Lesson 9. Seeking finance

Part Three: Financial Management

Lesson 9. Seeking finance Lesson 10. Saving wisely Lesson 11. Good management of resources Lesson 12. Accountability and record keeping Lesson 13. Planning financial goals Lesson 14. Avoiding loss & calculating a budget Lesson 15. Using credit in the business

Lesson 9. Seeking finance

Anchor scripture

• 1 John 5:14: This is the confidence we have in approaching God: that if we ask anything according to his will, he hears us. • Proverbs 10:5: He who gathers crops in summer is a prudent son, but he who sleeps during harvest is a disgraceful son.

Specific learning objectives: from this lesson, the participants will be able to: • Understanding how loans, interest, and repayment function. • Plan the wise use of taking and repaying a loan.

ASK Participants: In your own understanding, why should a person take a loan?

EXPLANATION: Unless you have enough money yourself to start the business, you may need to find other sources of finances. One way is to borrow from a bank - this is known as taking a loan. A businessperson can borrow money for various reasons, among them: • To buy inputs for the farm • To use as capital for the business • To buy more stock for his business • To fund a new business idea • To expand an existing business • To take care of an emergency need

Different types of Loans

Ask participants what different places or ways can you borrow money? • Bank loan or micro-loan from a financial institution • Borrow from someone in your family. It is risky – many times, it creates conflicts if your family member wants to repay all at once or you struggle to repay on time.

• Merry-go-round groups • ‘Borrow’ from your savings

After discussing these options, tell them about Urwego products and services.

Products:

• Group loans: inguzanyo z’amatsinda • Individual loans: inguzanyo y’umuntu ku giti ke

Saving Products Financing Products

Individual Loan School Fees Loan

Agriculture Loan - Rice Agriculture Loan -Coffee Group Loan

Agriculture Loan- Maize

Agriculture Loan

• Salary loans: inguzanyo ku mushahara • School fees loans: inguzanyo z’abanyeshuri • Mortgage loans: inguzanyo zo kubaka no gusana • Agriculture loans: inguzanyo z’ubuhinzi

Services:

• mHose • Transfers

• Remittances

Factors to consider when taking a loan

• Family: Financial decisions should be discussed a couple or a family, especially loans or financial commitments that require repayment. Discuss it openly with family before making a commitment.

• Interest rate

You will often have to pay back more than what you borrowed - this extra amount is called interest. This is the “cost” of the loan. Calculating the interest depends on many things, like the size of the loan, how long you have borrowed the money, how much you have already repaid, etc. A financial institution should be clear and open about the interest rate.

• Loan Groups

To get a micro-loan, especially if you do not have adequate collateral, you must be in a group or cooperative. If anyone in the group cannot repay their loan, the others will have to repay instead. Only team up with people you trust.

• Security

Security is a way for the lender to be sure to get the money back. This can be in the form of mandatory savings amounts or collateral or commitments you make to the loan group or cooperative.

• Repayment

When you take a micro-loan, you must make a regular repayment depending on the terms of the loan. For many types of micro-loans, this means a payment each week following a grace period of one week. Some other loans are paid biweekly or monthly.