Memorandum of understanding
    • Articles of Association
    • A declaration that all requirements of the registration with the registrar have been made
    • A list and statement of directors After receiving these documents and the registration fee,the registrar issues a certificate of incorporation and there after the company is free to prepare a document called a prospectus to promote it so that the public can buy it’s shares

    Memorandum of understanding

    • Is a document that details the relationship between the company and public?
    • This is a document which outlines powers and limitations of companies. It sets out clauses; each of which defines particular aspects of a company.
    This is a document prepared by a lawyer of a company indicating how a business is going to relate with the public.
    Any person starting a business is supposed to know the clauses of this document i.e:
    • Address clause
    • Objective clause
    • Capital clause
    • Liability clause
    • Name clause
    • Declaration clause

    Articles of Association

    This is a document that sets out the rules and regulations governing a company’s internal management. Usually this document contains the following:
    • Procedure for calling general meetings
    • Rights and obligations of board of directors
    • Rights of shareholders
    • Minute book and who should keep it
    • Appointment and removal of board directors
    • It also shows the audit and accounting requirements of the company
    NOTE: When the memorandum of association, and articles of association and a list of board of directors are filed
                with the registrar of companies, the company is then given a certificate of incorporation. This means that the
                company is legally known by the public. ie. it can sue or be sued in its own names in the court and at this stage
                acquires limited liability (LTD).
                 However, the company will later be issued with a certificate of trading which will allow it to begin business.

    After the registrar of companies has issued all these certificates, it will always need the company to keep records for reference.
    These records should always show the following:
    • The registration of Board of Directors
    • List of shareholders showing each director’s money and addresses
    • Books of accounts should be kept and also the minute book recording proceedings of meetings
    The company will issue a statement inviting members to buy it’s shares.

    Differences between shares and debentures
    • A share is a unit of capital for a company while a debenture is unit of loan for a company
    • A person who buys a share from a company is called a shareholder while the one who lends money to the company is called a debenture-holder.
    • Dividends can be delayed for years if profits are not made. While interest is compulsory whether profits are made or not.
    • Shares earn dividends while debentures earn interest.

    Public corporations

    Activity 21

    1. Form groups and discuss about public corporations.
    2. With examples suggest the importance of public corporations in your communities, and their disadvantages.
    These are organisations that are fully nationalised. The money used to form them is raised from tax payers.
    Some are run on commercial basis, while others give social services to the public. Those which carry out economic
    activities like Rwanda Airlines, EWASA etc., aim at making reasonable profits.

    The profits made are used to develop the country e.g. in construction of roads, hospitals, schools, among many others.

    Advantages of public corporations/ parastatals

    • Basic goods are made available to the public at a subsidised cost e.g. water and electricity
    • Prices may be lower
    • Creation of employment opportunities
    • Source of income to the government.
    • Economies of large scale production are enjoyed by both the nation and citizens
    • They foster development e.g. construction of roads
    Disadvantages of public corporations
    • Dis-economies of scale occur because of poor administration
    • Poor customer care
    • There is limited competition. This may lead to production of poor quality goods and services
    • Tax payers are always over burdened
    • Mismanagement of funds/embezzlement/corruption are common


    Activity 22

    Mukamana is from Mbyo, Bugesera District. She is one of the ladies involved in handicraft activities in her area.
    She makes baskets, mats, hats, necklaces and other related products. Mukamana and the other ladies face challenges
    when buying raw materials for making their products. Marketing their finished products is also difficult as they work individually. Sometimes they travel to Kigali in search for customers to buy their products and when they are away, they have to close their work places and open them for work when they return from Kigali.
    1. What benefits would Mukamana and the other ladies in Bugesera district enjoy if they decided to do their
         handicraft work together?
    2. How can the society also benefit from their activities?

    A co-operative enterprise or society refers to a group of people who join effort in the production or distribution of goods and services and share profits among themselves depending upon the participation of each member.

    Features/characteristics of a co-operative society
    • The association follows democratic principles in its operations as leaders are elected democratically.
    • Each member has rights as per the memorandum of understanding.
    • The startup capital required to fund the co-operation are solicited from members, who agree upon the amount of money each has to contribute.
    • The responsibility of each member is limited to the amount of share capital that he/she owns.
    Types of Co-operative Societies or Associations

    Activity 23

    In groups of five, identify examples of co-operatives and there after classify them as consumer, producer or savings and credit co-operatives. Clearly explain the benefits of each classification to the general public.

    There are many forms of co-operative associations in Rwanda. These are categorised as:
    • Consumer co-operatives
    • Credit and saving co-operatives (SACCOs)
    • Producer co-operatives
    Producer Co-operatives
    These are societies that co-operate to produce certain commodities for others to consume.
    They collectively help members to market their produce, transport and storage before processing,
    give credits, fertilizers etc.
    • They aim at collectively marketing their products at competitive prices.
    Consumers Co-operative Associations or Societies
    These are co-operative associations composed of consumers of a given type of commodity.

    • They enable consumers buy /acquire goods and services at a fair cost
    Workers Co-operative Associations
    These are co-operative associations made up of workers wishing to protect their employment and to control their
    working environment.

    SACCOs (Savings and Credit Co-operatives)
    These are co-operatives that carry out savings for their members and also provide credit facilities to them
    e.g Umwalimu SACCO.

    Principles of Co-operative Societies
    Most of the principles written by the Rochdal Pioneer in 1844 are today recognised by co-operative bodies
    throughout the world. Co-operatives are by nature organised on the following principles:

    • Open and voluntary membership. Membership to co-operative societies is open to those who can fulfil the regulations governing society.
    •  Any one above 18 years of age irrespective of sex, race, religion, social status or any other difference can join.
    • Democratic administration. Leadership of a co-operative is democratic. It is on the basis of one person one vote regardless of the number of shares one holds.
    • Payment of limited share capital. Each member of the co-operative society must contribute a minimum share capital that is agreed upon.
    • Distribution of surplus profits or dividend payment. Profits received by co-operatives are divided among members as dividends
    • Promotion of education to all members.

    Activity 24

    Discuss the principles and values that may be generally acceptable for individuals who may wish to operate a joint economic activity. Each member contributes to business capital or any other resource. There is also mutual sharing of all benefits and challenges.

    Problems faced by co-operative enterprises
    • Limited capital
    • Limited securities
    • Lack of skilled administration
    • Embezzlement of funds
    • Lack of interest of members
    • Disputes and misunderstanding between members
    • Tribalism/sectarianism/nepotism
    • High competition from similar co-operatives
    • Lack of government support
    • Government interference
    • Mismanagement of funds

    Activity 25

    Learners brainstorm on the socio-economic contribution of co-operatives.

    Socio-economic contribution of co-operatives
    • Creation of income generating activities like keeping animals, crop farming, trading, manufacturing and providing services.
    • Developing human capacities.
    • Increasing savings and investments: For example, saving and credit co-operatives mobilise savings from their members and then avail credit to members for investment.
    • Improving social and economic well-being: Co-operatives produce goods and service, generate incomes and also create employment opportunities which improve people’s standards of living.
    • Contributing to sustainable human development.
    • Source of government revenue: Co-operatives pay taxes to government from the incomes they generate when they market their products.
    • Source of income: Co-operative societies usually cater for the weak and poorer sections of the society by availing them with cheap services.
    • Source of foreign exchange: Co-operative societies engage in production and adding value to the agricultural produce. This promotes export hence enabling the country to earn foreign exchange.
    • Development of infrastructure: Co-operatives facilitate the development of roads, industries, generation of electricity, etc.
    • Food security. Most of the co-operatives are specialised in food production and manufacturing. This increases the quantity, quality and food security in the country.
    • Facilitate the development of urban centers.
    • Encourages industrialisation: Co-operatives provide raw materials needed especially by agro-based industries.

    Activity 26

    1. Visit a nearby co-operative society and find out the products that they make.
       Ask them to tell you their objective for forming the co-operative society.
    2. What benefits do they enjoy and the challenges faced to manage the co-operative?

    Registering a business in Rwanda

    Activity 27

    Research on the process of business registration for a business familiar to you. Role play the process of registering that business organisation. This may be sole trade, partnership, limited liability companies or a co-operative.

    Rwanda has the shortest procedure and or fastest processes in the whole of East Africa and possibly the world to
    register and start a business.

    The steps followed to register a business in Rwanda
    You can register your business online or at the Office of the Registrar General which is a department within the Rwanda Development Board located in Kigali, the capital city.

    Registering with the company registry at RDB
    Rwandan businesses can be registered as sole proprietorship, a company or a foreign subsidiary/branch.

    A. Registering as a Sole proprietorship
    A sole proprietor is required to submit:
    • 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
    • Consent of the spouse in case their matrimonial regime is based on joint ownership
    • Name of the business enterprise and trade mark if applicable
    • Commercial activities to be carried out
    • The headquarters of the business enterprise, in case of bankruptcy, judgements rendered to the applicant by Rwandan courts or foreign courts
    • If applicable, trademarks deposited before the state, indicating the place and date of deposit and two passport photos
    B. Registering a Company
    The Companies Act recognises four types of companies that can be formed. In practice, only the first two are mainly used:
    1. Limited liability company A limited liability company is formed by physical or moral persons, limited by their shares;
        it requires a minimum initial share capital of Rwf 500,000 equivalent to USD 850. A limited liability company cannot
        have less than 2 shareholders or more than 50. Private companies cannot engage in the business of banking,
        insurance, finance and leasing. Investors wishing to participate in these sectors are required to set up public companies.
    2. Public limited company A public limited company is formed by physical or moral persons, limited by their shares.
        It requires a minimum initial share capital of a hundred million Rwandan francs (Rwf 100,000,000) equivalent to
        USD 170,000. A public limited company has no limitations on: the type of business in which it may engage in,
        the number of shareholders, and listing its shares on a stock exchange but shareholders cannot be less than seven.
    3. Limited partnership A partnership is formed by an association of two or more individuals who intend to do business
        together.  Although the individuals operate collectively under the name of a partnership, they remain individually liable
        for debts of the partnership. Their properties and not just the property of the partnership are accessible to their creditors
        in the event that the partnership defaults on its obligations.
    4. Commercial partnership Commercial partnership has two categories of partners. The first category of partners is
        essentially  comparable to that of a limited partner. The second category is an investor who does not actively participate
        in the affairs of a partnership. He or she is not liable for the debts of the partnership beyond the amount of his/her investment.

    Activity 28

    Visit the Rwanda Development Board (RDB) website and research on the requirement for registering the various legal businesses in Rwanda including domestic and foreign companies.

    Articles and Memorandum of Association
    It is a pre-requisite for companies to prepare Articles and Memorandum of Association and get them notarised by a Public Notary. Notary services are available at the One Stop Centre of the Rwanda Development Board (RDB) at the Ministry of Justice (MINIJUST) or and District in the country.
    The cost of notarising the Articles and Memorandum of Association is arrived at by applying the following formula
    (Rwf 800 x number of pages x number of copies + Rwf 2500)One copy is retained at the Notary’s Office,
    one at the Registrar General’s Office at RDB and one at the Office of the Official Gazette for publication.
    It takes 30 minutes for a Public Notary to notarise the Articles.

    Certificate of Incorporation
    A certificate of incorporation is obtained at the Company registry at RDB upon submitting an application letter addressed to the Registrar General, a receipt of registration fees payable at the National Bank of Rwanda and three copies of the articles and memorandum of association

    Establishing a  subsidiary/branch
    Foreign companies wishing to establish a branch or a subsidiary company in Rwanda apply to the Minister of Trade and Industry for authorisation to establish a branch and the Registrar General of RDB for registration in the registry of companies.

    They must present a board resolution of the company to invest in Rwanda, articles and memorandum of association of the parent company and certificate of incorporation.

    Cost and time
    There are two types of businesses, those that are regulated and need secondary licenses and those that require standard procedures.

    Those that require standard procedures pay fees ranging between Rwf 12,000 to Rwf 100,000 depending on the type of the business.

    The tariff is available at the company registry at RDB. It takes 1-2 days to incorporate a company.

    Procedure for Registration of a Non-Governmental Organisation (NGO)
    1. Local Non-Governmental OrganisationA local NGO is required to get an approval from a District where it plans to
        undertake its activities, provide its constitution as well as register with the Ministry of Local Government (MINALOC).
    2. International Non-Governmental Organisation (NGO)An INGO is registered by the Department of Immigration
        and Emigration.

      The applicant makes an application letter addressed to the Director General of Immigration and Emigration and attaches:
    • A detailed action plan
    • A memo indicating the source of funding of the INGO,
    • Its annual budget
    • Evidence of collaboration from the Districts where the INGO operates from
    • A recommendation letter from the line Ministry(ies)
    • Articles of the INGO
    • A memo linking the relationship between the INGO program with the Community Development Plan (CDP).
    • A correctly filled inventory form
    Registering with Rwanda Development Board
    RDB is the principal Government Agency responsible for facilitating investors to realise their investment projects in Rwanda.

    One Stop Centre
    RDB operates a One-Stop-Centre permitting foreign investors and local investors to obtain the core facilitation and services required to realise their investment projects.

    For purposes of investment registration, investors from the Common Market for Eastern and Southern Africa (COMESA) are offered National Treatment and their minimum capital investment is set at USD 100,000 while the minimum capital investment for other foreign investors is set at USD 250,000.

    This initiative saves the investors both time and money to acquire necessary permits and approvals to enable them to implement their projects expeditiously. Representatives from the Rwanda Revenue Authority (RRA), Department of Immigration and Emigration, Rwanda Environment Management Authority (REMA) and Ministry of Lands are already housed at RDB for this cause.

    Registration of trademarks and trade names

    Activity 29

    1. Form a team and research into the meaning of a trademark. Identify types of trademarks.
    2. Using examples of trademarks identified, each team should design a trademark on a manila paper for a proposed
        product.  Each team is to pin its trademark on the wall.

    Trademarks and trade names are registered upon submitting an application letter to the Registrar General of RDB.
     A reproduction of the mark in 4 specimens not exceeding 8cm of height and 10cm of width and an application fee of Rwf 18,000 regardless of the classes.A trademark is used to distinguish the goods and services of one trader from those of another.
    A trademark is a right that is granted for a letter, number, word, phrase, sound, smell, shape, logo, picture and/or aspect of packaging.

    Registering with the Rwanda Revenue Authority

    Activity 30

    Research into the meaning of a tax identification number and how it is acquired. Give reasons why traders should not do business without registering with Rwanda Revenue Authority.
    1. Tax Identification Number (TIN)Within seven days of incorporation of a business, companies and individuals are
         required to register with the RRA to acquire a TIN. It takes 30 minutes to register and obtain a TIN.
    2. Value Added TaxAny company or individual that engages in business activities exceeding a turnover of Rwf 20,000,000
         in a fiscal year or Rwf 5,000,000 in the preceding calendar quarter is required by law to register for VAT with RRA within
         a period of seven days following the end of the year or from the end of the quarter mentioned above.However any person/       company who/which is not required to register for VAT by law may voluntarily register for it.

    Applying for an Investment Certificate
                                   Certificate of investment

    To apply for an investment certificate at RDB; attach a business plan, notarised copy of Memorandum and Articles of Association and a copy of the certificate of incorporation.The Agency is required by law to issue an investment license within 10 working days.The Agency however, has made a commitment to its clients to issue the certificate in 3 working days.

    The investor is required to submit a letter containing:
    • The name and address of the proposed business enterprise and its legal form
    • The date of commencement of its trade activities
    • The nature of the proposed business activity and level of planned capital investment
    • The estimated number of persons to be employed and categories of jobs to be created
    • The locally sourced inputs to be used by the project
    • The prospects of transfer of new technology
    • The nature and volume of waste that shall be generated by the enterprise’s operations
    • The proposed methods of its management( Environmental Impact Assessment)
    • The nature of support and facilitation which the investor is seeking from RDB
    Accompanying the business application letter, the investor has to attach a business plan/feasibility study detailing.

    Accompanying the business application letter, the investor has to attach a business plan/feasibility study detailing:
    • The executive summary of the project
    • The profile of the project promoter(s)
    • The project background
    • Market study or market analysis
    • Investment plan for a five year period, loan/equity financing
    • Projected income and expenditure statement for 5 years
    • Projected balance sheet for a period of five years
    • Projected cash flow statement for a period of 5 years
    • Payback period, net present value (NPV) and internal rate of return (IRR)
    • Loan amortisation schedule for the bank loan( if any)
    • Project implementation schedule/plan and notes on the assumption made in the business plan.
    Once the application for investment registration is approved, the investor is required to pay USD 500.

    Free Zone Operation
    RDB has been mandated to organise and manage free zones in Rwanda. However, controlling the daily operations of the free zone is carried out by private companies/individuals in accordance with specific conditions agreed upon with RDB.

    A free zone is a designated and gazetted area where enterprises import raw materials, machinery, equipment or components duty free. Enterprises located in the free zone are exempt from payment of corporate tax and all other taxes payable.

    For an enterprise to qualify to operate in the free zone:
    • It has to be a manufacturing company that exports at least 80% of its production
    • A merchandise/trade enterprise that re-exports at least 80% of its goods
    • A professional financial and technical investment enterprise engaged in export of services.
    Criteria of approving an enterprise to operate in the Free Zone:
    • A company has to create jobs that require specific and high quality technical know how
    • Infuse substantial new investments into productive activities
    • Transfer modern technology and other know-how
    • Diversify and expand investments and exports
    • Utilize locally produced raw materials
    • Create linkages within the economy and carry out an environmental impact assessment
    International company with headquarters in Rwanda
    An international company with headquarter operations in Rwanda is a separate legal entity within a company, whose main task and responsibility is to coordinate activities for a number of subsidiaries/branches/distributors/clients across the globe.
    Typical activities that are co-ordinated are general management, planning and coordination, procurement of raw materials, components or finished products, technical support and maintenance, market control and sales promotion, data information management, treasury management, corporate and financial advisory, research and development, training and personnel management.

    Furthermore, it acts as the interface between corporate headquarters and the subsidiaries/distributors/clients all over the world. International company with headquarter operations is of the stand-alone type, meaning they are not incorporated with other operational activities like manufacturing or logistics.Companies with the status of headquarters operations in Rwanda enjoy the same benefits as companies operating in the free zone.

    Acquiring status of an international company with headquarters in Rwanda
    For a company to qualify for the status of an international company with headquarters in Rwanda, it has to invest at least USD 2,000,000 in both moveable and immovable assets, provide employment and training to Rwandans, make international financial transactions of USD 5,000,000 a year through a Rwandan commercial bank, set up an effective and fixed place of business, spend at least USD 1,000,000 per year in Rwanda, perform in the country a minimum of three of the following services:

    • General management
    • Planning and coordination
    • Procurement of raw materials, components or finished products
    • Technical support and maintenance
    • Market control and sales promotion
    • Data information management
    • Treasury management
    • Corporate and financial advisory
    • Research and development
    • Training and personnel management
    Registering a construction project
    For purposes of investment registration, an investor is required to provide a business plan, authorisation to build granted by the District, bills of quantities certified by the District, perspectives of the building and a deed Plan.

    Eligibility for registration
    The construction project has to be worth one million and eight hundred thousand USD (1,800,000), completed within a period of twenty four months. Use construction materials available in the country, contract with companies that pay taxes and employ Rwandans.
    Rationally use the allocated land and carry out an Environmental Impact Assessment (EIA).

    Benefits of registering a business
    Activity 31
    Discuss the importance of registering a business and also suggest possible dangers of operating a business that is not registered.
    1. It enables a business to acquire a trade license and permit to commence its activities.
    2. After registration, a business will be entitled to protection by the country’s business legal framework.
    3. It helps a business to protect its brand. That means on registration, a business’ brand and trademark are patented.
    4. It safeguards the name of the business.

    Consequences of not registering the business
    • Non compliance fine
    • The government may close down such a business
    • The business cannot issue official invoices
    • The business may not be in position to access funds from financial institutions for investment
    Unit summary
    • Laws and the business: These are laws that protect consumer, sellers, the environment and the business themselves.
    • Importance of business laws: Protect the environment; prevent production and distribution of harmful products, protecting hygiene in public places.
    • Laws related to business: Trading license act, land act, foods and drugs law, laws of contracts, commercial law.
    • Legal institutions related to businesses: RDB, RURA, Police, RBS.
    • Legal forms of businessownership: Sole proprietorship, Partnership, Joint -stock, Parastatal companies, Co-operative.
    • Sole proprietorship: Business done by a single person.
    • Partnership: Business owned by more than one person.
    • Partnership deed: It is a written agreement stating the terms and conditions of a partnership.
    • Co-operative: A group of people who join efforts in the production or marketing of goods and services.
    • Parastatal: A government enterprises.
    • Joint-stock: These are businesses co-owned between private individuals and government.
    • Benefits of registering a business: To operate legally, to access fund from banks, avoid penalties.
    Unit assessment
    1. a) Differentiate between law and business laws.
        b) Using case study(ies) of your school and business men/women in your locality, do the following.
            (i) Identify the various laws governing your school area.
           (ii) Identify the various business laws governing business activities.
    2. a) Suggest various problems that may result from running the different activities in the country without laws set.
        b) Discuss the importance of setting business laws.
    3. a) Identify the various legal institutions related to business in Rwanda.
        b) discuss the various forms of business ownership you know.
    4. In each of the following forms of business ownership, state five advantages and disadvantages of each and
        give examples basing on Rwanda experience.
       a) Sole trade business (proprietorship)
       b) Partnership business
       c) Joint stock companies (public and private limited and unlimited companies)
       d) Co-operative business
    5. Discuss the various procedures followed in registering the different forms of business ownership mentioned in
        number (4) above.
       a) Outline the procedure of registering the following in Rwanda today
           (i) A domestic company.
           (ii) A foreign company.
    6. a) Discuss the benefits of registering a business.
        b) Show the various consequences that result from refusing to register a business.

  • Unit 5: Role of Standards in Business

    My goals

    By the end of this unit, I will be able to:
    • Explain the meaning and necessity of standards in business.
    • Describe the process of standardisation.
    • Discuss the importance of standardisation to government, entrepreneur in the process of exercising their rights and obligations.

    Activity 1

    1. Imagine you have bought a flask in a supermarket. After less than a week of using it, it no longer keeps porridge hot.
        What can you do about it? Should the supermarket give you another flask?
    2. What laws can be put in place to make sure this kind of thing does not happen?

    What is a standard?

    It refers to a document established by agreement and approved by a recognised body that gives rules, guidelines, or characteristics of activities or their results, aimed at producing a common product.

    Substandard products: These are products which do not meet the customers’ needs or purpose of their consumption.

    There are widely accepted, agreed upon or established means of determining what something should be.

    Brief history of standards

    Activity 2

    Form teams and research on the origin of standards, and how it has evolved over time. Each team will present its research findings to the entire class.

    The earliest standards were made to enforce honesty among people. Human society has exchanged goods and services on the basis of physical measurement. Unfair dealings and incorrect measurements were resented and systems were developed to enforce honesty. The earliest written standards were for weights. Egyptians developed a standard of measurement called Egyptian royal cubit some 5000 years ago. The basis of this standard was Pharaoh’s forearm. On a block of black granite approximately 20.63 inches long 6-palms and 24-finger widths were inscribed. It formed the basic measurement standard for pyramids and other great monuments.

    Shih Huang-Ti, the founder of the Chinese Empire, under whom the Great Wall was built, was designed for Chinese unity. He enforced one law, one weight, and one measure to rule out discord and confusion between petty states. His wall stood but his standards for weights and length did not. The standards proposed by the Chinese Emperor was used only for the construction of the Great Wall. The total length of this wall is 10,000 li (a Chinese unit of length) approximately 5,000 Kilometers. The unit li is no longer used.

    Napoleon Wars were among the first set of wars that tried to use standards to competitive advantage. After conquering most of the Western Europe, he noted from captured weapons the incompatibility of ordinance from various countries. Cannon balls were not of the same size, weight systems and calibers were unique to each captured army. Napoleon had to solve this problem through the science of measurement called metrology. The system that developed to assist the Emperor was the Le System International d’Unites, or the metric system. He imposed this system on all the conquered and allied nations. This metric system was eventually adopted by all of Europe and exported to all parts of world in the era of colonialism.

    Activity 3

    1. From the passage, why were the earliset standards enforced?
    2. The earliest measurement were for weights called Egyptian royal cubits 5000 years ago. In real life discuss how
         different   forms of measurement are used.
    3. Analyse the importance of using measurements in daily life.
    4. Which science of measurement did Napoleon use to solve the challenge he faced?5. Is this system still used in Rwanda
         and in the world today?

    Activity 4

    1. Take for example the garments that we wear such as shirts, shoes, belts even other things we use like pocket wallets,      
         papers, books, pens, padlocks and keys, cups, plates etc. All these items are of various weights, shapes and they
         are used to serve different purposes.
    2. In your opinion, why are standards necessary?
    3. How are they enforced?
    4. What can a consumer do in case he/she has a complaint about the standard of product or service?
    5. What can an entrepreneur do to comply and minimise complaints about his/ her product quality?

    Importance of standards to government

    Activity 5

    In groups analyse the importance of standards to government.
    To ensure that goods and services originating from or traded in Rwanda are designed, manufactured and supplied in a manner that matches the needs of the entire society, standards guidelines are put in place.

    • It helps to meet the requirements of the purchasers and the customers as well as those of the regulating authorities in the local, regional and international markets
    • It strengthens and harmonises national metrology systems that ensures the provision of a reliable and accurate measurements
    • It develops a culture for the application of quality management systems in public and private institutions
    • It facilitates the access of Rwanda goods and services to external markets
    • It leads to better public health, consumer and environment protection, economic growth, poverty reduction and better quality of life

    Importance of standardisation to an industry

    • Standardisation leads to lower costs of production by reducing redundancy, minimising errors and time to market
    • Compliance to standards by an industry helps its products, services and personnel to cross borders i.e they can market their goods and services in other countries
    • Industries that participate in standard development, improve their efficiency, maintain market access and remain competitive
    • Customers want products and services that are of high quality, reliable, consistent and safe. Hence reliance on quality earns customer loyalty to the industry

    Activity 6

    In groups learners research and present a case in support of standardisation to an industry and what would result in case an industry does not adhere to standard.

    Importance of standards to consumers

    Activity 7

    Isimbi went to the market and bought a new cloth that she wished to put on at the party of her brother’s graduation; but when she washed it for the first time it lost its colour and she really felt betrayed by the seller because the cloth was no longer good for the party. Mugeni also bought a pair of open shoes when she was going to visit Mukambwe, not very far from her home, her new shoes got torn and she had to pay money to someone to repair her shoes before continuing with the journey.

    From the above text;
    1. What kind of inconvenience did Isimbi and Mugeni experience?
    2. What caused this problem?
    3. Identify the dangers that such products can cause to a consumer. Give examples.

    Consumers expect that services and products produced will be of consistent quality, durability and ease of use.

    International standards are voluntary rules and guidelines that help to ensure:
    • Safer, healthier, more environmentally sound products and services
    • Products with improved quality and reliability
    • Better operational compatibility between products and the delivery of services
    • Improved choice and access to goods and services
    • Better product or service information

    Importance of standards to the society

    Activity 8

    In Rwanda, the government came up with a road map to development called Vision 2020. All Rwandans are very supportive and happy about this plan. It is intended to transform Rwanda into a middle income country. Roads, schools, hospital, power generation plants are being constructed, there is free education for all children, free laptop per child, bye- bye Nyakasti and
    Gira Nka projects have been put in place.

    1. How can the use of poor construction materials, building without the use of proper plans, buying of fake laptops for
        children and teachers using poor teaching methodology affect the fulfilment of Vision 2020 in Rwanda?
    2. Identify possible accidents that may happen because of using substandard products and services.

    Standardisation of infrastructure is a basic condition for the success of economic policies; aimed at achieving sustainable development in society. Creating such infrastructure in society is essential for improving productivity, market competitiveness, and export capability.

    • Standards protect the natural environment from being contaminated by the activities of some entrepreneurs for example industrialisation, use of chemicals in agriculture etc.
    • Enhanced product quality and reliability at a reasonable price.
    • Improved health, safety and environmental protection, and reduction of wastes in society.
    • Greater compatibility and interoperability of goods and services in society.
    • Simplification for improved usability.
    • Reduction in the number of models, and thus reduction in costs.
    • Increased distribution efficiency, and ease of maintenance.
    • Standards provide confidence in products and services to the users.

    The process of standardisation in Rwanda

    Activity 9

    Using a visual aid, listen and watch clips on the standardisation process. Reflect on how standards are developed internationally, regionally and nationally.

    Standardisation is the process of developing and implementing technical specifications. The process of standardisation generally comprises of seven major phases:
    • Identification of need: A user identifies a need.
    • Collective programming: This stage reflects on the needs identified and the priorities defined by all partners.
    • Drawing up of a draft standard: The interested parties, represented by producers, distributors, users, consumers, administrations, etc. meet and form standardisation committees and a draft standard is prepared.
    • Consensus: In this phase, the views of all interests are taken into account; manufacturers, vendors, consumer groups, testing laboratories, government, engineering professionals, and research organisations.
    • Validation: This is done in the form of a public enquiry, involving all the economic partners in order to be certain that the draft standard does not give rise to any major objections.
    • Approval: This phase is for the approval of the text for publication as a standard.
    • Review: The application of all standards forms the subject of a regular assessment for its relevance by the standardising body.This makes it possible to detect the time a standard must be adapted to new needs.

    Activity 10

    Form groups to research into the process of standardisation in Rwanda. Each group will presents its research findings to the class.

    Role of standards

    • Standards serve as reference documents that are used in contracts or international trade; on which commercial transactions are based.
    • They represent a level of technical expertise and technology, that are used by industrialists as the indisputable definitions that simplify and clarify contractual relations between economic partners.
    • A standard is a document that is used by jurisprudence to settle disputes. For business partners it serves as:
                 ·A factor for rationalisation of production by defining the requirements of technical characteristics, customer
                   satisfaction,  and manufacturing methods validation from multiple viewpoints.         
                 . A factor for clarification of transactions by clearly defining the requirements and reducing uncertainties that
                   may have different practical values to different parties in transaction.
                 ·A factor for innovation and developing products by transferal of knowledge.
                 ·A factor for transferring new technologies by facilitating and accelerating the transferal and use of technologies.
                 ·A factor for strategic decision making for companies. The participation in standardisation activity assists in
                  identifying  solutions and adapting them by increasing the competence of companies.

    Need for International Standardisation

    Activity 11

    In groups analyse the sizes of products used in daily life; shoes, balls, phones, chargers, batteries, time, etc.
    Discuss the need for a common standard for products in the world.

    Consider the example of internationally standardised freight containers; this standard has enabled traders to use all means of a transport, road, air and sea transport. The standardised documents accompanying the cargo identify sensitive or dangerous cargoes and makes international trade cheaper, faster, and safer.

    The standards for similar technologies in different parts of the world contribute to the elimination of technical barriers to trade. For example banking cards, credit cards, and telephone cards, paper sizes (ISO 216), the same symbols for automobile controls in cars all over the world are some other examples of internationally accepted standards.

    International standardisation eliminates ambiguity in business transactions. Information processing and communication, packaging, textiles, distribution of goods, energy production and utilisation, ship building, banking and financial services are some of the diverse fields for which there are well-established international standardisation.

    Activity 12

    Visit the Rwanda Standards Board website to see how standards work; get a list of standard principles and find out where they are applicable.

    Levels of standardisation

    There are 3 levels of standardisation:
    1. International standardisation
        International standards are developed by international standards organisation.
        For example, the International Organisation  for Standardisation. This is one way of overcoming technical barriers
       in  international commerce that is caused by differences between technical regulations and standards developed 
       independently by each nation.
    For example;
    (i) International Electro-technical Commission (IEC)
    (ii) International Organisation for Standardisation (ISO)

    How international standards affect consumers
    Consumers expect that services and products will be consistent in quality, durability and ease of use.

    International standards are voluntary rules and guidelines that help to ensure:
    a) Safer, healthier, more environmentally sound products and services
    b) Products with improved quality and reliability
    c) Better operational compatibility between products and greater consistency in the delivery of services
    d) Improved choice and access to goods and services
    e) Better product or service information

    2. Regional standardisation
       This enforces standards of services, goods, infrastructure in a given region. The regional standard bodies deal with
        many  other matters that can directly or indirectly promote trade and commerce in accordance with the progress and
        prosperity of a given region.

    Importance of standardisation

    • To promote regional peace and stability through abinding respect for justice and the rule of law in the relationship between countries in the region
    • To accelerate the economic growth, social progress and cultural development in the region
    3. National standardisation
        National standards bodies are established by the national government of a given country. For example in Rwanda,
        the national standard body is responsible to manage all standard bodies in the country. These bodies make sure that
        the activities performed by businesses reflect and confirm to standards. Goods and services produced in the country
        must meet the set standards.

    Examples of national standard bodies in Rwanda:
    (i) Rwanda Bureau of Standards
    (ii) Rwanda Environmental Management Authority
    (iii) Ministry of Health
    (iv) Rwanda Development Board
    (v) Rwanda National Police
    (vi) Ministry of Agriculture and Animal Resources

    Types of standards

    1. Basic standards
        Are essential facts or principles that have to be maintained in a product or in service provision.
    2. Product standard
       These are established requirements or qualities for a product or related group of products to ensure
        that it will service its purpose effectively.Product standards are established methods of testing, grading and
         making a product.

    3. Terminology standard
         Are standards concerned with words to use in the research and development process. This demands that representatives
         of an industry or parties to a transaction use a common, clearly understood language.
    4. Test and measurement standards
         This defines the methods to be used to assess/test the performance or other characteristics of a product. It is a process
          of measuring the properties or performance of products.
    5. Service standards
        These are established requirements to be met in order to achieve the designated purpose effectively; “such as for repairing
         a car”.
    6. Process standards
         Are standards that specify requirements to be met by a process. This can be a process of making a product.
    7. Code of practice standards
        These are written guidelines issued by an official body or professional association to its members to help them comply
         with its ethical practice.                                      
    8. Ethical standards
        These are moral principles that if respected, promote values such as trust, good behaviour, fairness and kindness.
    9. Performance standards
        Standards on how a product is supposed to function. For example; “a performance standard on the speed of a Toyota
        Corona car per hour, along with a test method to determine if the car meets the requirements.”
    10. Design standards
          These define characteristics or how the product is to be built.“The specification that a bus must wear
          a given size of tyres is a design standard”. “The specification that a television set of a given size must project images
          of a given size is a design standard”.
    11. Interface standards
          These are standards concerned with compatibility; such as the point of connection between a camera and a laptop
           terminal. A USB fitting in the terminal of a camera and then the end fits in the laptop.

    Activity 13

    Teams discuss what may make a product substandard. Give examples. Each team will be given time to present its work to the entire class.

    The institutions involved in inspection activities in different fields of standardisation in Rwanda include the following;

    Activity 14

    Research about institutions involved in different standardisation activities in Rwanda and their responsibilities.

    1. The Rwanda Standards Board - RSB
         Rwanda Standards Board (RSB) is a public institution established by Rwanda government legislation No 30 of
         29/07/2013  detailing the responsibilities, organisation and functioning of the Rwanda Standards Board to undertake
         all activities pertaining to the development of standards, conformity assessment and metrology services in the country.

         It is the only body with powers to define and prossess national standards. Public services and public or private firms
         must present their standards to RBS for adoption at national level. RSB is governed by a board of directors composed
         of major stakeholders from government, industry, academic institutions, and consumer associations.
    2. The agencies of the Ministry of Agriculture and Animal Resources
         Rwanda Animal Resources Development Authority (RARDA), Rwanda Agricultural Development Authority (RADA),
         Rwanda Horticulture Development Authority (RHODA). These agencies carry out plant protection and animal health  
          inspection as well as control agro chemicals.
    3. The Ministry of Health
        The Ministry of Health inspects food supplements, food hygiene, medical products etc, to ensure that they meet the
         required standards.
    4. The Ministry of Infrastructure (MININFRA) and Local Government Authorities
         The Ministry and Local Government Authorities inspect buildings, roads, bridges and other civil engineering structures.
    5. Rwanda National Police (RNP)
        Rwanda National Police carries out inspection of motor vehicles for road worthiness.
    6. Rwanda Development Board (RDB)
        Rwanda Development Board ensures that established businesses meet their specifications as specified by the board.
    7. Rwanda Environmental Management Authority (REMA)
        REMA inspects projects, activities and products that may cause environmental degradation. Among products that
        are prohibited are products that can pollute the environment for example chemicals and gases.

    Activity 15

    Form teams; each team should choose an institution involved in inspection of standards in Rwanda. Clearly explain its role in standards assurance in Rwanda. Use activity 14 to do activity 15.

    Unit summary

    • Meaning of standards in business: It is a document established by government that gives rules, guidelines, or characteristics of activities aimed at producing a common product.
    • Types of standards: Basic, product, terminology, test and measurement, service code of practice, ethical, interface and design.
    • Importance of standards: Ensure that goods on market match the needs of the society, it strengthens the national metrology, it enables a country to access the international market.
    • The process of standardisation in Rwanda: Identification of needs, collective programming, drawing up of draft standard, consensus, validation, approval and review.
    • Levels of standardisation: International, Regional and National
    • Institutions involved in standardisation activities: RBS, Ministry of Agriculture, Ministry of Health, Ministry of Infrastructure and Local Government
    Unit assessment
    1. a) Explain the meaning of “standards in business”.
        b) List any five necessities for standards in business.
    2. List the various characteristics of each of the following giving examples from Rwanda.
        a) Standard products .
        b) Substandard products.
    3. Discuss the various importance of standards to the following stakeholders in Rwanda in the process of exercising
        their rights and obligations.
        a) Government
        b) Consumers.
        c) Industry.
        d) Society.
    4. Discuss the process of standardisation in Rwanda.

  • Unit 6 : Market Research

    My goals

    By the end of this unit, I will be able to:
    • Explain the meaning of market, marketing and marketing research.
    • Explain the 4 components of marketing mix.
    • Identify various marketing strategies that can be used in commercial activities.
    • Explain the importance of market research in commercial activities.

    Identify tools of marketing research

    Activity 1

    Imagine a kitchen garden (Akarima Kigikoni) where you grow onions, carrots and cabbages; produced more than what you could eat at your home. Suggest how you would get buyers to buy the extra carrots, onions and cabbages.

    A market is an arrangement through which buyers and sellers come into contact to negotiate an exchange for goods and services.
    A market may also refer to all individuals, institutions and other enterprise that buy goods or services of a particular kind. For example from everyone in an area or country who deals in craft goods.

    Real or actual market for an enterprise/business refers to individuals, companies and institutions willing and able to buy the products of an enterprise at an ongoing price.

    Marketing: The action of promoting and selling products including market research and advertising.

    Potential market

    Activity 2

    1. You are a crafts person. You make mats and baskets from local materials. You do not have your own shop.
         Where could you sell your goods, and as a seller come into contact with possible buyers?
    2. If you want to find out the price to sell your goods at, you need to find out what prices all the other people in
        the area are selling your kinds of goods at. There may be people who would like your goods but do not come to
        the place you are selling them. How could you increase the sale of your mats and baskets?

    A potential market refers to enterprises, or individuals that are able but not yet willing to buy the product.
    They can be turned into real market in future for instance through advertising.

    Factors used to determine the potential market of a business

    • Number of substitute products: Substitutes are products that serve the same purpose and satisfy the same needs e.g rice and macarone, cassava and sweet potatoes. A business with no close substitute has greater market potential than one with many substitutes. If you are the only person making a particular kind of baskets, you are likely to sell them faster.
    • Price: The customers’ ability to buy a product of a business is very much affected by the price of the product. The market potential for cheap goods is very high because people are able to afford them.
    • Income level: Market potential for a product depends on the target market’s ability to purchase a product. This depends on incomes. The higher the incomes, the higher the purchasing power of the target market and market potential for the business and vice-versa.
    • Business location: A business which is strategically located in relation to its target market will have a high market potential than one which is not accessible by the market.
    • Size of the population and other businesses present in the area: People and businesses constitute consumers and the higher their number is the greater the business potential.
    • Competition in the market: Businesses that produce and sell similar products to the same customers share and compete for customers. The higher the level of competition, the lower the market potential and vice versa.
    • Demand: This is the amount of business products that the consumers are willing and able to buy at a certain price per period of time. The higher the demand, the higher the potential market and vice-versa.

    Market research

    Activity 3

    Move out of your school and visit nearby businesses, petrol stations, restaurants, bus parks, stadiums, groceries, etc. In groups of four, identify the potential customers for a restaurant, a stadium, groceries or any other economic activity in your surrounding.

    Market research refers to the process of collecting and analysing information or data related to the demand of a good or service in a particular market. Market research gathers information about consumers, competitors, distributors, within a firm’s target market.
    In order to obtain the necessary information; entrepreneurs can use the following methods:
    1. Statistical data The entrepreneur may approach a research organisation that has statistical information about a product
        or a related situation in the market that may be of interest to the entrepreneur.
       Statistics may be obtained from the following:
       a) Specialist Agencies
       b) University Research Centers
       c) Consumer Associations
       d) Advisory Board of Trade, like Rwanda Development Board (RDB), Private Sector Foundation (PSF) etc.
       e) Business associations making similar products etc.
    2. Questionnaire or Contact method
    3. Interviews (asking questions). This involves a person asking questions
    4. Observation (watching what goes about)
    5. Postal survey
    6. Consumer panels
    7. Test marketing

    Activity 4

    In relation to activity 3, give reason why you may need to gather information from customers. What kind of information would you like to get? How would you get it? Discuss your findings in groups.The need for market research

    Activity 5

    Mr. Kanamugire is a pineapple farmer. Every month he can produce 2000 pineapples on his farm. But, because his farm is very far away from town, he always fails to sell his pineapples. This makes him lose money because pineapples cannot be kept for a long period of time. Advise Mr. Kanamugire so that he can find market for his pineapples.

    1. Market research helps to reduce the risks involved with a new product because data obtained is used to assess with
        a  degree of accuracy the likely chances of the new product achieving satisfactory sales.
    2. Market research helps a firm to improve their knowledge of consumers and competitors so that changing trends can
        be  identified.
    3. Market research helps a business to predict its sales and make appropriate plans. If sales are expected to increase, 
        production will be increased and reduced if sales are expected to reduce.
    4. To monitor the effectiveness of business activities. For example a company that makes cooking oil may want to know the 
        number of homes that use their product.
    5. Market research is used to gather data which can be used as a basis for market decision making.
    6. Market research is used to assess favourable designs, styles and packaging that consumers rate most highly.
    7. It helps firms to identify competitors.8. Market research data provides explanations for product success or failure in
        the market.

    Components of marketing

    Activity 6

    In groups, list down examples of items that you always use at home. Where do you get these items? How do you get them? Can you tell the class about the most interesting products that you always enjoy buying? How much do you pay for them? How do you know where to find them?

    A marketing mix is often referred to as the “4p’s”, i.e. Product, Place, Price and Promotion. It is a term used to describe all the activities which go into marketing a product.

    To meet customers’ needs, a business must develop products to satisfy them, charge the right price, get the goods to the right place and it must make the existence of the product known through promotion.


    A product is something that is offered to a market. A product can be a good or a service. It can be a good such as a table or it can be a service for example insurance.

    The price

    Price is the amount paid by a consumer for a product. The fixing of a price level for a commodity is a vital component of a marketing mix. Price has a great impact on the consumer demand for a product.If price is set too low then the consumers may lose confidence in the quality of the product. If the price is too high, many consumers will not be able to afford the product.

    Objectives of price

    • To target a market
    • To maximise short term profits
    • To maximise long term profits
    • To stimulate growth of the business
    • To target returns on investment
    • To maintain price leadership
    • To discourage new entrants

    Factors affecting pricing decision

    • Government influence: In some instances, the government may set prices, mainly for essential goods.
    • Level of competition: Where there are many producers of a similar product, the price set will be in line with the competitors’ prices in order to compete with them favourably.
    • Demographic factors: The decision to set a price of a product also depends on the number of potential buyers, location of customers, their economic strength and the expected consumption rate of buyers.
    • Costs incurred: If costs incurred during the production process are high, then the final price will also be relatively high.

    Methods of Price determination in the market

    Activity 7

    When buyers go to the market to buy products, each product they buy costs a different amount of money.
    1. Why are different products sold at different prices?
    2. How is a price of a product determined?

    1. Haggling (Bargaining): This is where a buyer negotiates with a seller for a discount below the actual sale
        price of a commodity.
    2. Auctioning (Bidding): This is where a seller (auctioneer) offers goods for sale and requests for bids from buyers.
        The highest bidder takes the commodity. This method is common in fundraising especially in churches.
    3. Fixing by treaties (Agreements): This is where buyers and sellers come to an agreement to fix the price of the commodity.
    4. Government determination (legislation): This is where the government fixes the price of a commodity.
    5. Interaction of the forces of demand and supply: This is where the price in the market is determined by the forces
        of demand and supply. If quantity demanded is higher than quantity supplied, price will rise and vice-versa.
    6. Resale price or recommended retail price: This is where the producer (manufacturer) fixes the price of a commodity
        at which sellers (retailers) have to sell to the final consumers. The price is usually written on the commodity.
        For example, newspapers, airtime cards, stamps, etc.


    Activity 8

    Soda, juice, milk and other drinks are produced by Bralirwa company in Gisenyi, Inyange company in Masaka and other companies located in different parts of Rwanda. How do products reach the consumers from where they are manufactured? Who distributes them and why? How best can consumers get these products without delay?

    This shows how products move from the manufacturer to the final consumer. It refers to the channel of distribution that is used. The distribution process includes: manufacturers, wholesalers, service providers, retailers, marketing specialists and customers.

    Middlemen: The term middlemen is used to refer to wholesalers, retailers that are intermediaries between manufacturers
                          or service providers and their customers.

    Types of marketing intermediaries

    1. Middlepersons: Refers to an independent business concern that operates as a line between producers and consumers
        or industry and consumers.
    2. Agents: These are wholesalers/retailers who do not own the goods they sell. Agents normally specialise by customer type
       or by product or by product line.
    3. Wholesaler: These are merchant establishments that engage in bulk buying, storing and physically handling the goods
        and sales of goods to retailers.
    4. Merchant middlemen: These engage in the buying of goods from the wholesalers and selling them to final consumers.
    5. Brokers: Are people who do not buy goods themselves but arrange deals between buyers and sellers.


    Activity 9

    Form teams, each team should choose a product to promote. Role-play to demonstrate all possible forms of promotion including: advertising, personal selling, after sales service and sales promotion.

    This involves ways of attracting customers to buy products either for the first time or to buy more of them.

    Forms of promotion

    There are several forms of promotions that can be used by a business. They include the following among others:
    1. Advertising
        This is the process of informing the public about the existence of goods or services through the use of the media
        such as: newspapers, radios, television, journals etc.
        Advertising can either be informative; that is the emphasis of advertising is to give full information about the product or
        it can be persuasive that is where emphasis is put on convincing customers that they really need the product and they
        have to buy it.
    2. After sales services
        This is a system of product promotion where dealers in certain products arrange to offer maintenance services
        to customers who buy their products. These services may include:

    • Repairing and maintaining the product at low cost.
    • Providing transport, installation and testing of a product to ensure it is operating as expected.
    • Guaranteeing the availability of spare parts for the product.
    • Inspecting and checking the product at regular intervals to detect and repair defects either free of charge or at special rates.
    • Providing product warranty so that if it breaks down due to a manufacturing defect within the warranty period, the seller replaces or repairs it.

    3. Sales promotion

    Activity 10

    Brainstorm the various promotion activities that you hear on radio, watch on television, internet, or see physically in the community where you come from. Role play the promotion strategies of a new telephone company (Airtel or Tigo).

    This refers to the application of various techniques to attract customers and increase sales.

    They include the following:
    • Giving discounts or price reductions
    • Free gifts for purchase of a product
    • Self-service, where customers serve themselves
    • Delivering a product to customers’ homes
    • Use of fantastic music
    • Attractive display of products
    • Answering questions about the product and demonstrating the usefullness of the product
    4. Public relations
        This is a deliberate strategy used by enterprises to keep the public aware of its trading and other activities.
        It is aimed at promoting the good image of a business and its products through activities like sponsoring football
       matches, making charity donations to the needy etc.5. Personal selling

    Activity 11

    Use products such as biscuits, sweets, avocadoes, oranges, bananas, mangoes etc, to role play personnel selling. Form groups, each group should have a different product to sell to other groups.

    This is a method of selling products through personal interactions between sales persons and consumers. It involves direct
    face to face communication between sellers and potential buyers.
    To make an effective sale, the sales person should:
    • Gain the attention of the customer.
    • Arouse interest of the customer for the product.
    • Influence and convince the consumer to act i.e., actually buy the product.
    Simple summary of a marketing mix

    Importance of 4ps

    1. Offering
        Part of marketing is conveying to customers what you have to offer and why it is different and better than alternatives.
        The product element is most obvious in the offering, since your product is what people buy. Where you offer it, whether
        in-store or online, is important, making the distribution element a factor. The price point is part of the overall offering,
        because it affects your product’s value.
    2. The Target
        When you market, you also have to strategise about who to target with your messages. Your primary customer
        group    becomes the target customers of your marketing campaign. Your product and price offer some direction
        in identifying the right audience. For instance, cutting-edge mobile technology ads often are targeted to young
        consumers.  Identifying the media used by these customers is also important; which brings the “promotion” P into play.
    3. Message Delivery
        Tangibly, the promotion P addresses the actual process of creating and distributing messages about
        your brand and products. Under the promotion umbrella, you have to decide what messages and formats to use to
        persuade your target customers to buy. Humour, sexuality, fear and anxiety are all used to present emotional appeals
        in marketing. Selecting the right media within television, radio, newspapers,magazines, the Internet, billboards and
        other support media is another critical part of successful promotion.
    4. Value Creation
        In a general sense, the marketing mix allows you to understand how to build and sell value to your
        customers. Ultimately, customers buy what they perceive is the best value for their money in a purchase
        situation.  Implementing marketing campaigns that show off great products at fair prices gives you an opportunity
        to succeed. Finding affordable marketing options also helps you get better return on your investment from marketing.
    5. Ensures we get our goods and services to our customers effectively and efficiently
    6. Builds and maintains brand value and awareness
    7. Delivers profitable growth
    8. Builds customer value
    9. Enhances shareholder value
    10. Companies that focus on customers needs and deliver great customer experience are more successful than those
          that do not.

    Marketing strategies

    Activity 12

    Consumers do not buy what you sell. They buy what has value to them. We are exposed to hundreds of marketing massages every day. We do not respond to all these messages but we select the most relevant.
    1. Why does the marketing strategy matter?
    2. Identify some marketing strategies commonly used by business people in Rwanda.

    These are techniques used by companies to increase and achieve advantage in the market over other competitors.

    1. Sports marketing: This is when businesses sponsor games and sports; they may have athletes, footballers, and
         boxers wearing their business logos on their uniform. For example; Bralirwa sponsors Gumaguma super star event
          in Rwanda.
    2. Cause marketing: This is a way of developing brand loyalty by sponsoring a charity. For example paying fees or
        supplying uniforms for a charity marathon, donating to a school and hospital to promote a business. It is an effective
        way of introducing a new product into the market place.
    3. Selecting customers to serve: This involves identifying the needs of each customer and determining the amount
         and type of communication for each. New customers need to be welcomed and educated about the range of products
         and old customers need to be appreciated.
    4. Target marketing: This is the selection of potential customers to whom a business wishes to sell products or services
         based upon the market’s diversity, maturity, the level of competition and the volume of sales expected.
    5. Positioning marketing: This is a marketing concept that outlines what a business should do to market its products.
       The marketing department creates a product depending on the intended audience. It is created through the use of
        promotions, price, place and product.
    6. Segmentation marketing: This approach subdivides a population into segments with similar characteristics that is, 
        geographic segmentation, benefit segmentation, behaviour segmentation and psychographic segmentation.
    7. Value proportion marketing: This refers to a set of benefits or values that a brand promises to deliver to consumers
        to satisfy their needs.
    8. Lotteries: This is a game of chance, where winners are typically decided by a draw. Lotteries can be used in
        decision-  making situations, such as sports drafts and allocation of scarce medical treatment, but are most commonly
       used in the popular form of gambling, financial lotteries. The financial lottery is a game where players select a group
       of  numbers and win prizes based on how they match the drawn results.
    9. Time-based pricing: This is a pricing strategy where the provider of a commodity, may vary the price depending on
        the time-of-day when the service is provided or delivered. The rational background of time-based pricing is expected
        or observed change of the “Supply and demand” supply and demand balance during time.
        For example telecommunication companies charge low rate in the night than during day.
    10. Discount Pricing Strategy: A discount is a reduction on actual price of the commodity by the seller. Businesses
          use discount pricing to sell low-priced products in high quantities. Large retailers are able to demand price discounts
          from suppliers and make a discount pricing strategy effective. It is usually impossible to compete with these retailers
          based solely on a discount pricing strategy. Occasional discounts and discounts that reward loyal customers are
          effective. Discounts used too often begin a downward pricing spiral that may eventually damage your ability to sell
          the product at full price.

    Market survey/Market research

    Activity 13

    Mutoni is planning to start a poultry farm in your village, she has trust in you and she believes that you are capable of working at the farm as a marketing manager. Your duty on the farm will be to market and sell eggs and off layer chicken from the farm. Show a plan of how you will look for the market of the products and overcome competition from other farms that produce the same products like you do.

    Market survey refers to the process of gathering and analysing information about the market e.g brand loyalty, competitors, consumers’ tastes and preference etc.
    It intends to gather and analyse information about previous, current and future market anticipation.


    Ingabire is ready to do some research on her customers and market.
    She has created a list of questions that need answers but isn’t sure where to start.

    Your task:
    • Step 1: Review the list of questions.
    • Step 2: Identify whether this is primary or secondary data to collect.
    • Step 3: What research method can she use?
    • Step 4: Where could she go to find this information?

    Importance of market survey/research

    • It enables an entrepreneur intending to introduce a new product on the market to know his / her competitors and their products. This reduces the risk of being outcompeted in terms of quality and pricing.
    • Market survey enables the entrepreneur to gather information about macroeconomic variables. This helps entrepreneurs not to under or overestimate the current market demand for their products.
    • It helps an entrepreneur not to relay on feelings about the market but to have knowledge of products preferred by consumers and why it is preferred.
    • It enables entrepreneurs to find new ways of doing business or come up with new products.
    • Market survey helps the entrepreneur to outcompete other businesses that deal in the same product like his/hers.
    • It enables a business to reach its potential buyers. This helps a business to plan for strategies of turning them into real customers.
    • Market survey enables entrepreneurs to determine the feasibility of new business ideas and gaps in the market before taking them on.



    1.Working in groups, develop a 6-question market research survey to find out the best type of milk to sell to youth of
        ages 12-19. Remember to ask questions that will help you design a new product that people in that age group will
         want to buy. Ask your teacher if you need help develop questions.
    2.By referring to the study findings in question 1, discuss the advantages of carrying out the market research.

    Steps in market surveys

    • Finding a topic of research to study. This is the title of all the research work that has to be done in the field. For instance an evaluation of the influence of income levels of consumers business growth.
    • Defining the research problem. This enables the entrepreneur to find out how to deal with the prevailing situation. This enables him/her to achieve his/her target.
    • Setting of objectives detailing what the research wants to achieve at the end of the study. They should always be brief and SMART (systematic/specific, measurable, achievable, realistic, and time bound).
    • Determine the scope. The researcher determines the boundaries of his study; that is to say areas to be covered and what to be included or excluded.
    • Designing a clear plan on how to conduct data collection.The researcher collects data on a number of things such as price, product, promotion, target market, etc.
    • Analysing data. This is done during and after the field study. It enables the researcher to know how the market will be in terms of demand.
    • Presenting data. After data analysis, the researcher presents a report to the relevant authorities for action.

    Customer survey

    Activity 14

    Form teams to design a customer survey template in form of questions that will be used to assess how much their customers like the products or services they provide and how they can serve them even better.

    This is a procedure that a producer, trader or entrepreneur uses to find out customers’ attitudes towards his/her products in the market or the products that he/she plans to put in the market.

    When carrying out customer surveys, a business has to put in mind the type of customers it is expecting to meet in order for
    the survey to be successful. For example:
    • Loyal customers. These are customers that regularly transact business with the organisation.
    • Need based customer. These are not attached to the business but to the product. They have attachment to specific brands
    • Wandering customers. These have no specific need or desire in mind when they come to the store or shop.

    Types of customers

    1. Impulsive customers
        These are customers who buy whatever items that are appealing or attractive to them.
        They do not have any specific items in their minds.

    2. Potential customers
        These are persons or businesses that are able but are not yet ready to buy products from business but can be turned
        into customers in the near future.
    3. Loyal customers
       These are customers that buy from the business regularly. They are normally fewer and bring in more money to a business.
    4. Real/Actual customers
        These are customers who have already done some transactions with a business.
    5. Discount customers
        These are customers that buy low cost products that have been discounted. These are customers only when businesses
         discount their prices.


    6. Cash, Cheque or Credit customers
        This is a category of customers who depend on mode of payment; that is, they buy depending on how payments are
         to be effected.

    Importance of customers to a business

    Activity 15

    Role play
    Uwase and Anne Marie are busy chatting when a customer walks into the restaurant. They see the customer but continue talking. The customer makes eye contact and asks if there is food. Uwase and Annie Marie act as if they have been greatly inconvenienced, making the customer feel like he/she should go somewhere else.

    Comment on the behaviour of Uwase and Annie.

    How best would have Uwase and Annie Marie conducted themselves towards the customer? If this happened to you, what would you do? If you were Annie Marie, would you have done this?

    Many businesses consider their customers to be very important. This is reflected on most business slogans for example UMUKIRIYA NU MWAMI(customer is king).

    Customers have the following importance to a business:
    • Customers are a source of income to the business. They provide revenue by purchasing its products.
    • They advise entrepreneurs about the quality of products produced or provided by a business.
    • They evaluate business performance by giving feedback to the business if requested by a business or through complaints about services provided by business.

    Importance of treating customers well

    • It increase the sales of a business.
    • It improves the reputation of a business.
    • It encourages prompt payment.
    • It is a source of business growth and success.

    Activity 16

    In groups learners role play the methods of collecting data from customers by reflecting how and when they may use, social media, internet, records, consumer behaviour and so on.

    Customer data collection

    • Collecting data using the mobile technology. It is very apparent that Smartphones have become a part of the lifestyle of the majority of humanity across the globe. About 63.7% of the Rwandans population use mobile phones for checking messages, receiving SMS alerts and to obtain information. Businesses can ably use phones to collect data from customers.
    • Collecting data using the internet technology. Web marketers are getting more inclined to start collecting the data available from their customers using the internet.
    • Customers’ Real-Time Behaviour. To understand your customers better, you have to get greater insight into how they actually behave. Surveys are fine and generalisations drawn from basic demography are still important, but businesses today need to gather as much data as possible on the way customers are behaving in real time.
    • Customer Service Records. When people call to return products, get more information and the like, it is the perfect opportunity to ask them a few questions about what they like/dislike, how they found you and how they are using their product or service.
    • Referral Source. Many times on a sales call you are busy tracking all the information about the client that is relevant to them closing a sale, but you forget to track the referral source of the lead. Without the referral source, it’s hard to understand how you can better reach your customers.
    • Personal Tastes and Preferences. Businesses have to specialise in collecting data about consumers’ tastes and preferences so they can use this consumer intelligence to create content that is liked with the users.
    • Social Media. Statistics show that millennials are on social media on average 5.4 hours a day. That’s one-fifth of each day. Clearly the best place to reach consumers is where they spend their time such as Facebook, Whatsapp, etc.
    • Comprehensive Contact Information. An accurate and informative contact list is one of the most powerful marketing tools. Once you’ve closed a deal, you need to keep the lines of communication open with each client.

    Good ways of treating customers

    • Giving discounts
    • Giving gifts to customers e.g. sweets, caps etc.
    • Giving credits
    • Organising parties for customers (get-together)
    • Being honest and kind to customers
    • Deliver goods on time
    • Offering transport facilities for customers to transport their goods.
    • Accepting goods returned in case they have defects e.g damaged goods.
    • Selling them fresh goods i.e goods which are not expired.

    Advantages of customer surveys

    • These help a manufacturer / trader to find out whether customers are satisfied with their products or not. This helps business to decide whether to maintain the same products and services or change them.
    • Through customer surveys, producers widen their market and this leads to business expansion.
    • Customers get an opportunity to think and talk about the services of their suppliers. This helps suppliers to correct their mistakes.
    • Inconveniences are cited and solved before eroding the relationship between customers and their suppliers.
    • Suppliers get a chance of identifying competitive differences and strength in the market.
    • Customer surveys are relatively cost effective and efficient as compared to other marketing efforts like parties and launches.
    • Through customer surveys, “rapport” develops between the market surveyor and customers. This encourages interpersonal relationships.
    • There is development of skills like information searching, team building, interpersonal communication and guidance, socialisation and report writing skills .
    • Suppliers get chances of identifying the best distribution channels for their products because they come to know the difficulties involved in distributing their products.

    Steps for effective customer surveys

    • Choosing the right timing of the survey: Timing of the survey depends on the surveyor and what he or she would like to achieve. He/she may do this before supplying the product in order to assess the potential demand or after supplying product to identify peoples’ attitudes towards the quality, quantity and delivery of the product.
    • Asking right questions:This is a crucial step in market surveying. One should ask questions that help him or her to identify what customers think about their products and the business as a whole. To achieve this, customers should be asked open-ended questions during the survey.
    • Planning the right follow-up: In the follow-up phase, thank each customer who responded. Tell them how much you appreciate their efforts and time. Tell them that their concerns were well heard and that you are making changes and promise better results.

    Competitor survey

    This involves comparing a company’s products with products of other similar companies, alongside comparing the strength, opportunities, weakness and threats of all these companies.

    Sources of information for competitors analysis:

    Recorded data:

    This is easily available in published form e.g. press, government reports, and magazines.

    Observable data:

    This has to be actively sought and from several sources e.g. advertising companies.
    This data requires a lot of planning and organisation e.g. discussion with suppliers, trade shows, seminars,
    conferences, social contracts with competitors.

    Identifying competitors
    Competitors can be identified basing on some of the following criteria:
    • Do word-of-mouth market research: Ask consumers in your area who they buy from or which services they use.
    • Identify your competitors: The kind of product or service you offer determines who your competitors are.
    • Find companies that sell that product or offer that service.Pretend to be a consumer and seek all the information that you want.
    • Asking your competitors’ customers instead of yours shows you why people chose others’ products or services over your own. It also shows you what you can focus on in marketing to win over new customers.
    • Determine if your market or industry is growing or shrinking: It is important to figure out not only how well your company is doing, but all companies like yours. This will make you aware whether or not the product or service you offer is stable enough for you to reach into adjacent markets to look for more sources of profit.

    Competitors product features

    • Competing firms sell similar products.
    • There is perfect knowledge in the market.
    • There is existence of price war in the market i.e. if one firm reduces the price for their products so as to get customers, other firms also reduce the prices for their products.
    • There is existence of many firms in the market selling similar products.
    • Free entry into the market and free exit from the market.
    • There are many similar products in the market.
    • The demand for products is elastic.
    • Competing firms get normal profits both in the short run and long run.
    • There is a lot of persuasive advertisement since commodities produced have close relationships.

    Competitor intelligence

    These are the questions you should ask yourself when carrying out competitors’ survey:
    • Who are our competitors?
    • What threats do they pose?
    • What is the profile of our competitors?
    • What are the objectives of our competitors?
    • What strategies are our competitors pursuing and how successful are these strategies?
    • What are the strengths and weaknesses of our competitors?
    • How are our competitors likely to respond to any change to the way we do business?

    Competitor profiling

    These are ways businesses keep information about their competitors by creating organised profile on each of them. This is called competitor profiling. The profile not only lists the basics such as name and location, but also your observations such as perceived weaknesses and strengths.

    Importance of competitor analysis

    1. Competitor’s analysis helps the competitors or businesses to adopt good competitors’ strategies.
    2. Competitors analysis identifies which competitors to compete with.
    3. Competitor’s analysis shows how to influence competitors’ behaviour to the firm’s own advantage.
    4. Helps in obtaining information about important competitors.
    5. Helps to understand and predict competitor’s behaviour.
    6. Helps in obtaining information and predict competitors’ behaviour.
    7. A fellow competing business will understand how to influence competitor actions i.e., business actions.

    Product analysis

    Activity 17

    Develop a questionnaire to use to analyse services provided in your school in the various departments; kitchen, bursar’s office, Director of Studies, subject teachers, prefects’ body or school nurse. You can inquire from fellow learners or members of staff of the school.

    This refers to asking questions about a product and forming answers. It means experts,
    or a member of the general public, or potential customers, or a group of people analysing a product.
    Product analysis can take place at any stage/process of production. Product analysis can be carried out by comparing similar products with each other using the same criteria.

    Purpose of product analysis


    In small groups or pairs, depending on the number of specimen products available, each group will be given an existing used product (pair of jeans, pencil case, hat, bag, jacket, shirt, skirt etc). Use the products to answer the following questions:

    1.Identify the product and what it is or designed to fulfil?
    2.Who would use your product? How does it enhance the lifestyle of a user group?
    3.When do you think your product was invented/designed? Has it stood the test of time and why?
    4.Would you describe your product as once being innovative and why?
    5.How would this product have impacted on the environment? How can this product be sustainable?

    • To help the customer determine whether the product is worth buying.
    • Product analysis may be aimed at designing an improved version of a product.
    • Sometimes a prototype/ model may be analysed. This is a way of making improvements before the final product is manufactured.
    • To help the entrepreneur and the manager determine whether the product is worth producing.
    • Product analysis helps to determine the product price.

    Criteria to use while conducting product analysis

    When analysing a product, begin by preparing a list of questions. Every product has its own criteria that can be used to
    analyse it. For example, below is a list of questions that could apply to a table as a product.
    • Ergonomics i.e. Will a consumer need to stretch too far while using the table? Will this make the consumer uncomfortable?
    • Cost: How much will it cost to produce a product and for how much it will be sold should also be considered.
    • Aesthetics: This involves questions like; does the product look good? Will the style liked by customers or not? In other wards the product should be good looking, stylish and likable by customers.
    • Construction method: How the product has been made and the joining techniques used have to be looked at. Observe whether the product will easily be damaged or not.
    • Client’s requirements: It should be considered whether the product is made the way it is required by the customer or look at what changes are required to make the product suitable for a consumer.
    • Health and safety: One should consider whether the product is safe and fulfills health and safety laws/conditions.
    • Colour and texture: The colour, the texture and the effectiveness of the product should be well assessed.
    • Materials: This involves questions like; are the materials suitable for that type of product, or are they quality materials?
    • Enviromental impact: Consider the enviromental impact of the product. Is the product manufactured from materials supplied from suitable sources? Can the materials be recycled/reused?

    Steps involved in developing a new product

    Activity 18

    Imagine that you want to start a project of making craft shoes, neckless, arm bands and igniting bags. Think of the procedure you will have to follow when developing each of the products so that you meet your customers’ desires.

    Step 1: Idea generation: This is the first step of product development. To many market researchers,
                 generating ideas is a continuous process with contributions both from inside and outside the company.
    Step 2: Screening: After idea generation, the ideas are evaluated by the company personnel to get out the best and,
                 or relevant ones. As ideas are reduced down to a few attractive options, rough estimates are made, about sales, 
                 production costs, profit potential and compactors’ response if the product is introduced.
    Step 3: Concept development and testing: At this stage, the producer tries to obtain initial feedback from potential
                 customers, distributors and its own employees about the new product. Feedback may include: the likes and
                 dislikes about the new product and level of interest so as to be able to predict product demand.
    Step 4: Business analysis. At this stage the marketer has reduced ideas to one or two options. The key objective at this
                 stage is to obtain useful forecasts of the market size (overall demand) and financial expectations.
    Step 5: Production and marketing mix development: At this stage, companies direct their research and development
                 teams to construct an initial design of the idea. Marketers also start to design a marketing plan. Once the product
                 is ready for the market, the company looks for customers’ and advises on the new product. This stage involves        
                 company activities, such as, advertisement, pricing and distribution options.
    Step 6: Market testing: Products that make it to this stage are ready for testing as final products. At this stage the company  
                 looks at the degree by which its new products are liked by customers from a few selected areas.
    Step 7: Commercialisation : If market testing yields promising results, the product becomes ready to be introduced to a wider   

    Product analysis checklist


    Product/service analysis and quality control

    Activity 19

    What is quality? Use a dictionary to find the answer. Discuss how you can distinguish a high quality product from a counterfeit product.
    Quality: This refers to the ability of a good or service to satisfy the needs of a customer. It relates to the characteristics of a product that makes it fit for the purpose for which is meant to serve.
    For a product to be considered of quality, the producer should recognise certain standards depending on the needs of the customers.
    Quality is relative; for example, one customer may consider a phone with facebook as of good quality while another customer may consider a phone with a torch to be of quality hence quality varies between customers.

    Product/service analysis: This refers to the act of finding out by entrepreneurs/suppliers whether the goods or services they offer to customers meet their needs. The quality (characteristics) of their products can be subjected to judgement in comparison to quality (characteristics) of other similar products.

    Activity 20

    Your friend Kayibanda has for a long time been keeping money wanting to buy a laptop computer from Nyarugenge market. Kayibanda does not have knowledge about poor quality and good quality laptops. How can you advise him so that he buys a quality laptop?
    Product characteristics on which product evaluation/analysis is based on may include:
    • Colour brightness
    • Ease of getting dirty
    • Aesthesis
    • Ease of maintenance
    • Durability of the product
    • Price of the product
    • User friendliness

    Quality management in production

    Activity 21

    1. Form teams. Each team should think of a product that they can produce. Demonstrate how the production
        activities should be carried out in order to make the product best for consumption.
    2. Explain how you can produce a quality product.
    3. What are the benefits of producing a good product?

    Quality management is when the entrepreneurs ensure that they control all production activities so as to produce products that meet required specifications or standards.

    Methods of quality control

    Activity 22

    1. In groups, describe the process through which cassava flour passes through to reach on your dinning table. 2. Explain the methods that can be used by all the parties involved in the chain of distributing Bugali to ensure that the consumers of Bugali enjoy eating it.
    The following methods can be used to control quality in the production process.
    • Monitoring and supervision of the production process.
    • Providing very good storage facilities for both the raw materials and the finished products.
    • Using experienced and skilled manpower in the process of producing goods and services.
    • Use of machines in production to reduce on human error and promote standardisation.
    • Carrying out market research to find out what consumers really want.
    • Selection of better raw materials.

    Advantages of quality control


    In teams, refer to the meaning of quality control and analyse the advantages of quality control on the environment.
    How can this product be sustainable?

    • It reduces competition: Production of quality products helps a business to outcompete other businesses that produce the same commodities like theirs.
    • It promotes brand loyalty: Customers will be attracted to a product of better quality hence the product and the entrepreneur will earn a better public image.
    • It is a way of complying with the standards prescribed by Rwanda Bureau of Standards.
    • It reduces on the costs of production thereby helping the firm to generate more profits.
    • It minimises conflicts between the producers and the consumers because consumers will not often times find defaults on products.

    Quality assurance

    This involves planned and systematic activities implemented within the quality system and demonstrated as being
    necessary to provide adequate confidence that the quality will be maintained and achieved.


    Advantages of quality assurance

    • It can help an enterprise to maintain its market share.
    • It eliminates resource wastage since faulty products can be easily detected at the successive stages of production before they are put on market.
    • Workers gain respect and recognition since they have more ownership of the product.

    Total quality management

    This refers to the organisation structure, resources, processes and procedures needed to implement the quality culture in an enterprise.

    What are the benefits of total quality management (TQM)?
    Total quality management is a general philosophy of gradually improving the operations of a business.


    Explain the procedures of total quality management and give advantages of ensuring total quality management for any business organisation.
    There are a number of tools available to assist in a TQM effort, such as:
    • Benchmarking
    • Failure analysis
    • Process management
    • Product design control
    • Statistical process control.
    • TQM can be implemented successfully in any part of a business, such as:
                      ·Field servicing
                      ·Legal and administration
                      ·Material management
                      ·Research and development
                      ·Sales and marketing

    The advantages of total quality management (TQM) include:
    • Cost reduction: When applied consistently over time, TQM can reduce costs throughout an organisation, especially in the areas of scrap, rework, field service, and warranty cost reduction.
    • Customer satisfaction: Since the company has better products and services, it gets fewer complaints from customers.
    • A higher level of customer satisfaction may also lead to increased market share.
    • Defect reduction: TQM has a strong emphasis on improving quality within a process, rather than inspecting quality into a process. This makes it less necessary to employ a team of quality assurance personnel.
    • Morale: The ongoing and proven success of TQM leads to noticeable improvement in employee morale, which in turn reduces employee turnover, and therefore reduces the cost of hiring and training new employees.

    Supply survey

    Activity 23

    You plan to start a business of selling fruits at home to your neighbours. You have to look for people
    who can supply you with fruits like lemons, mangoes, oranges, yellow bananas, pineapples and others.
    So many people are willing to supply you these fruits. Which criteria will you use to choose the best person (s) to be selling these fruits to you?
    What can you consider when choosing someone to supply you?

    Supply survey is the process of finding out and establishing the best potential suppliers of a given input or product.

    Factors considered when choosing the best supplier of a given input or product
    • The quality of goods and services supplied. They should be to the expected or agreed standards: The supplier should be the one to sell good quality goods approved by the National Bureau of Standards.
    • The consistency and reliability of the supplier also needs to be considered when selecting the best supplier. This ensures that whenever a product is required, it will always be available.
    • Communication: There should be easy communication with the supplier who is chosen.
    • Terms and conditions: These need to be examined as suppliers have different terms and conditions of payment. A supplier who gives favourable terms and conditions of payment should be chosen.
    • The lead time together with the distance between the supplier and the buyer should also be considered. If the lead time and distance between the supplier and buyer is short, that supplier should be chosen as compared the distant one.
    • Taxes and regulatory procedures in the purchase and delivery of goods always need to be considered when choosing suppliers. Normally, taxes make commodities so costly and one should look for sources of goods where taxes are low or where they are not levied.
    • Ability of the supplier: Entrepreneurs also need to look at the ability of the supplier to supply the needs of the business. The supplier chosen should have the capacity to supply enough and sufficient quantities whenever required.
    • Price: The price at which the supplier is selling his products should also be considered. This is always done through comparing the prices of different suppliers. Entrepreneurs will always choose for low cost suppliers of quality goods.
    • After sales services offered by different suppliers always influence the choice the entrepreneurs make on the suppliers. Those who offer better after sales service are more likely to be chosen.
    • The reputation of the suppliers greatly influences the entrepreneur’s choice. Suppliers with good reputation in the market are more likely to be chosen than those without good reputation.
    • The methods of delivery also have to be considered by the entrepreneur. Entrepreneurs will always choose those with good methods of delivering the ordered materials/goods.


    Use the knowledge of ownership you learnt in O-level to find the types of suppliers and give example in each case.

    Types of suppliers
    • Manufacturers: These are businesses that turn raw materials into finished goods and services. They supply their products to wholesalers, large scale retailers and consumers.

    • Retailers: These sell goods to the final consumer. A retailer is a trader who buys goods from the producer or wholesaler in large quantities and sells them to the consumers in relatively small quantities.

    Agents: These are business units that stock and distribute products on behalf of other businesses especially manufacturers or producers.

    • Wholesalers: These are business people who buy large quantities of goods or services and resell to other traders. In most cases the other trader is a retailer.

    Chain of distribution


    Bralirwa Company has its main industry at Gishenyi, but in every district in Rwanda, Bralirwa has customers of it products. These customers get its products from traders who deal in selling and transporting these products from the industry to the various parts of the country.
    1. In teams, identify some of the products produced and distributed by Bralirwa Company.
    2. Give the categories of businesses that deal in selling Bralirwa products.
    3. Which role do they play in the chain of distributing Bralirwa products from its industry in Gishenyi?

    These are the channels through which goods are distributed from the producer to the final consumer. These channels include:
    • Consumers who are in position to buy in large quantities may buy directly from the producer.
    • The most common channel is from the producer to the wholesaler, then to the retailer and finally to the final consumer.
    • Some retailers may buy from the producers and then sell to the final consumers.
    • Consumers may buy from producers through appointed agents.
    • Small scale retailers may buy from large scale retailers and sell to the final consumers.

    Illustration of a distribution chain

    Factors affecting the chain of distribution

    • Nature of goods: Expensive goods like cars tend to be sold direct to the consumer.
    • Scale of production: Some producers produce in small quantities and have no ability to sell directly to the consumers, so they have to go through middlemen. For example, small coffee growers.
    • Nature of market: For local goods, it may be possible to sell directly to consumers, but imported goods normally pass through middlemen.
    • Government policy: Government may set up a marketing board such that producers sell through such bodies.

    Developing a marketing plan


    Imagine that you are the marketing manager of a newly established poultry farm. Your job will be to lead the marketing team in your department to market the poultry farm products which will include eggs, manure, and chickens. In teams, explain to the class the factors you would put into consideration when planning to market your products.

    A marketing plan refers to the strategies of a business on how to price, promote and distribute, so as to attract,
    and retain customers.

    A marketing plan includes:
    • Identification of the products or services; their location; how they buy; from whom they buy and why they buy.
    • Statement of market size, growth and expected market share. For example, to achieve a market share of 50% within the first 2 years.
    • Analysing the various ways of communicating with and influencing customers through advertising and promotion.
    • Current market prices for the product and similar products.
    • The distribution channels to be used and how they function and the strategy of bringing products to customers with ease.࿤Projected marketing expenses.
    • Target market and market segments.
    • Business trends and opportunities in the industry that the business is planning to make use of.
    • The position of the competitors, where they are located, and what advantages and disadvantages they have (their strength and weaknesses) SWOT analysis.
    • Expected sales, recruitment plans and motivation of sales team in order to achieve sales targets.
    • How the product will be advertised and promoted.࿤Pricing strategies to be used, how the price will be determined.

    Activity 24

    Refer to activity 18, from the products you choose to produce. Design a plan which will help you sell your product to your customers.

    Unit summary

    • Marketing: It is the action of promoting and selling products including market research and advertising.
    • Components of marketing/4Ps: Product, Price, Place and Promotion.
    • Importance of the four “P” of marketing in a commercial activity: It enables businesses to meet the target group; reduce competition; increase sales; improve on quality of the products, and track changes in the market; charge fair and affordable prices; create brand loyalty and trust.
    • Marketing strategies: These are methods used by an enterprise to increase sales and achieve advantage in the market over other competitors.
    • Market survey: This refers to the process of gathering and analysing information about the market.
    • Elements of market surveys/Customers survey: Finding a topic; defining the research problem, setting of objectives; determining the scope; designing a clear plan on data collection; analysing data and presenting data.
    • Competitor survey.
    • Product/Service Analysis and Quality Control: This refers to asking questions about a product and forming answers.
    • Quality: This refers to the ability of a good or service to satisfy the needs of the customer.
    • Quality management: Is when the entrepreneurs ensure that they control all production activities so as to produce products that meet required standards.
    • Quality assurance: This involves planned and systematic activities implemented within the quality system to provide adequate confidence that quality will be maintained and achieved.
    • Suppliers survey: Is the process of finding out and establishing the best potential suppliers of a given product.

    Unit assessment

    1. a) Define the following concepts as used in entrepreneurship; market, marketing, and market research.
        b) Explain the components (4ps) of marketing in a commercial activity.
    2. a) Define marketing and marketing strategies. Identify various marketing strategies that can be used in commercial activities  
        b) Explain the importance of market research in commercial activities.
    3. a) Describe how customers are the backbone of any business.
        b) Identify the tools of market research.
    4. a) What is market survey?
        b) What is the importance of market surveys?
        c) Describe the elements of market surveys.
    5. a) Show a difference between customer survey and competitor survey giving the importance in each case.
        b) What are the sources of competitors’ information?
    6. a) Show the difference between quality analysis and quality control.
        b) Examine the advantages and disadvantages of quality assurance and quality control.
        c) Describe the process of developing a marketing plan.

  • Unit 7 :Business Organisation and Management

    My goals

    By the end of this unit, I will be able to:
    • State the meaning of business organisation and management.
    • Identify various forms of business organisation.
    • Know what is an organisational structure and chart.
    • Explain the importance of management in a business organisation.
    • Describe the management functions in a business organisation.
    • Identify the categories of people to work within the business organisation.

    Business organisation


    This unit shall introduce the learner to different forms of business organisations and their setup. It shall provide the learner basic understanding business organisations according to size, products, life span and ownership. It also spells out the merits and demerits, importance the management process of the various forms of business organisations.

    What is the meaning of business organisation?
    Business is the buying and selling of goods or services. It involves the exchange of goods or services for money. The main purpose of carrying out business is to make profits.

    Organisation is a group of people who form a business together in order to achieve a particular aim usually making profits.

    Activity 1

    • With the aid of any school club, list its membership according to the level of responsibilities.
    • Describe the role of each member in the club.

    Activity 2

    1. List the various types of businesses that exist in your community and those you are familiar with.
    2. List the types of merchandise/goods sold or what line of businesses they deal in.
    3. How are they different in terms of size?


    For most people, when you talk of business, what comes to their minds is the activity of buying and selling of goods for a profit. There are many types of businesses. They differ in terms of classification based on the criteria; i.e size, ownership, lifespan and nature of products/activities.

    Types of businesses according to size

    Micro businesses

    These are the smallest types of businesses in the communities.

    Characteristics of micro businesses
    • They are usually started with little capital as low as 50,000 Rwf.
    • It employs the services of the owner, who may be assisted either by the wife or husband.
    • The sales revenue is usually low.
    • Most of these businesses operate without being registered.
    • They mostly use simple technology for their production for example a restaurant using simple cooking utensils.
    • Most of these micro enterprises are not operated in a fixed premises. They may be located at the owners home, roadside or veranda.

    Activity 3

    1.Suggest the likely benefits enjoyed by micro businesses.
    2.Identify challenges faced by micro businesses.

    Small scale enterprises

    These are enterprises that operate on a small scale and have features which include:
    • They are started by capital of about 1,000,000 Rwf to 2,000,000 Rwf.
    • They are usually operated from buildings that are strong. It may belong to the owner or rented from other people.
    • They are generally easy to start and may not require formal registration before commencing.
    • It is started by the owner who may be assisted by family members like a wife and children. On expansion it can employ between 2 to 20 people.
    • They use simple technology for their production which is relatively suitable for the local market.
    • Their sales revenue are low, however, they are higher than that of micro enterprises.

    Activity 4

    1.In your community, which businesses are associated with the above characteristics?
    2. Suggest the likely benefits enjoyed by small scale enterprises
    3. Identify challenges faced by small scale enterprises

    Medium scale enterprises

    These are more established and bigger than small scale enterprises with the following features:
    • They employ between 20 and 100 workers. Most of who are skilled, semi skilled and unskilled.
    • Medium scale enterprises operate on large sums of capital as compared to small scale enterprises.
    • Most of these businesses exist in form of limited liability companies that need a certificate of enterprise registration also known as incorporation before start of business activities.
    • They produce large output due to the advanced technology they use. It can meet the demand for the local market and the surplus for foreign market.How is medium scale enterprises started?

    Activity 5

    Analyse the above characteristics and give examples of businesses in Rwanda with such features.

    Large scale enterprises

    These are enterprises established with huge sums of capital for start up. They have the characteristics as below:
    • ࿤They are started using large capital, usually not less than 500 million Rwandan francs.
    • ࿤They are registered as joint stock companies.
    • ࿤They employ over 100 workers most of whom are skilled, semi skilled and unskilled in position like managers, engineers, accountants, technicians and marketers.
    • ࿤They use modern technology and equipment for production. Their output is of large scale thus able to meet both the local market demand and the foreign market demand.

    What I know

    You have observed different people from your locality getting involved in a number of businesses. You have discovered that some people get involved in transformation of raw materials into finished products such as transforming timber into furniture, wheat into bread. This is referred to as a “manufacturing” business. Others get involved in the growing of crops and rearing of animals which we call ‘agri-business’. Others simply get involved in services provisions, while others get involved in buying and selling of goods and or services.

    Types of businesses according to products/activities 

    Manufacturing businesses

    These are enterprises that transform or process raw materials to make products (finished goods). They use inputs like raw materials and other resources, like, labour in form, of workers and machines to produce an output. For instance the extractive industries like CIMERWA, manufacturing cement and mattress manufacturing like Rwanda foam.


    These are businesses whose operations involve the production and selling of agricultural products for a profit.

    Their activities include: (See photo above): piggery (rearing of pigs, that is, for pork), poultry, that is, the rearing of birds for meat, eggs, livestock production that is the rearing of animals for beef.
    • Which activities, related to those above are carried out in your community?
    • What do you think are the products of these activities?

    Activity 6

    • Identify various forms of agri-businesses in your community.
    • List the products obtained from the various forms of agri-businesses identified above.Service businesses

    Service businesses


    • Identify the type of service on offer.
    • How can you define a service business?
    • Why is there much concern about good service delivery?

    Activity 7

    1. Apart from the service businesses indicated above, identify other forms of businesses within the same category.
    2. Suggest ways of making service delivery better.

    Trading businesses

    Activity 8

    In groups, discuss the following and present your ideas in class
    1. Have you ever seen people in your community who buy and sell goods or services?
    2. If yes/no, suggest the various businesses and their products such people get involved in.
    3. Identify companies/enterprises in or near your community that do trading activities.

    These are businesses that engage in the buying and selling of goods for a profit. They act as middlemen between the producers and the consumers.

    • What examples can you give for such businesses in your community?
    Types of businesses according to life span
    Temporary or short term businesses
    These are businesses that people start knowing that it will last for a short time. For example the sell of seasonal goods in particular periods.
    • Give reasons why such businesses last for a short time?
    Permanent or long term businesses
    These are businesses started without knowing the actual date of ending it. They usually operate for a long period of time.
    • Can you cite examples of such businesses?
    Types of businesses according to ownership
    These are businesses started by those who contribute capital for its formation and operation. They include:

    Sole proprietor
    Who is a sole proprietor?

    Look at the diagram below

    Activity 9

    In your opinion:
    1. What are the challenges faced by a sole proprietor?
    2. What are the features of sole proprietorship?
    3. How are sole proprietorships formed?
    4. Is the business separate from the owner?
    Sole proprietorship is the simplest and easiest to form. It does not require legal recognition and attendant formalities. This form is the most popular form in India due to the distinct advantages it offers. William R. Basset opines that “The one-man control is the best in the world if that man is big enough to manage everything”.

    Main features

    The main features of proprietorship form of business can be listed as follows:
    1. One man ownership:
        In proprietorship, only one man is the owner of the enterprise.
    2. No separate business entity:
        No distinction is made between the business concern and the proprietor. Both are one and the same.
    3. No separation between ownership and management:
        In proprietorship, management rests with the proprietor himself/herself. The proprietor is also a manager.
    4. Unlimited liability:
        Unlimited liability means that in case the enterprise incurs losses, the private property of the proprietor can also
        be utilised for meeting the business obligations to outside parties.
    5. All profits or losses to the proprietor:
        Being the sole owner of the enterprise, the proprietor enjoys all the profits earned and bears the full brunt of all
        losses incurred by the enterprise.
    6. Less formalities:A proprietorship business can be started without completing much legal formalities. There are
        some businesses that can be started simply after obtaining necessary manufacturing licence and permits.



    1. Simple form of organisation:
        Proprietorship is the simplest form of organisation. The entrepreneur can start his/her enterprise after obtaining license
        and permits. There is no need to go through the legal formalities. For starting a small enterprise, no formal registration
       is  statutorily needed.
    2. Owner’s freedom to take decisions:
        The owner, that is, the proprietor is free to make all decisions and reap all the fruits of his/her labour. There is no other
         person who can interfere or weigh him/her down.
    3. High secrecy:
        Secrecy is another major advantage offered by proprietorship. This is because the whole business is handled by
        the proprietor himself/herself and, as such, the business secrets are known to him/her only.In addition, the proprietor
        is not bound to reveal or publish his/her accounts. In present day business atmosphere, the less a competitor knows
        about one’s business, the better off one is. What the competitors can make is guess estimates only.
    4. Tax advantage:
         As compared to other forms of ownership, the proprietorship form of ownership enjoys certain tax
         advantages. For example, a proprietor’s income is taxed only once while corporate income is, at occasions taxed
         twice, say, double taxation.
    5. Easy dissolution:In proprietorship business, the entrepreneur is all in all. As there are no co-owners or partners,
        therefore, there is no scope for the difference of opinion in the case the proprietor/entrepreneur wants to dissolve
        the business. It is due to the easy procedure of formation and dissolution that proprietorship is often used to test
         the business ideas.


    1. Limited resources:
        A proprietor has limited resources at his/her command. The proprietor mainly relies on his/her funds and savings and,
        to a limited extent, borrowings from relatives and friends. Thus, the scope for raising funds is highly limited in
         proprietorship.This, in turn deters the expansion and development of an enterprise.
    2. Limited ability:
        Proprietorship is characterised as a one-person show. One person may be expert in one or two areas, but not in all areas
        like production, finance, marketing, personnel, etc. Then, due to the lack of adequate and relevant knowledge,
        the decisions taken by him may be imbalanced.
    3. Unlimited liability:
        Proprietorship is also characterised by unlimited liability. It means that in case of loss, the private property of the
        proprietor   will also be used to clear the business obligations. Hence, the proprietor avoids taking risks.
    4. Limited life of enterprise form:
        The life of a proprietary enterprise depends solely upon the life of the proprietor. When he/she dies or becomes insolvent
         or insane or permanently incapacitated, there is every likelihood of closure of the enterprise. That is to say,
          the enterprise also dies with its proprietor.

    A. Partnership business

    Activity 10

    1. Do you have a friend or more with the same business idea as yours?
    2. Are they ready to join and form up one business with you?


    Activity 11

    Make research and answer the following questions:
    1. What is a partnership?
    2. What are the features of a partnership business?

    In your opinion:
    • What is a partnership business?
    • How is partnership business formed?

    Activity 12

    Discuss the merits and demerits of a partnership business.

    Types of partners

    • Active partner: This is one who contributes capital and takes part in the active management of the business. He/she also shares profits and losses jointly with other members of the partnership.
    • Dormant partner: This is one who does not take part in the active management of the business, but contributes capital and shares losses and profits of the business.
    • Quasi partner: This is a partner who offers his/her name to be used as the name of the partnership. He/she does not contribute any capital to the business and does not take part in the active management of the business. He/she is not responsible for any debts and losses incurred by the business.

    Activity 13

    In groups do the following:
    State the major documents needed for the formation of a partnership business and explain its content.

    Joint stock companies


    Activity 14

    Discuss with a friend the following;
    1. What is a limited liability company?
    2. Cite examples of joint stock companies in Rwanda.
    3. The features of joint stock companies .

    These are businesses formed by buying of shares that makes its capital. Seven or more shareholders are capable of forming or establishing a joint stock company. In the process of forming a joint stock company, companies are required to have the following documents:

    Memorandum of Association and Articles of Association
    The process of registration is called incorporation.
    Upon registration, a company is issued with a certificate of incorporation locally known in Rwanda as certificate of enterprise registration.

    Activity 15

    In groups, discuss these questions:
    1. Why is a limited liability company a separate entity?
    2. Why is it called a limited liability company?
    3. What are the advantages of joint stock companies?
    4. What are the challenges that joint stock companies face?


    Activity 16

    In groups, discuss and present the following in classNow that you know the meaning of parastatals;
    1. Give examples of parastatals found in Rwanda that you know.
    2. Discuss the various benefits /advantages resulting from existence of such enterprises in Rwanda.
    3. Discuss the various disadvantages of parastatals.

    These are corporations that are owned, controlled and managed by the government or state.
    The main aim of these parastatals is to provide specific goods and services that meet the needs of a
    country at a reasonable price.The government cannot easily privatise the provision of those utilities for
    the sake of the welfare of its citizens.

    The examples in Rwanda are: WASAC (Water and Sanitation Corporation)REG (Rwanda Energy Group)

    Main features include:
    • There are no private shareholders. Government owns 100% shares.
    • The government appoints the management board.

    Advantages of parastatals

    • State corporations or parastatals provide vital services at a reasonable price such as water and electricity.
    • They are usually service oriented and not profit motivated.
    • The profits are used to support the country’s national budget.
    • They safeguard jobs rather than retrench.

    Disadvantages of parastatals

    • Financial losses of the company are usually borne by the tax payer.
    • There is often a lack of proper accountability.
    • They are usually not efficient because of political interference.
    In your opinion:
    • Why do governments still own parasatals/corporations despite the problems they face?

    Comparison of business organisations


    Activity 17

    1.a)Differentiate between a business organisation and organisational structure of a business.
       b) Why is it important to form departments in a business organisation?
    • It eases management with each departmental head managing a reasonable number of staff instead of all employees being under one manager.
    • It encourages specialisation so that each department specialises in a particular activity or role.
    • Makes coordination and flow of information more organised and systematic.
    • It reduces the work load of the top management as different activities are done by different sections.
    • It enables the organisation to employ specialists so that each department is headed by someone specialised in a given area.
    • Departments ensure accountability since each department is tasked to perform a specific function and is answerable to the top management of the organisation.
    Functions of an accounting and finance department in a business organisation
    This department handles all financial matters and prepares all the accounts of the business. Its functions are as follows:
    • Preparing budgets.
    • Receiving payments of cash and cheques and issuing receipts for such payments received.
    • Keeping all the financial records of the business.
    • Making appropriate payments to suppliers, contractors, employees and service providers.
    • Banking all cash and cheques.
    • Paying taxes and other obligations of the organisation like social security, salaries, wages, etc.
    • Monitoring the movement of financial resources within the organisation and outside the organisation.
    • Producing financial statements for the business especially the income statement, balance sheet, cash flow statement and statement of owner’s equity.
    Functions of a Human Resource department in a business enterprise
    The Human Resource department deals with matters related to the employees of the organisation. It performs the following functions:
    • Identifying the need for workers in the organisation.
    • Recruitment and training of new workers.
    • Counselling and guiding workers.
    • Preparing job descriptions and specifications.
    • Laying off workers who are no longer needed by the organisation.
    • Disciplining workers.
    • Managing the payroll.
    • Keeping staff records.
    • Appraising the performance of employees.
    • Managing welfare of the workers while at work and create policies that balance the needs of the organisation and the welfare of the workers.
    • Motivating workers.
    • Negotiating with trade unions.
    Leadership roles in business
    • Visionary role: The leader has the vision of the future and conveys his/her belief to the team
    • Executive role: The leader determines the business objectives to be achieved by the group; directs and coordinates group activities in achieving them.
    • Planning role: The leader decides what the group should achieve and how it should be achieved.
    • Policy making role: The leader participates in making policies that guide the group activities.
    • The leader is an expert: The leader has the expertise and information required by the group.
    • Controlling relationships. The leader decides on the internal organisation of the group and influences how people work together in the group.
    Personal values and attributes employers look for in an employee An employee who is talented.
    • An employee with good inter-personal relations.
    • An employ who is a good performer.
    • An employee with relevant qualifications.
    • An employee who is self-disciplined.
    • An employee with good communication skills.
    • An employee who is self-motivated with initiative.
    • An employee who is creative and innovative; who will bring in new blood in the business.
    • An employee with problem-solving abilities.࿤An employee with leadership abilities.
    • An employee with a team-work spirit.࿤An employee who is willing to learn.
    • An employee who is hard-working, flexible, trustworthy and open-minded.
    • Honesty and integrity.
    The difference between the Procurement department and Marketing department
    The procurement department is responsible for acquiring goods and services necessary for the business to perform its operations while the marketing and sales department deals with generating revenue for the business organisation by selling goods and services.

    Functions of the marketing and sales department
    The functions of the marketing and sales department include:
    • Selling the goods and services of the business to customers.
    • Generating demand for the products by identifying new markets.
    • Managing and coordinating all marketing, advertising and promotional activities.
    • Studying and analysing competitors.

    Activity 18

    1. What are the functions of an accounting and finance department in a business organisation?
    2. Identify the functions of a Human Resource department in a business enterprise.

    Activity 19

    1 a) Explain the leadership roles in business.
       b) Describe the personal values and attributes employers look for in an employee.

    Activity 20

    1. a) Differentiate between the Procurement department and Marketing department.
        b) What are the functions of the marketing and sales department?

    Activity 21

    1. a) Discuss how managerial functions are used to achieve business success.
        b) What considerations should an entrepreneur make when choosing business partner?

    Activity 22

    1. a) Define the following terms as regards employees in a business organisation.
    • Recruitment: This is the initial identification of suitable candidates for the job at hand.
    • Selection: This is the process of obtaining and using job related information from applicants to their suitability for the job they are being recruited for.
    • Socialising: This is the process of orienting the selected candidates to the organisational goals, values and culture.
    • Job analysis: This is the process of getting detailed information about a particular job, such as skills, knowledge and attributes an employee must have; new tasks or responsibilities.
    • Job description: This informs employees exactly what is expected of them and provides a useful document to refer to when evaluating an employee’s performance.
    • Workforce turnover: This is the measurement of how many people leave the workplace (voluntarily and involuntarily) over a certain period.
    • Functional conflicts: These are conflicts considered to be innovative and creative, encourages performance and helps to collectively achieve goals.
    • Dysfunctional conflict: These are conflicts that hinder achievement of your business goals by affecting the employees and ultimately, the business productivity.
    b) What are the sources of employees for a business enterprise?

    Activity 23

    1. You intend to operate a restaurant in your town.
         a) Explain the factors you would consider when recruiting employees in your business.
         b) Outline the techniques you would use to motivate employees in your business.
         c) Describe the methods you would use to appraise the performance of your employees.

    Activity 24

    1. a) Briefly explain ways how an entrepreneur can maintain good relations with employees in an enterprise.
        b) What methods can be used by an entrepreneur to assess the candidate’s suitability for the job?

    Activity 25

    1.a)Define management.
       b) Explain any four managerial functions.

    Activity 26

    1.a)List five important features in managing an enterprise.
       b) Define an organogram (Organisation Chart).
       c) Explain four kinds of information that are provided by an organogram.
       d) Draw a hypothetical organogram of a medium scale manufacturing business.

    Activity 27

    1. a) How will the work schedule help an entrepreneur in proper management of an enterprise?
        b) Why is management important in a business?

    Activity 28

    1. a) What is meant by team building?
    b) Why is team building important in the success of a business enterprise?

    How do I choose a business organisation?
    • Step 1: Research about different types of business organisations.
    • Step 2: Determine the liability you want for the business.
    • Step 3: Decide on the number of owners.
    Organisational Structure/Design of an Enterprise
    Organisational structure refers to how authority and responsibilities or tasks are distributed in an entity.
    • It determines the manner and extent to which roles, powers and responsibilities are delegated, controlled and coordinated.
    • It also involves how information flows between levels of management. Basically it spells out who does what in an organisation and who reports to whom in hierarchy.
    • An organisational structure depends entirely on the organisation goals and objectives to achieve them.
    • It looks at how decision making takes place in an organisation.
    The organisational chart/organ
    ogramThis displays the structure of the organisation, and also shows the relationship between employees and the ranks of all the positions in the organisation

    Organisational divisions and departments
    The structure of organisations differs from one to another, depending on the size and the type of the business activities.There are key departments that every business organisation will need especially for medium and large scale businesses. Refer to the example of an organisational chart indicated below.

    A sample of an organisational chart of a medium sized business.

    Importance of organisational structure
    Activity 29
    Select a business well known to you and find out the following:
    • Who are the workers and who are their supervisors? What are their tasks?
    • Who are the administrators and what are their tasks?
    • How is information passed on among workers, supervisors and administrators?
    • What is job grading in an organisation?
     Business Management
    Management in business is the process of getting things done by using people and resources such as capital, raw materials and time. It is a way of achieving business objectives and goals.

    Coordination of factors of production
    • Portray a good image
    • Reduce wastage of resources
    • Handle public relations
    Importance of management
    • Build commitment࿤Solve conflict
    • Ensure discipline

    Managerial Functions

    Managerial functions are special activities that are designed for a manager to perform in order to achieve the goals and objectives of an enterprise.

    Activity 30

    In groups;
    a) Form a team, select a team leader and his/her assistants.
    b) Assign the team and the assistants with titles and responsibilities
    c) Identify a product that you would like to produce.
    d) List the roles/responsibilities of the team leader and the assistants.
    e) Suggest the actions you would take to come up with the final product.

    People in Business Organisations
    There are various kinds of people in an enterprise. They perform different tasks according to skills and abilities.

    Activity 31
    1. List the different kinds of people in your school that make up the teaching and non-teaching staff.
    2. Suggest the skills required for each category of staff.
    3. Who are the people who directly determine the existence and operations of any business?

    Factors considered in choosing people to work with in a business organisation
    Case Study 1
    Madam Monica owns and runs Kigali Bakeries Ltd in the suburbs of the city. Kigali Bakeries Ltd produces a wide range of products ranging from bread, buns, pies, cakes to doughnuts. Recently, she experienced shortage in supply due to the overwhelming number of customers.

    Due to the shortage in supply of Kigali Bakeries Ltd products, people started scrambling and sometimes they ended up fighting. There was only one lady at the counter serving all the products to the multitude of people and this also added to the problem of struggling to be served first.

    Madam Monica, however, noticed the problem and took a loan to expand her business. She decided to increase production and also recruit more staff.

    Use the case study to answer the following questions:
    • Suggest the new posts to be filled in the bakery.
    • What shall be the roles of these new members of staff?
     Case study 2
    Twahirwa, Ganza and Mugisha have contributed money to start a poultry business. Their aim is to rear chicken (broilers and layers), turkeys and ducks. However, the money they contributed is enough to rear chicken (broilers) only.
    They approached a number of friends who have money to contribute towards their project, but they had other businesses other than poultry in mind.

    Unit summary

    • Business organisation.
    • Types of business according to size.
    • Types of business according to products/activities.
    • Types of business according to life span.
    • Types of business according to ownership.
    • Organisational structure/design of an enterprise.
    • The organisational chart/organogram.
    • Factors considered in choosing people to work with in a business organisation.

    Unit assessment

    1. a) Explain the meaning of business organisation and management.
        b) Identify various forms of business organisations.
    2. a) Identify the various departments and their roles in a business organisation.
        b) Explain the importance of management in a business organisation.
    3. a) What is an organisational chart?
        b) Design an organisational structure/chart for a business organisation.
    4. a) List down the major classifications of business organisations.
        b) Define the following types of businesses clearly giving merits and demerits in each case:
           (i) Sole proprietorship
           (ii) Partnership
           (iii) Joint stock companies
           (iv) Parastatals
    5. Define an organisational structure and an organisational chart.
    6 a) Choose an organisation or business of your choice and draw an organisational chart for that business.
       b) What is the importance of an organisational chart for the business?
    7. Identify the different departments that may make up a medium scale industry.
  • Unit 8: Financial Management

    My goals

    By the end of this unit, I will be able to:
    • Explain the meaning of the following terms; finance, financial system and financial management.
    • Define the meaning of money.
    • Understand barter trade.
    • Asses the origin of money.
    • Suggest the functions of money.
    • Explain the functions of financial management.
    • Analyse the sources of business capital.
    • Understand the concept of interest.


    Activity 1

    1. By using the internet or financial management books, what do you understand by the term business finance?
    2. Enumerate some of the activities involved in business finance in your school.

    Business finance may be defined as those activities which deal with the provision and management of funds for the satisfactory conduct of business.

    Financial Management

    Activity 2

    Using the internet and text books, brainstorm the definition of financial management

    Financial management is concerned with the efficient acquisition and deployment of both short term and long term resources to ensure that the objectives of the enterprise are achieved.

    Activity 3

    1. The term financial management has 2 aspects. Name them.
    2. Financial management deals with four major financial management decisions that a firm must undertake.
        Suggest the decisions involved.

            An illustration showing some of the financial management concepts.

    Financial systems

    Activity 4

    Assuming you are the bursar or the accountant in your school, state some of the financial systems you would use for accounting purposes.

    There are multiple components making up a financial system at different levels within a firm. A financial system encompasses all aspects of finances. For example; accounting measures, revenue and expense schedules, wages and balance sheet verification. Regional financial systems would include banks and other financial institutions, financial markets, financial services. At a global stage, financial systems would include the International Monetary Fund, central banks, World Bank and major banks that practice overseas lending.


    Activity 5

    1. Explain to an old person who was used to exchanging goods with other goods the meaning of money in the present day.
    2. What are some of the currencies that are being used in Rwanda?

    Money is something that is accepted as a form of payment for products or services, or for the payment of obligations.
    It is a medium of exchange with a specific value by which the value of all other things can be measured. Money is simply a common medium of exchange that everyone agrees upon thus, they accept it as a form of payment for their goods and services.

    Activity 6

    1. Money has 3 properties that make it desirable to use as a medium of exchange. State the properties known to you.
    2. Enumerate some of the ways you would use your pocket money at school.
    3. Before money came into being, the barter system was used for exchange. How would you define this system using
        your experience?
    4. In what circumstances have you used this system both at home and school?
    5. Suggest some of the advantages and disadvantages of barter trade.
    6. From the stories you have heard and based on the internet resource, brainstorm on the origin of modern money.

    Barter trade is the exchange of goods and services for other goods and services. For example, a person with fruits exchanges surplus fruits and gets something he or she needs.
           An illustration for barter trade system

    Stage One: Barter Trade
    Stage Two: Commodity Money
    Stage Three: Durable Commodities
    Stage Four: Precious Metals
    Stage Five: Development of Paper Money

    Key Points about the Evolution of Money

    Money did not have a single origin but developed independently and gradually in many different parts of the world.
    No single person may be said to be responsible for developing money the way some people are credited for inventions.

    Many factors contributed to the development of money and according to archeological findings, economic factors were not the most important. Religion and culture also played a role in the evolution of money.

    Money performs a wide variety of functions and the functions performed by the earliest types of money were restricted initially and would NOT necessarily have been the same in all societies.

    Functions of money

    Activity 7

    Money by itself is not very useful. It is only useful because of what it can do and what it can help us do. Explain the different functions of money that you know.

    Functions of financial management

    Activity 8

    1. From your own experience, what do you understand by the term financial management?
    2. Suggest the routine functions that constitute financial management within your school or any business enterprise.
    3. Elaborate on the various functions of financial management in an organisation.Financial management refers to the
        routine functions and activities that are performed within an organisation to ensure efficient use of funds.

    Functions of financial management
    1. Assessment and valuation of investment opportunities to ensure that the generated resources are invested effectively.
    2. Assessment of the optimum amount of asset mix required including the determination of fixed assets, current assets
        and liquid resources needed by the business.
    3. Ensuring that stocks of raw materials, finished goods and work in progress are kept at optimum levels consistent
        with business efficiency.
    4. Determining the volume of financial resources required at any given period of time and the acquisition of the
        required financial resources.
    5. Ensuring that suitable control systems are employed for authorisation of expenditures.
    6. Ensuring that all risks capable of being calculated are covered by insurance.
    7. Ascertain that cash available in the business is used as fully as possible throughout the year.
    8. Consideration of the needs of the providers of finance.
    9. The maintenance of an optimum mix of funding bearing in mind the potential impact of the capital structure on
         the market value of the business.

    Business capital

    Activity 9

    The most important consideration before starting any business is knowing the amount of capital required and the source of that capital. In simpler terms, define the term business capital.

    The money you need to start and run a business is called capital.How much you need and from where you get and the implications of each source are what we want to investigate.
    Capital is the amount of financial resources that is needed by the entrepreneur to properly implement a business plan. Most people do not know how to get the money they required for starting a business.

    Sources of business capital

    Activity 10

    1. There are several places where you can get the money that a new business needs. This, however, requires you to
         think  about the type of funding that will work best for your company. By giving examples, identify the various sources
         of business capital in your community.
    2. Brainstorm on the advantages and disadvantages of each source of capital identified above.
    3. Capital is majorly in two ways that is liquid capital (money) and asset capital, for example machinery, land,
        labour, etc. Discuss the various uses of capital in an enterprise.
    4. As a student of entrepreneurship, explain at least five uses of capital in your family.

    Personal savings

    Retained profits

    Trade credit or supplier’s credit


    Loans from banks and other financial institutions

    Ordinary shares or common stock
    This is a permanent source of business capital with no maturity date. Ordinary shareholders are the legal owners of the business.

    Business capital may also be raised from partners. Business partners may contribute capital to start or expand the business. Each partner contributes some amount towards business capital.

    Other sources of Business capital
    • Grants
    • Advances from customers
    • Inheritance
    • Sale of personal property
    • Friends


    Activity 11

    1. Discuss the meaning of interest using your own experience and the other available resources.
    2. Form a group of five members and discuss the various types of interest. Explain the different types of interest you
        know in your presentation.
    3. Explain the meaning of simple interest. Use the internet and the available text books in your school library.

    Interest  is the cost for use of borrowed funds. When you borrow a given amount of money from the bank (amount called principal), you will be charged a given amount per year (interest) at a specified rate (interest rate). The interest rate is usually expressed as a percentage of the principal. For example, interest may be stated as 10% per annum. This means that every year, you pay 10% of the borrowed amount (the principal) as interest.

    Simple interest

    Simple interest is calculated using this formula:
    Interest = (Principal × Time × Rate) /100

    P = Principal amount borrowed
    R = Rate of interest
    T = Time or duration of repayment.

    Example 1

    Find the simple interest on 400Rwf for 5 year at 3% p.a

    • Solution:
    Simple interest = I = PRT / 100 = I = 400 × 5 × 3100 = 60Rwf

    Example 2

    Find the simple interest on 40,000Rwf for 4month at 2%
    I = PRT /100 Where I = Interest, P = Principal, T = Time and R = Rate
    P = 40,000                   R = 2%                         T = 4 month
    40,000 × 2 × (4/12) 26,666.7100 = 711,111,993 Rwf /100 = 7,111,119.93

    Example 3

    Calculate the amount to be paid after 6 year if 65,000Rwf is borrowed at 11% p.a
    I = PRT /100 Where I= Interest, P = Principal, T = Time and R = Rate
    P =                   65,000               R =                    11%                     T =           6 years
    65,000 × 11 × 6/100                         4,290,000/100=      42,900Rwf
    65,000 + 42,900 =         107,900Rwf

    Activity 12

    1. Calculate; the simple interest on 125,000Rwf for 3½ years at 6½% p.a.
    2. Find the time within which 76,800 Rwf increases to 89,600 Rwf at 5% p.a.
    3. Find the principal on which a simple interest for 8 years at 2.5% is 2160 Rwf.
    4. Kwizera borrowed a sum of money at 12% simple interest per annum. After 5 years he repaid 128,000Rwf. Calculate
        the sum of money borrowed.
    5. Form a group of five members and discuss the meaning of compound interest.For example, if a loan of 10,000Rwf earns interest 10% per month, after the first month, the total amount due will be the principal of 10,000Rwf plus the interest of 1000 which totals 11,000Rwf. The interest for the second month will be calculated basing on the new amount of 11,000Rwf.

    A loan, for example, may have its interest compounded every month; in this case, a loan of 100Rwf initial principal and 1% interest per month would have an amount accumulated to 101Rwf at the end of the first month, 102.01 at the end of the second month and therefore the compound interest after two months will be:
    CI = A – P
         = 102.01 – 100 = Rwf ..........................................................

    Compound Interest

    Example 1

    TIGO Company deposited 980,000 Rwf 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.
    I = PRT

                 First year
                             P = 980,000        R = 8%         T = 1year
                                = 980,000 8 1 / 100 = 78,400
    New amount =   Principal + interest
                         =   980,000  + 78,400 = 1,058,400Rwf

                Second year
                                I = PRT
                                I = 1,058,400 × 8 × 1 / 100 = 84,672Rwf
      New amount = New principal after year 1 + compound interest in second year
                           = 1,058,400 + 84,672   =    1,143,072Rwf

    We can use annuity method to determine the interest given the fact that the last or previous method is long and tedious in case you are given a long period under consideration. The formula for the amount after (n) years is given by;

                                            A = P (1 + R)^n/100
                  Where; P = principal, R = Rate, n = Number of years
                  A = Amount to be received after n years

    Using the same example as above substitute the values of P, R, and n in the formula
                                    A = P(1 + r/100)^n
                                        = 980,000(1 + 8 / 100)^2
                                        = 980,000 (1 + 0.08)^2
                                        = 980,000 (1.08)^2
                                        = 1,143,072Rwf

    Activity 13

    1. Grace plans to buy a car after 3 years. The car is expected to cost 220,000Rwf. Grace deposits 80,000Rwf at the
        beginning of the 1st year and 40,000Rwf at the beginning of the 2nd year. Calculate the amount which should be
        deposited at the beginning of 3rd year if compound interest is paid at the rate of 10% in order to enable her buy the car.
    2. Kanimba borrowed 18,000Rwf from a microfinance at 2% per month with the option that interest unpaid would be added
        to principal to obtain the new amount for every successive month. How much would he pay after 6 months if he pays the
        entire amount at once?
    3. Nyange enterprise borrowed 2,000,000Rwf from a bank and was required to return 2,400,000Rwf. Given that interest earned 
        in the first year was 245,000Rwf and the interest at the end of each period was added on to principal, find;
       a) The interest rate
       b) The compound time it would take to obtain the amount 2.4 years.

    Break-Even Point, Payback Period and Return on Investment, Return on Equity

    Activity 14

    1. Use the internet and textbook resources from your school library and discuss the meaning of break-even point
    2. Form a group of 3-5 members; illustrate a break-even point using a graph for presentation by your group leader.
    3. State the assumptions that were considered by your group to illustrate the break-even chart.
    4. State the usefulness of a break-even point.
    5. Enumerate the limitation of break-even charts.Break-Even Point (BEP) is that point of sales volume at which total
        revenue is equal to total costs. It is a no-profit, no-loss point. Two approaches can be used to compute the BEP.
       The formula and the chart approaches indicated below illustrate the two scenarios or situations of break-even point.

           The break-even chart-cost-volume-profit charts

    Key terms used in break-even point concept
    1. Break-even point analysis: This is a tool used to determine the volume at which a company’s costs will exactly equal to
        its revenue, therefore no profit made.
    2. Fixed costs: These are costs that do not tend to vary or change based on sales/volume. For example rent, equipment,
        insurance etc.
    3. Variable costs per unit (VC): These refer to costs that tend to fluctuate with the level of sales or costs that tend to change
         with the level of sales. For example raw materials, sales commissions, and delivery expenses.
    4. Contribution margin: This is defined as a product or service price minus variable costs for unit sold.

    The importance of break-even point to a business/entrepreneur/company
    1. It can help managers assess the effect of changing prices, sales volume and costs on profits.
    2. It helps small business owners to make decisions regarding whether to expand their operation or hire new employees.
    3. It helps a business owner to have a good handle on the quantity exported, the likely selling price and the variable costs
    4. It equips the business owner with the potential application for basic business analysis, hence being able to make a good

    Disadvantages of break-even point analysis
    1. It only emphasises the supply side (ie the costs only). It does not 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, i.e., there is no change in the quantity 
        of goods held in inventory at the beginning of the period and quantity of goods held in inventory at the end.
    5. In multi-product companies, it assumes that relative proportions of each product sold and produced are constant,
        i.e., the sale mix is constant.

    Break-even charts or cost-volume – profit charts
    A break-even chart may be defined as a graph which shows profit or loss at different levels of activity within a limited range. The level of activity at which sales revenue is equal to total cost is known as break-even point. At this level of activity, there will be no profit or loss. In the break-even chart, the following curves are drawn: fixed cost curve, total cost curve and sales curve.

    The break-even chart is also known as the cost volume profit chart. This graph shows the costs, sales and profit and loss within a specific level of activity. Before the break-even point, there is loss and after that point the level of activity shows profit. It is explained by the help of the following diagram.

    The break-even formulae
    The BEP can be computed in terms of units, or in terms of money value (dollars, francs, etc) of sales volume or as a percentage of estimated capacity, in units. The BEP may be calculated for single product firm in terms of units of product.

    The BEP in terms of units will be reached when units sold create sufficient revenue to cover their total costs (that is fixed and variable). Each unit of the product sold will cover its own variable cost and leaves a remainder called contribution or marginal income to cover the fixed costs. The BEP will occur when enough units have been sold so that total contribution is just equal to total fixed costs.

    Note: The contribution per unit is the difference between selling price per units and variable cost per unit total is equal to the contribution multiplied by units sold; and profit is derived when fixed cost is subtracted from total contribution. Thus;
                Unit contribution = unit selling price – unit variable cost
                Total contribution = unit contribution × units sold
                Total contribution = total fixed cost + profit

    At break-even points, profits will be zero and therefore total contribution will only cover the fixed cost.

    Illustration 1
    Let us assume that a manufacturing firm produces a single product whose selling price is 20 Rwf per unit and the variable cost per unit is 12Rwf. The annual fixed costs of the firm estimated is 160,000 Rwf, to break-even the firm’s contribution from the sale of units of product should be equal to the fixed cost of 160,000 Rwf.

    The sale of one unit of the product yields a contribution 8 Rwf (i.e. the difference between the selling price of 20 Rwf and the fact that the firm’s profit is equal to zero at a volume of 20,000 units is verified as follows;

                           Sales revenue (20,000units at 20 Rwf)            400,000 Rwf
                Less:   variable costs   (20,000units at 12Rwf)            240,009 Rwf
                            Contribution                                                     160,000 Rwf
                 Less:   fixes costs                                                        160,000 Rwf
                            Profit                                                                  0 Rwf

    That is, BEP in terms of units can be computed by the formulae
                            BEP (units) = Total fixed cost (TFC) / Selling price – Variable cost per unit

    In francs; the break-even point for a single product can also be calculated in terms of francs value of sales volume. If both sides of equal value are multiplied by the selling price, we will get break-even solution in terms of francs. Thus,
                                        BEP (Francs) = total fixed cost1-(variable cost per unit/selling price per unit)
                               = 160,0001-(12/20) = 160,000(8/20)      =     400,000 Rwf

                              BEP (Francs) = TF / CP–V× P
    The same answer could be arrived at by multiplying the break-even units by selling price (20,000X20 Rwf) = 400,000 Rwf

    The advantage of the second format is that it can be used with both per unit information as well as the total information. This is also because the variable cost of sales ratio will remain the same for any sales volume as both variable cost and sales revenue change in direct proportion to sales volume.

    Using total sales and total variable cost information, format 2 is particularly significant for a multi-product firms. These firms find difficulties in measuring volume in terms of common units of products. For such firms, the break-even point will be calculated in terms of total francs sales.

    Illustration 2
    A diversified firm has the following budget for the year ending December 2006.
         Budgeted sales 5,000,000 Rwf
         Budgeted variable costs 3,000,000 Rwf
         Budgeted fixed costs 1,000,000 Rwf

    The break-even point for the firm will be;
                               BEP (francs) = 1,000,000 / 1-(3,000,000/5,000,000)
                                                    = 1,000,000 / 1-(3/5)
                                                    = 1,000,000 / 1 – 0.6
                                                    = 2,500,000

             Sales revenue                               2,500,000 Rwf
             Variable cost (2,500,000 X 0.6)     1,500,000 Rwf
              Contribution (2,500,000 X 0.4)      1,000,000 Rwf
               Fixed cost                                     1,000,000 Rwf
               Profit                                             0

    Activity 15

    1. A firm manufactures and sales a standard product known as “chocolate”. The selling price per unit of the product is
        1,500 Rwf. The variable cost of producing the product is as follows:
        Direct material 400 Rwf per unit of the product
        Direct labour 150 Rwf per unit of the product
        Variable overheads 50 Rwf unit of the product
        The fixed costs incurred by the firm per period is 1,800,000 Rwf
       a) Determine the value of the variable cost.
       b) Determine the BEP of the firm.
       c) The quantity to be produced if the firm is targeting a profit of 900,000 Rwf.
       d) What is the contribution per unit of the firm?
    2. A manufacturing company dealing in plastic containers has the following costs and revenue information; price per
        unit 80,000 Rwf, variable material costs per unit 25,000 Rwf, variable labour cost per unit 30,000 Rwf, fixed costs
         75,000,000 per month. The total production capacity of a firm is 100,000 containers.
          a) Determine the break-even point in units and sales.
          b) Determine the number of containers that they must sale to earn a profit of 100,000 Rwf.
          c) If the firm is selling 40,000 containers assuming (1) above; what would be its margin of safety in units and sales?
          d) What is the firm’s contribution per unit?e) If the firm’s variable labour costs increases by 20%, and its selling price
               reduces to 70,000 Rwf, what would be the new break-even quantity?
          f) What is the percentage change in the contribution per unit?
          g) If the firm decides to produce 60% of its production capacity, how much profit will it generate?

    Activity 16

    1. Using textbooks available and internet resource, brainstorm about the meaning of payback period.
    2. State the advantages and disadvantages of payback period.
    3. An investment whose initial cash outlay is 20,000,000 Rwf is expected to generate the following cash flow over its
       useful life. Find the total investment.
       Year        Cash flow
        1             8,000,000 Rwf
        2             7,000,000 Rwf
        3             9,000,000 Rwf
        4            10,000,000 Rwf

    This is the most popular and widely used method of evaluating investment proposals. This method uses the minimum period in which the cash flows anticipate on the investment completely cover the initial outlays and other outflows as the yardstick for determining the viability of the investment. Payback period is the minimum period required to recover the original cash outflow in the investment.

    Accept or reject criteria
    The decision rule here is to select from competing investment a proposal that has the shortest payback period. Though, sometimes the projects may have a minimum payback period such that every investment with payback period less than the investor’s payback period will be viable.

    Ways of calculating payback period
    There are two ways of calculating the payback period.
    The first method can be applied when the cash flow stream is in the nature of annuity for each year of the project’s life, where cash flows are uniform. In such a situation, the initial cost of investment is divided by the constant annual cash flow.

    Payback period when the investment generates uniform/constant cash inflows
                          Payback period = initial cash outlay / annual cash inflows

    Example 1
    An investment has an initial outlay of 50m Rwf and it is projected to have a useful life of 8 years with a uniform cash flow stream of 7.5m Rwf.

                         Its payback period = initial cash outlay / annual cash inflow
                                                       = 50,000,000 / 7,500,000
                                                       = ............... years
                                                       = .............. × 12 = 8 months
                                                       = .............years and ...............months

    The second method is used when a project’s cash flows are not equal, but vary from year to year. In such a situation, payback period is calculated by the process of accumulating cash flows till the time when cumulative cash flows are equal to original investment outlay.

    When the cash flow is not uniform
    Example 2
    A firm invests 2m Rwf in a project at the beginning of the first year, 800,000Rwf and 600,000Rwf at the beginning of second and third year, respectively. However, the firm expects returns at the end of the first, second, and third years of 1,000,000Rwf, 400,000Rwf and 1,000,000Rwf respectively. It expects to continue receiving 500,000Rwf after the third year. Determine the payback period.

    • Solution
    Total investment = 2,000,000 + 800,000 + 600,000 = .................Rwf


    Activity 17

    1. Discuss the meaning of return on investment.
    2. Discuss the meaning of return on equity and its components.
    3. When choosing the right source of finance, a business needs to assess the different types of finance based on a criteria.
        In a group of 5-10 members, discuss and present the criteria you would follow.
    4. Discuss at least three main types of short term finance known to you.
    5. Discuss the main types of long term finances that are available for a business and present them to your class.
    6. Internal finance comes from the trading of the business. Give four examples of internal finance from the discussion above.

    Returns on capital employed or investment
    ROI = PBIT / Capita employed× 100%
    ROI = PBIT / CE× 100

    Where: ROI is a return on investments
                 PBIT is profit before interest and tax
                 CE is capital employed

    Capital employed is sometimes referred to as equity plus long term debts. It’s usually calculated by the formula
                            Capital employed = Total fixed asset + working capital
                                                   CE = TFA + WC

    Return on investments (ROI) is sometimes given by the shareholders ratio. Shareholders ratio measures a return on the shareholders’ investment in the business, which is normally expressed as the ratio of dividends declared by the business to the par/market. The value of shares held by the shareholders is calculated using this formula.

                                       Dividend Yield = gross dividends (ordinary shares) / Market price of shares

    It should be noted that as the business becomes more established and profitable, the market value of its shares appreciates and becomes significantly different from par/face value of the shares.The return on equity is defined as;
                                                  Equity earnings / Average equity

    Illustrations showing return on Equity
    The numerator of this ratio is equal to profit after tax less preference dividends. The denominator includes all contributions made by equity shareholders (paid-up-capital + reserves and surplus). This ratio is also called the return on net worth.

    Horizon’s return on equity for 20 × 1 is;
                            34 ÷ [(262 + 256)/2] = 0.131 or 13.1%

    The return on equity measures the profitability of equity funds invested in the firm. It is regarded as a very important measure because it reflects the productivity of the ownership (or risk) capital employed in the firm. It is influenced by several factors of earning power, debt-equity ratio, average cost of debt funds, and tax rate.

    In judging all the profitability measures it should be borne in mind that the historical valuation of assets imparts an upward bias to profitability measures during an inflationary period. This happens because the numerator of these measures represents current values, whereas the denominator represents historical values.

    Valuation ratios
    Valuation ratios indicate how equity stock of the company is assessed in the capital market. Since the market value of equity reflects the combined influence of risk and return, valuation ratios are the most comprehensive measures of a firm’s performance. The important valuation ratios are; price-earnings ratio, yield, and market value to book value ratio.

    Price-earnings ratio; perhaps the most popular financial statistic in stock market discussion, the price-earnings ratio is defined as;
                                          Market price per share  / Earnings per share

    The market price per share may be the price prevailing on a certain day or the average price over a period of time. The earnings per share is; profit after tax less preference dividend divided by the number of outstanding equity shares.

    Horizon’s price-earnings ratio at the end of 20 × 1 is;
                     21.0/2.37 = 9.25

    The price-earnings ratio (or the price earnings multiple as it is commonly referred to is a summary measure which primarily reflects the following factors; growth prospects, risk characteristics, shareholder orientation, corporate image, and degree of liquidity.

    Yield; this is a measure of the rate of return earned by shareholders. It is defined as;
                                                       Dividend + Price change / Initial price

        This may be split into two parts;
    Dividend / Initial price Dividend yield + Price change / Initial price capital gains/loss yield

    For horizon the dividend yield and the capital gains for 20 × 1 are as follows;
    dividend yield = 1.8/20.0 = 9% capital yield = 11.0/20.0 = 5%

    Hence, the total yield for 20 × 1 was 14%.

    Generally companies with low growth prospects offer a high dividend yield and a low capital gains yield. On the other hand, companies with superior growth prospects offer a low dividend yield and a high capital gains yield.
    Market value to book value ratio is another popular stock market statistic, the market value to book is defined as;
                                                             Market value per share / Book value per share

    Horizon’s market value book value at the end of 20 × 1 was;
                                       21.00/17.47 = 1.20

    In a way, this ratio reflects the contribution of a firm to the wealth of society. When this ratio exceeds 1 it means that the firm has contributed to the creation of wealth in the society. If this ratio is, say, 2, the firm has created a wealth of one franc for every franc invested in it. When this ratio is equal to 1, it implies that the firm has neither contributed to nor detracted from the wealth of society.
    1. Profit margin ratios of Horizon limited are somewhat higher than the industry average. The rate of return measures of
        horizon limited is also higher than the industry average.
    2. The valuation ratio of Horizon limited compare slightly favourably in relation to industry average.

    Unit summary
    • Business finance: Is defined as those activities which deal with the provision and management of funds for the satisfactory conduct of business.
    • Financial management: Is concerned with the efficient acquisition and development of both short term and long term resources to ensure that the objectives of the enterprise are achieved.
    • Money: Is something that is accepted as a form of payment for products or services, or the payment of obligations.
    • Functions of money:
    • Functions of financial management: Determining the volume of financial resource, ascertain the cash available in the business,consideration of the need of the providers of finance.
    • Business Capital: It is the money needed to start and run a business.
    • Sources of business capital: Grants, partners, retained profits, personal savings.
    • Break-even point: This is a point of sales volume at which total revenue is equal to total cost.
    • Payback period: It is the minimum time required to recover the original cash outflow in the investment.
    • Return on Investment: It is the anticipated profits on investment.
    • Return on Equity: Measures the profitability of equity funds invested in the firm.
    Unit assessment
    1. a) Explain the meaning of finance, financial systems and financial management.
        b) Explain the functions of financial management.
    2. a) Which precautions should one consider when choosing sources of finance to their business activities?
        b) Identify the various sources of capital and their advantages and disadvantages.
    3. a) Find the simple interest on 80,000Rwf for five 10 years at 6% p.a.
        b) Find the simple interest on 40,000Rwf for 4 month at 2% p.a.
        c) VISION 2020 enterprises deposited 1,200,000 Rwf with their bank for 4 years. If the bank offers an interest rate
            of 16% p.a and allows the interest to be added to the principal so that it also earns interest, find the interest after
            four years.
    4. a) Define the following concepts:
           (i) Break-even point
           (ii) Payback period
           (iii) Returns on investment.
        b) A manufacturing firm is considering investing 100,000 Rwf in new machinery. The equipment is expected to increase the
        c) Umutako company limited makes dresses. In 2015 the company sold 124,000 Rwf pieces of dress at a price of 5,000 Rwf
           per dress, the expenses of this company can be divided into:
    • Total variable cost 100,500 Rwf excluding tax
    • Fixed costs 670,000Rwf excluding tax.Calculate the break-even of the above business.
  • Unit 9: Financial Institutions

    My goals

    By the end of this unit, I will be able to:
    • Explain the meaning of financial institutions.
    • Appreciate the roles of financial institutions to an entrepreneur.
    • Analyse the types, functions/roles of banking and non-banking financial institutions.
    • Identify the various financial products and services in financial institutions.
    • Explain the different banking documents and the parties involved.
    • Explain the steps followed for acquiring a bank loan.

    Activity 1

    1. Through a discussion of 5-10 members, discuss the meaning of financial institutions. Give examples known to you.
    2. Financial institutions facilitate entrepreneurs and other individuals, discuss and present their roles to entrepreneurs.


    Financial institutions are institutions that deal in providing a variety of financial services to the public ranging from providing safe custody for peoples savings, deposits and withdraw services, payment means and fund transfer, loan services and financial advice among others.

    Types and functions/roles

    Activity 2

    1. As an entrepreneur, define the role of the central bank of your country.
    2. Describe some of the roles of the central bank to your business growth.
    3. Discuss the meaning of a commercial bank and its function to an individual in a community.
    4. Give examples of commercial banks known to you.
          A photograph of the National Bank of Rwanda headquarters

            Photographs of some commercial banks in Rwanda

    Activity 3

    1. Using the resources available, brainstorm the meaning of development banks.
    2. “Depending upon the requirements of the economy and the state of development of the country, development banks play
        important roles in the promotion of industries in developing and underdeveloped countries”. Discuss.
    3. Through a discussion of 5-10 members, discuss the meaning and roles of merchant banking and micro finance institutions.
            Photographs showing some of the SACCOs in Rwanda

    Activity 4

    1. Assuming you have been invited to give a talk to the community on the roles of SACCOs, what value would you attach
        to the SACCOs in the community?
    2. From the illustrations above mention the SACCOs you can identify.

    Non-banking financial institutions

    Activity 5

    1. List at least three non-banking financial institutions you know.
    2. Of what value are these non-banking financial institutions to the community?
    3. State at least three ways one would make money from a mutual fund
       a) Insurance companies
       b) Social security fund
       c) Brokerages
      d) Mutual fund companies
      e) Saving and loan association and unions

    Financial Products and services

    Some financial products provide convenience to our everyday lives, such as having a bank account to manage our money. Other products like insurance provide financial coverage against a range of events. Investment products may help us grow the money we have for purposes such as our retirement.

    Activity 6

    1. State the financial institution you are familiar with.
    2. Discuss the different banking products you know within the financial institution mentioned above.
    3. From the illustration below, state the details of a bank statement.
    4. Explain at least five different bank services offered by the financial institution mentioned.
    5. From the illustration below state the details of an e-alert or sms in relation to banking and cash, mortgage,
        insurance, credit and loans.

    Bank services

    1. Digitisation (electronic banking)
    2. Mobile banking
    3. Electronic banking
    4. Electronic (E)-statements

         An illustration showing e-statement

    5. Online banking/internet banking
    6. Real time SMS Alerts (RTAs)

           An illustration the details of e-alerts or sms

    7. Exclusive electronic banking centres

    Banking documents

    Activity 7

    1. Discuss and explain the different banking documents you understand better in your experience.
    2. List the main details of each document mentioned.
    3. From the illustrations below, state the following:
        a) Account number
        b) Account name
        c) Cheque number
        d) Financial institution
        e) The cheque currency

      An illustration of a bank cheque

       An illustration of a bank statement

                                   Banker’s card

         An illustration showing a withdraw slip

    Bank cheques

    A cheque is a written order by an account holder instructing the bank to pay a stated amount of money to a named person. A cheque is not money but just an instruction to the bank to pay the stated amount of money to a named person. When I give you a cheque, you can take the cheque to the bank and the bank will give you the amount of money stated on the cheque. The bank will get that money from my account.

    Parties to a cheque

    Activity 8

    1. 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;
        a) Drawer.....................................
        b) Payee......................................
        c) Drawee bank............................

    These parties are called:
    Drawer: This is the account holder, who issues a cheque instruction to the bank to pay a stated amount of money to the person or business. If you pay someone by cheque, you are the drawer.
    Drawee: This is the bank that is instructed to meet payments to a named person on behalf of the account holder.
    Payee: This is a person or business named on the cheque that is supposed to receive payment against the cheque. Generally, the person who receives a cheque, banks it on his/her account.

    Activity 9

    1. From the illustration above fill in the table below
    2. Form a group of 5-10 members to discuss and present what you understand by the term cheque.
    3. State and explain the different types of cheques.
    4. Suggest some of the advantages and disadvantages of cheques as an entrepreneur.
    5. Enumerate some of the reasons why a cheque can be dishonoured.
        An illustration for a bank cheque

    Types of cheques

    • Bearer’s cheque
    • Post-dated cheque
    • Stale cheque
    • Dishonored cheques
    • Open cheque
    • Crossed cheque
    • Blank chequeBank Loans

    Activity 10

    1. Research the internet and other available resources and discuss the meaning and types of bank loans.
    2. In a group discuss and state the features or characteristics of the types of loans mentioned above and fill in the
        missing information using a table.
    3. State some of the requirements that are used to secure the loans mentioned above.
    4. Suggest the different procedures or steps that would be taken to acquire a loan from a financial institution.
    5. In groups, assuming you are the community entrepreneurs fill in the loan application form Y below.
    6. Assume you have acquired a loan from one of the SACCOs in your village for school fees, what measures would you
        take to pay back the loan?

    A bank loan is a debt financing obligation issued by a bank or similar financial institution to a company or individual that holds legal claim to the borrower’s assets above all other debt obligations.

    Types of loans

    • Credit Cards
    • Overdraft

    Term and Revolving Loans

    The main characteristics of term loans and revolving loans are shown below:

    Secured and Unsecured Loans

    The table below shows the different types of secured and unsecured loans:

    Below is a table showing loan products, features and requirements.

    Procedures for Loan Application

    Below are some of the loan application forms that are used by the loan applicant

    Credit Management

    Credit management is the process for controlling and collecting payments from customers. A good credit management system will help to reduce the amount of capital tied up with debtors (people who owe money) and minimise exposure to bad debts.

    Monitor your debtors

    Maintain a debtors’ records to identify any due or overdue debts. Develop a good records management system and keep records up to date so you can quickly identify people who owe you money and how much they owe you.

    Take a proactive approach to credit management by contacting clients a few days before the due date to remind them a payment is due and ask if they foresee any problems with meeting their payment.

    Implement your debt collection practices the minute a debt becomes overdue and ensure clients do not exceed their credit limits.

    Credit refund

    Personal loans from banks and financial institutions are usually unsecured loans, taken out for personal reasons and not for business related or investment reasons. The two most common types of secured loans (where you have both a loan and a mortgage) are home loans and car loans. If you fail to make your agreed repayments on an unsecured loan, your property cannot be seized unless your lender or a debt collector acting on their behalf (or a debt collector who has purchased the debt) has a valid court order.

    Your lender or debt collector is required to consider your request for flexible payment arrangements if you are experiencing hardship. You should contact them early, inform them about your changed circumstances, and ask how they can assist you to find an affordable way to manage your repayments.

    The following provides information about your rights and options in relation to personal loan debt.
    • Your rights for negotiating changed payment arrangements for personal loans, including how to proceed if your lender refuses your proposal.
    • The range of options available for paying your personal loans.
    • Debt collection procedures if you do not pay your personal loans.
    If you are experiencing financial difficulty, you can request a hardship variation if you think you could manage your loan if the monthly payments were reduced or changed in another way.

    Unit summary

    • Financial institutions: These are institutions that deal in providing a variety of financial services to the public such as providing safe custody for their saving deposit and withdraw services.
    • Roles of financial institution to entrepreneurship: Providing credit, accepting deposits, giving interest on deposits, facilitating payments and money transfer.
    • Banking financial institutions, types and functions/roles.
    • Non-banking financial institutions: These are financial institutions which do not create credit but accept deposits from the public such as insurance companies, trust companies, building societies. They provide specialised services that cannot be provided by commercial banks.
    • Financial products and services: These are the activities done by financial intermediaries to meet the needs of the public such as insurance, money transfer, loans, etc.
    • Banking documents: These are the written, digital or printed facts showing transactions between financial institutions and their clients.

    Unit assessment

    1. a) Explain the meaning of financial institutions, banks, cheques, bank loans and non-banking financial institutions.
        b) Describe the role of financial institution to entrepreneurship.
    2. a) Distinguish between banking and non-banking financial institutions.
        b) Identify the products and services offered by financial institutions.
    3. a) What is loan management?
        b) Explain the procedures for acquiring a loan.
    4. a) Assess the advantages and disadvantages of acquiring a bank loan.
  • Unit 10: Initiation to Accounting

    My goals

    By the end of this unit, I will be able to:
    • Explain the difference between book keeping and accounting.
    • Describe the accounting process.
    • Explain the importance of keeping accounting records in business.
    • Identify different users of accounting information.
    • Define assets, liabilities and equity.
    • Distinguish between cash and credit transactions.
    • Identify various source documents for a business.

    Activity 1

    Form small groups and discuss the distinction between book keeping and accounting.

    Book keeping

    Book keeping is the recording, classifying and summarising of business transactions in an accurate and systematic way. On the other hand accounting is the recording, classifying, summarising, interpreting and analysing financial information. Book keeping is therefore a component of accounting.

    Activity 2

    In teams, role play the school departments which do not keep accounting records, for example academic department, kitchen department, Head teacher’s office, etc., and state the importance of keeping accurate records for a business.

    Importance of book keeping and accounting

    • It helps in tax assessment. Taxes like customs duty, income tax, excise duty, etc., are levied by government depending on the records. To ensure proper assessment of taxes, book keeping records must be maintained properly to avoid under or over taxation by government.
    • Book keeping acts as a tool for planning. This is because most entrepreneurs base their financial decisions according to sales, purchase, profits and investments.
    • It acts as a tool of control. Book keeping enables entrepreneurs to keep records of all properties of the business, which helps to eliminate the possibility of theft and misappropriation.
    • Book keeping helps an entrepreneur to ascertain whether the business has realised a profit or it has incurred a loss.
    • It helps an entrepreneur in credit transaction. Most business transactions are carried out on credit basis i.e., buying or selling on credit. It would therefore be difficult for the entrepreneur to remember all the purchases or the sales made on credit without proper book keeping.
    • Book keeping acts as a proof of financial position of a business. Knowing the assets (properties of the business) and liabilities (debts of the business) the entrepreneur can easily establish profiability or losses.
    • It helps to solve disputes among business members e.g partnerships co-operatives etc.
    • It acts as a center for reference whenever information about the business is required.
    • It works for comparison purposes. For example, to compare the performance of business over time.

    The Accounting cycle

    This refers to the complete process of recording business transactions and processing accounting data to generate useful financial information.

    The accounting cycle begins with recording individual transactions in the books of accounts and ends with the preparation of financial statements and the closing process. Having a proper cycle and procedure helps business organisations to ensure that their financial records are accurate and current.

    Major steps in Accounting Cycle

    The major steps involved in the accounting cycle are:
    • Analysing and recording transactions from source documents
    • Posting transactions to ledger accounts
    • Preparing a trial balance
    • Preparing adjusting entries
    • Preparing adjusted trial balance
    • Preparing financials.

    Activity 3

    In small groups, discuss who would need/use accounting information in case they owned a business enterprise and kept business records.

    Types of accounting

    Accounting is divided into three categories;that is, management accounting,financial accounting and cost accounting.

    Management accounting

    Management accounting focuses on providing information for use by management. It enables the management of the business to make decisions.

    Financial accounting

    It is a branch of accounting which tracks the assets, liabilities, incomes and expenses with an objective of ascertaining whether the business has made profits or losses.
    Financial accounting establishes the balance sheet and the income statement.

    Cost accounting

    The purpose of cost accounting is to find out the cost of goods and services produced. It helps a business to minimise costs by identifying avoidable losses and waste. It helps to identify the cost per item in order to determine costs.

    Users of accounting information

    Users of accounting information use them to make judgements and influence decision related to the business. These include the following:

    Internal user

    • Owners: The owners will use the information in order to determine the performance of the business. It also helps them to improve on the way they manage their business.
    • Employers/ managers: They want to know about the financial strength of the business and they also require information in relation to profit sharing, for better pay, job security and whether the business is still strong enough to continue existing.
    • Shareholders (in case of companies) will want to know that their investment in the business is secure and what the returns are likely to be.

    External users

    • Government departments, such as Rwanda Revenue Authority may use accounting information to determine the tax liability of the business.
    • Customers: These will want to be sure that the business can meet their supply requirements such that the supplies will be sustained in the future.
    • Lenders (financial institutions) such as banks will need accounting information in order to assess the financial capacity of the business to determine whether to give it a loan or not.
    • Creditors: The creditors are interested to know whether the business is credit worthy such that it can meet their payments.
    • Local community: The public may want to know the extent to which the business is concerned with their welfare, possibility of providing employment, pricing of products to decide whether there is need to help.The accounting information is used by both internal and external parties as summarised below.

    Common terms used in accounting

    Activity 4

    Identify as many concepts in accounting as possible. Do research about their application in daily life and in carrying out transactions.

    1. Account: An account is a record of transactions. It is a page in a ledger book where details of transactions of the
        same nature are recorded.
    2. Assets: These are business possessions that have monetary value. Assets are divided into three types:
        a) Fixed Assets: These are assets that are owned by the business for a period more than one year and they are not for 
            resale. Examples of fixed assets include: land, vehicles, computers buildings etc.
        b) The intangible assets: These are assets which cannot be seen physically (intangible) or non-material possessions of
             the business for example copyrights, company name, goodwill, trademark etc.
        c) Current assets: These are valuable resources that the business owns for a short period of time, that is usually one year.
           They can be turned into cash or they are used up in the production process during the year. Examples include; stock, cash,
           debtors and prepaid expenses.
    3. A petty cash payment voucher: This is a document for preparing petty expenses in an enterprise. Payments for small 
        expenses like brooms, cleaning, pens etc are recorded in this voucher.
    4. Capital: This is property or money that is invested in business by the owner(s).
    5. Debtor: A debtor is a person or company that took goods or obtained services on credit. For example, Vanessa sells
       Vanina  5 lip shiners but Vanina promises to pay at a future date. Vanessa calls Vanina a debtor and she remains a
       debtor until she pays the money. The amount of money still held by debtors is called a debt.
    6. Debiting: This refers to the recording of date on the left hand side of the T-ledger account.
    7. Ledger: It is a book of accounts in which the results of business transactions are arranged under suitable titles for example
        purchases account, sales account, equipment account, transport account etc.
    8. Drawings: This refers to the monetary value of goods and services taken out of business by the owner for personal use.
    9. Entry: It is when a transaction is recorded once in the books of accounts.
    10. Expenses: It is the monetary value paid or payable for goods and services in the course of business transaction.
    11. Purchases: These are goods bought for resale or for use in the business for production of more goods and services.
    12. Stock: These are goods not yet sold or goods still undergoing the production process like raw materials.
    13. Liabilities: These are obligations against the business for example, loans, creditors, bank overdraft, etc. Liabilities
          are classified into two: long term liabilities and current liabilities.
    14.Statement of account: This is a chronological list of transactions between two parties for a particular period of time
         i.e between a debtor and a creditor.
    15.A cheque: This is a written order from a depositor telling the bank to pay cash to the person or business named on
         the cheque.
    16.A delivery note: This is a document issued by the seller showing goods delivered or taken by the buyer.
    17.Cheque counters foil: This where the details of the information on the cheque issued is recorded and detached when
         the cheque is made. It gives good accountability for the money spent by the business.
    18. Double entry: Is a system flowed in accounting where a transaction is recorded twice in the books of accounts.
          In one account the transaction is debited and then credited in the other.
    19. Transaction: A transaction is the smallest unit of business activity. It is a deal between two or more people that involve
          exchange of goods and services for money.
    20. A trader: This is a person who buys goods and resales them for a profit.

    The accounting equation

    The fundamental equation of book keeping is the equality between the assets and liabilities of a business. This equation, known as the accounting equation or the book keeping equation, is the guiding element in the preparation of a balance sheet.

    Activity 5

    In groups of four, remind yourselves the meaning of a balance sheet. Discuss what comprises a balance sheet. Give examples of the components of a balance sheet and use them to prepare a balance sheet of your business.

    How can you define a balance sheet

    A balance sheet is a statement that shows the assets and liabilities together with capital of a business in a given period of time. It measures the financial position of a business.

    A balance sheet has two sides and the two sides of the balance sheet should always be equal. This is because one side shows where the business’ resources come from (capital or owners’ equity + liabilities) and the other shows how the resources have been used by the business (assets).

    Note: All resources owned by a business are referred to as assets. All money or items due to people or organisations
              outside the business are known as the liabilities. Among the liabilities are any resources of the owner(s) that have
              been invested in the business as capital (owners’ equity).

    The equality between assets and liabilities and owners’ equity is expressed by the accounting equation,
              Assets = Liabilities + Owners’ equity.

    Therefore, the accounting equation is usually shown as:

    From the above equation, we can derive the capital and liability formulae as follows.
                    Capital = Assets – Liabilities (C = A – L)
                    Liabilities = Assets - Capital (L = A - C)

    If the business transactions are recorded properly, the accounting equation is always “in balance”. This means that the left hand side of the equation is equal to the right hand side of the equation.

    Table U below shows four businesses. Use the accounting equation to determine the values of W, X, Y and Z.

    Activity 6

    In groups, research the meaning of assets, liabilities, capital and owners’ equity giving examples of each case. Use the data collected before to classify assets as non-current and current. Classify liabilities as short term and long term.

    Asset Accounts


    An asset is defined as a resource that is owned or controlled by a company that can be used to provide a future economic benefit. In other words, assets are items that a company uses to generate future revenues or maintain its operations.

    Assets accounts generally have a DEBIT BALANCE. This means that entries created on the left side (debit entries) of an asset T-ACCOUNT increase the asset account balance while journal entries created on the right side (credit entries) decrease the account balance.


    All accounting systems separate groups of assets into different ACCOUNTS.These accounts are organised into current and non-current categories. A current asset is one that has a useful life of one year or less. Non-current assets have a useful life of longer than one year.

    Here is a list of some of the most common asset accounts found in a chart of accounts:


    Cash – Cash is the most liquid asset a company can own. It includes any form of currency that can be readily traded including; coins, cheques, money orders, and bank account balances.

    Accounts Receivable – Accounts Receivable is an asset that arises from selling goods or services to someone on credit. The receivable is a promise from the buyer to pay the seller according to the terms of the sale. This is an unusual asset because it isn’t an asset at all. It is more of a claim to an asset. The seller has a claim on the buyer’s cash until the buyer pays for the goods or services.

    Notes Receivable – A note is a written promise to repay money. A company that holds notes signed by another entity has an asset recorded as a note. Unlike accounts receivable, notes receivable can be long-term assets with a stated interest rate.

    Prepaid Expenses – Prepaid expenses, like prepaid insurance, are expenses that have been paid in advance. Like accounts receivable, prepaid expenses are assets because they are a claim to assets. If six months’ worth of insurance is paid in advance, the company is entitled to insurance (a service) for the next six months in the future.

    Inventory – Inventory consists of goods owned a company that is in the business of selling those goods. For example, a car would be considered inventory for a car dealership because it is in the business of selling cars. A car would not be considered inventory for a pizza restaurant looking to sell its delivery car.

    Supplies – Many companies have miscellaneous assets that are entirely in product production; that are too small and inexpensive to capitalise. These assets are expenses when they are purchased. A good example is a car factory’s bolts. It is difficult to account for each bolt as it is used in the assembly process, so they are just expensed.


    Fixed Assets – Fixed assets include equipment, vehicles, machinery, and even computers. These assets generally have a useful life of more than one year and are usually more expensive business purchases.

    Intangible Assets – They are assets which are not physical. Examples of intangible assets are goodwill, stock investments, patents, and websites.

    Liabilities account

    These are debts or amount of money that the business owes the outsiders. They are claims of the business to the outsiders. Properties/possessions that are used by the business which must be paid for.
    • Long term liabilities
    • Short term liabilities
    a) Long term liabilities: These are debts of the business that are expected to be paid after a long time usually after one year
        e.g bank loans, debentures.
    b) Short term liabilities/current liabilities: These are debts of the business which are to be paid within a short time usually
        within a year. They are claims by outsiders of the business that are repaid within one accounting year e.g trade
       creditors, bank overdraft, outstanding expenses, prepaid income etc.

    Owner’s equity/net worth/equity

    This is the total amount of the resources in business that belongs to the owner at a given date. Owner’s equity is the amount that remain in business after adding new investments and net profit and subtracting drawings or any loss made by the business. Therefore, owner’s equity = initial capital + new investments + net profit- drawings

    Total assets – Total liabilities

    There are several types of equity accounts. Here are the main types of equity accounts:
    Capital – Capital consists of initial investments made by owners. Stock purchases or partnership buy-ins are considered capital because both are comprised of cash contributions made by the owners to the company. Capital accounts have a credit balance and increase the overall equity account.

    Withdrawals – Owner withdrawals are the opposite of contributions. This is where the company distributes cash to its owners. Withdrawals have a debit balance and always reduce the equity account.

    Revenues – Revenues are the monies received by a company or due to a company for providing goods and services. The most common examples of revenues are sales, commissions earned, and interest earned. Revenue has credit balance and increases equity when it is earned.

    Expenses – Expenses are essentially the costs incurred to produce revenue. Costs like payroll, utilities, and rent are necessary for business to operate. Expenses are contra equity accounts with debit balances and reduce equity.

    Activity 7

    The following items were extracted from MUHIRE’S trial balance for the year ending on 31st December 2014
                       Details                           RWF
                       Stock                             96,000
                       Sales                           860,000
                       Rent                                 5,000
                       Cash at bank           10,500,000
                       Debtors                      2,100,000
                       Creditors                     1,420,000
                       Motor van                    8,200,000
                       Equipment                   1,945,000
                       Rent payable                   543,000
                       Telephone                     1,810,000
                       Land                                 920,000
                      Salaries and wages        1,460,000
                      Insurance                           690,000
                      Raw materials                    200,000
                      2 year loan                    17,567,000
                      Bank overdraft                    300,000
    In groups, calculate the owners’ equity using the information provided above.

    Business transactions

    Activity 8

    Use various learning resources to discover the meaning of a transaction, a cash transaction and a credit transaction.

    A transaction is an agreement between buyers and sellers to exchange goods and services for money.

    Cash transactions

    Activity 9

    In groups, suggest benefits and disadvantages of selling goods and services by cash only.

    A cash transaction is when money is used in buying and selling of goods and services. Buying something by paying money instantly is called cash purchase while selling goods or services to someone for cash or cheque is called cash sale.

    Advantages of selling on cash basis

    • It enables the business owner to plan for his/ her capital.
    • Business reduces on the risk of losing money through bad debts.
    • The entrepreneur may not frequently borrow money to finance his/her purchases since he/she is likely to have enough cash to use.
    • The entrepreneur would be free from accounting work which involves some expenses.
    • The entrepreneur is likely not to be involved in legal expenses in case the buyer failed to pay the amount due.
    • It promotes selling of products in relatively small quantities since the customers can afford to pay for them instantly.
    • It enables the seller to pay his/her creditors promptly which can help him/her to benefit by receiving cash discount.
    In order to ensure that cash is properly managed, an entrepreneur should do the following:
      (i) All the cash received in business should be banked.
      (ii) All cash receipts and other documents for cash should be kept for reference.
      (iii) The entrepreneur has to avoid using business money for personal use.
      (iv) All the cash received should be receipted and accounted for.

    Activity 10

    In groups, discuss the advantages and disadvantages of credit transaction. Role play the good side and the bad side of credit transactions.

    Credit transaction

    This is when the business supplies or is supplied with goods or services without paying cash / and receives payment or pays after a certain future date.


    • There may be interest charged on raw materials or goods or services obtained on credit hence profits of the firm may decrease.
    • It is a way of promoting sales of a certain business since credit transactions attract customers to the business.
    • It enables a business to get the needed raw materials and services for production process.
    • It enables a business to reduce the storage costs since is can supply the products and then receive payments later.
    • It creates a good relationship between the seller/supplier and the customer (buyer).
    • Credit transactions fetch more profits since they do not involve discounts.


    • It may lead to loss of money by a business through customers who fail to pay their debts (bad debtors).
    • The entrepreneur may fail to raise enough finance to run the business; that is, may fail to purchase raw materials, pay workers and other utilities due to shortage of funds.
    • Credit transactions may also force the entrepreneur to depend on borrowed funds. This increases the costs of business operation in form of interest charged on borrowed funds.
    • It causes conflicts between buyers and sellers.
    • Administering credit requires much paper work.
    • Under credit, a buyer may not be in position to bargain so the seller may overcharge.

    Instalment payment

    Activity 11

    Role play in teams to demonstrate people buying and selling products through installment payment and thereafter discuss the advantages and disadvantages of this mode of business transaction.

    This system allows a customer to pay a certain portion of the price of the goods or services on the day he/she takes them and promises to pay the remaining amount in agreed portion, at regular intervals until when the whole amount is settled.

    Instalment credit may be under:
    • Hire purchase
    • Deferred system.
    a) Hire purchase: Under this system, the buyer takes possession of the goods but ownership is not his/hers until the last instalment is paid.He/she is required to pay a certain amount (percentage) known as down payment or deposit payment and the remaining balance is paid in agreed time. When the buyer fails to pay, the goods will be repossessed by the seller and the already paid instalments are not refunded.
    b) Deferred payment. This enables the buyer to have possession of the goods and to have full ownership on payment of the first instalment. If the buyer fails to pay all instalments as agreed, the seller cannot repossess the product, but takes court action to recover the money not paid.

    Activity 12

    Uwimpuhwe is a civil servant. His monthly income is Rwf 100,000. Though his income seem to be small, he has a plan of buying a motorcycle that he wishes to give to his brother to use to carry passengers so that he can create another source of income. The cost of the motorcycle is Rwf 1,200,000. To raise this entire amount, Uwimpuhwe must save all his monthly salary for 1 year which is difficult because he has to meet the other needs of his family. However, in his nearby town, there is a trader who deals in selling motorcycles and allows people who cannot afford to pay the full amount at once to pay for the motorcycles in four equal installments during the course of the year. The trader allows one who has paid at least a half of the amount to take and be using the motorcycle till he/she pays the remaining amount so that ownership can be transferred to him/ her. Uwimpuhwe has Rwf 600,000 and hopes to get a motorcycle from the trader so that his brother can use it for transporting passengers. He thinks that money generated may be used to pay part of the remaining installment.

    From the text above, suggest the advantages of installment payment to the buyer and to the seller.

    Advantages of instalment payment

    To the buyer
    • Obtaining expensive goods: A buyer can get expensive assets he/she would not have got under cash payment.
    • Raise standards of living: The standard of living of the buyer tends to go-up. This is because he/she is able to obtain goods without paying all the money at once.
    • Bank security: Items bought under instalment system may act as security for a buyer to apply for bank loans.
    • Convenience: Instalment buying is a convenient system of buying goods compared to cash or other means.
    • Partial payment: The buyer is in full use of the goods though payments are not yet completed. He/she is given time to look for money in bits while using the goods.
    To the seller
    • Increasing the turnover: A seller is able to dispose off many of his/her goods since many people tend to buy under this system.
    • Increase sales: The market of the seller is widened. Many people find it more convenient to buy under this system compared to cash.
    • Repossession is possible: Should the buyer fail to pay the instalments, the seller may repossess the product. If this is done, the already paid instalment is not refunded hence a benefit to the seller.
    • High profits are realised. The interest tends to be very high and hence the seller is able to make high profits.
    • Defaulters can be eliminated: The right of the seller to repossess the goods encourages the buyer to strive and pay all the instalments or else he/she incurs a loss. The number of bad debtors is reduced.
    • Facilitates continuous business: The larger number of buyers paying regular instalments provides the business with continuous working capital hence helping business to expand.

    Disadvantages of instalment system

    To the buyer
    • May incite buying: Consumers may be induced to buy products they cannot actually afford. They lose such items in case of failure to pay all the instalments.
    • Commodities are expensive: Commodities tend to be more expensive than when bought in cash. This is because the system seems to be very convenient to the buyer but in the end he or she pays much more.
    • High interest charged: The interest charged on hire purchase is very high. The buyer may not easily realise this because he/she pays in instalments.
    • Burdens the buyers: The buyers are overburdened by regular payments. They become slaves of continuous payment which becomes a burden.
    • Lacks full rights over goods: The buyer has no full right over the goods until the last instalments are paid. The buyer may lose the goods if the instalments are not paid.
    To the seller
    • Ties-up capital: The seller’s capital is usually tied-up in debts. This affects the daily or working capital and may result in losses.
    • Items repossessed may not easily sell: The seller may not easily sell off the repossessed property as they are already second-hand. The value of the item tends to depreciate even if it is used for a short period.
    • Raises costs: As a result of regular payments, a lot of book keeping is involved and this increases the administration costs. Every buyer must have a ledger where his/her transactions are recorded.
    • May spoil business image: A lot of money is spent and business image spoilt by taking a buyer to court for failing to pay all the installments. Such action may be seen as unbecoming to other buyers and may discourage them from buying the sellers’ items.
    • May lead to total loss: In case of fatal accidents to the item like cars where even the owner dies, the seller suffers total loss.

    Source documents

    Activity 13

    In teams, identify source documents used for different transactions. Practice writing out a variety of sample source documents and point out their relevancy.

    Source documents are documents which provide the accounting information when required. They are documents prepared when transactions take place to provide documentary evidence to show that a transaction was effected. They include the following:

    1. Cash receipt

    This is issued when a debtor pays for the goods already delivered or service already rendered. It acknowledges the receipt of cash.

    2. Bank statement

    This is a document issued by the bank to its customer showing the transactions that have taken place during a given period of time. It shows deposits made, withdraws and balance at a given period date.


    3. Cash sale slip

    This is used for cash transactions. It is prepared by the seller and issued to the customer who has paid for goods on the spot.

    4. Invoice

    It is a document which gives the quantity, quality, unit price, total value of goods sold on credit.

    5. Cash payment voucher

    This is prepared for internal use. It is prepared /approved by top management to authorise payment of cash for goods and services.

    6. Credit note

    This document shows a decrease on the claim of money. It is issued when part of the goods sold or purchased are returned or price overcharged is reduced at later stage.

    7. Debit note

    This document is sent by the seller to correct an undercharge on the original invoice. It is issued because it is better to issue another document rather than do alterations on the original invoice.

    Unit summary

    • Accounting: Is an art of recording, classifying, analysing and summarising transactions in terms of money and interpreting results thereafter.
    • Book-keeping: Is recording of things owned by the business and the money owed to the suppliers and others by the business and how these things change day by day.
    • Why keep accounting records:To ascertain profits or losses; helps in credit dealings; proof of financial position; acts as a tool of control.
    • Users of accounting information: Financiers, shareholders, tax collectors, entrepreneurs, employees, etc.
    • The accounting equation: This is an equation that shows how the assets of any organisation, company or individual are financed either by borrowing money or by paying with the money of a company’s shareholders.
    • Business transactions: This is a deal that involves exchange of goods and services for money.
    • Source documents: These are documents that provide accounting information when needed.

    Unit assessment

    1. a) Explain the difference between book-keeping and accounting.
        b) Explain the importance of keeping accounting records in business.
    2. a) Identify different users of accounting information.
        b) Define assets, liabilities and equity. c) Identify assets, liabilities and equity.
    3. a) Distinguish cash and credit transactions.
        b) Identify various source documents for a business.