SCORE SPM Manual

IGA SELECTION, PLANNING AND MANAGEMENT A training course for the participants who are interested in operating IGA’S

This publication is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of Sustainable Comprehensive Responses for Vulnerable Children and their Families (SCORE) project and do not necessarily reect the views of USAID or the United States Government.

INTRODUCTION IGA Selection, Planning and Management is a training course for the non-literate participants interested in staring, expanding and managing IGAs. It has been designed for groups of participants who are interested in starting up/improve on income generating activities (IGAs) both in the towns and villages.

Poor families in both urban and rural areas often do not have a great deal of experience with managing financial and other resources for the purpose of income generation. Although many supplement family income with earnings from small household-based activities, few have experience in saving and borrowing money for investment in an IGA. The IGAs supported through NGO programs are usually larger and more complex than participants‟ previous activities, exposing them to the risk of financial losses if the activity fails. This risk of failure can be reduced by providing participants with training that enables them to systematically assess the appropriateness of several potential IGAs, comparing each to their specific skills and resources. An analysis of this kind will allow each of them to choose the IGA that is most suitable, given their individual circumstances.

The objective of this training course is to assist these men and women: 

To select an IGA that is suitable for their individual circumstances, after careful consideration of the technical, marketing, social and financial aspects of a number of alternative IGAs;

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To plan for the successful launch of the IGA after the selection has been made; and

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To manage the IGA effectively, so that the loan is repaid on time, the income earned from the IGA matches expectations, and the risk is kept within manageable limits.

The course consists of five sessions, which should be conducted in four-hour sessions once a week over a period of five weeks. At the end of the first-week period, the participants should have each selected an IGA after an analysis of all-important factors; and have planned for the start-up of the chosen IGA. The training materials were de-engineered to make them responsive to environment and gender concerns, cost effective and yet bring out the themes and issues by using PRA Methods.

2 Training Course on IGA Selection, Planning and Management

The course is a two-module course. The first one centers on five major questions after a preliminary market assessment. The preliminary assessment focuses on the first question; I. What product/service do people lack?

This should lay the foundation for the five questions that follow.

II. Can I operate this IGA? III. Will people buy the products/services I want to sell IV. Is the IGA profitable?

V. How much money do I need to start and operate the IGA? VI. Will the income from the IGA when added to other family income, be enough to pay house hold expenses?

Whereas the second one covers: i. Marketing and customer care ii. Managing business time management and delegation iii. Problem solving and decision making iv. How too increase business profits v. Managing business failures & growth vi. Quality management & costing

This second course is offered to VSLA clients that have been trained on VSLA and their IGAs have become Small & Medium Enterprises

3 Training Course on IGA Selection, Planning and Management

GUIDELINES FOR THE NGO 

Three principal subjects are discussed during the five sessions that comprise the course: Subject Area

Sessions

Selecting a suitable IGA Preparing an operational plan Managing the IGA

1-3 4 5

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The course uses training methods that are designed to encourage creative thinking and maximum retention of the key concepts. Each session is followed by a home assignment that reinforces the learning points and guides the participants as they individually investigate potentially suitable IGAs.

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Each participant makes a decision about the most suitable IGA for him or herself after completing Session 3. The assignments thereafter prepare them for the successful launch of their IGAs.

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PRA methodology is used extensively including drawing graphics and discussions.

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The ideas are generated through discussions with participants and simple methods are used to calculate costs.

GUIDELINES FOR THE FACILITATOR 

Read the curriculum and prepare for the session beforehand.

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Prepare all materials and aids before starting the session. Searching for materials during the training session may reduce its effectiveness.

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Use all training materials in the right sequence. Improper use of the materials may diminish learning.

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Begin the session with some informal discussion about the participants' lives. This will allow the learner to think that you are one of them.

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Be friendly, confident, easy and cheerful at all times.

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Keep the session in good humor. Consciously try to create a pleasant learning environment.

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Stories are used in different sessions of this course. Read the stories slowly and artfully so that the participants feel excited while you are reading and can easily understand them.

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Don't cite examples related to any participant, as this may cause embarrassment.

4 Training Course on IGA Selection, Planning and Management

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Avoid favoritism. Pay equal attention to all learners. Your function is to link the ideas of the participants.

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Be careful to ensure that everyone participates. All learners do not have the same ability and speed of learning. Some are more comfortable than others speaking up in a large group.

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Don't get excited if participants cannot easily answer a question. In such a situation, encourage them by complimenting them on what they know and not focusing on what they do not know.

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Follow the time schedule. But also respect learners' opinions, especially if they need more time.

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Believe in the creativity and worth of the participants. Let the learners speak more, practice more, and try more. Remember that the learner is the subject of all your efforts.

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A training curriculum is a guide that helps the facilitator identify an easy way of transferring certain knowledge, skills and attitudes to learners in order to achieve the predetermined objectives of the course. There is no need to follow the curriculum exactly. Make changes according to your circumstances and the proficiency of the participants.

5 Training Course on IGA Selection, Planning and Management

DAY 1 SESSION 1 INTRODUCTION Time:

60 Minutes

Step I: Welcome the participants to the training course and thank them for giving their valuable time.

Tell the participants that the training course consists of four sessions that will be held once a week. Discuss the date and time of the sessions to make sure that everyone can attend. If necessary and possible, adjust the time of future sessions to match the convenience of the participants.

Explain that the purpose of the training course is to prepare them for start-up and expansion of income generating activities. In order for this result to happen, they must have seriousness of purpose. You, the facilitator, expect them to demonstrate seriousness of purpose by:       

Attending all five sessions.

Arriving at the session on time.

Participating actively.

Not leaving the session to attend to other business.

Thinking carefully about the learning from each session in the following week.

Preparing thoroughly for the next session according to the instructions given.

Starting up or expanding an IGA that they have planned during the course.

Say that; there are various ways for the low income earners to survive, but not all ways are sustainable. Some ways, such as undertaking IGAs, make them independent and in control of their lives. But other ways, such as taking help from relatives or neighbors, or expecting handouts from government, make them more vulnerable.

Operating an IGA provides the opportunity to be self -employed using one's own skills and resources. IGAs generate increased income that allows families to enjoy better food, clothes, shelter, medicine and status in the society. Unfortunately, many times the poor do not have confidence in their capabilities and think that they cannot manage economic activities or other initiatives that let them live better. The first part of the session is designed to change this perception.

There are SIX IMPORTANT POINTS, which should be considered before start-up of an IGA. The participants can add on.. These are: i.. What product or service do people lack in this community?

This question analyses MARKET potentiality The five questions are: 6 Training Course on IGA Selection, Planning and Management

ii. Can I operate this IGA? In the first question, a participant is supposed to analyze by answering three key issues about it namely;  SKILLS AND KNOWLEDGE. Do I have the skills and knowledge needed to operate this activity?  TIME; Do I have the time to operate the activity and do I know the seasons? iii. Will people buy the product I want to sell? iv. Is my IGA profitable?

This question guides the participant to assess the level of INCOME s/he will realize from the proposed IGA. v. How much money do I need to start and operate this IGA? What are the possible sources for this IGA funding?

The fourth question enables the participant to think through possible sources of IGA financing both as it starts and runs. Therefore, it answers the source of both start-up and operating CAPITAL. vi. Will the income from this IGA, when added to other sources of my family income, be enough to meet my household expenses?

Anyone who intends to start up an IGA should, first of all, list all the IGAs that might be suitable. Then s/he should think about these five important points for each of the IGAs under consideration before making a decision.

Most people often do not assess all these points before deciding which IGA to undertake. They select IGAs that they observe other people doing or that they think might have a good profit.

This Session is designed to make participants aware that an IGA should be started up only after careful analysis. Each point is covered in more detail in Session 2.

Thus, the five important points form the prime content of the training on IGA identification and selection. The trainer's greatest priority is to ensure that the participants have registered the importance of these points. To facilitate this learning, the trainer should enumerate these five points using the five fingers of the hand. During each subsequent session, this technique should be used to reinforce the learning.

GETTING ACQUAINTED

The facilitator uses the following game to make participants become well acquainted and relaxed: 7 Training Course on IGA Selection, Planning and Management

Step 2: Place the packets of salt, matches, soybeans, firewood and pots in the middle of the group of participants. Request each participant to take one item. Allow the participants to take the items and sit down before you give the next instruction.

Ask the participants to group themselves according to the item that each has picked: Participants having salt will be in one group, those having matches will be in another group and so on.

Request the participants to tell the other members of their small groups their names, the number of people in their households and the ways that their households earn money.

Now ask the group with soybeans if they can eat the soybeans alone. The conversation may be similar to the following: Q: A: Q: A: Q: A: Q: A: Q: A:

Those who have got soybeans please taste it.

Sorry. Soybeans cannot be eaten without cooking.

What more do we need that other participants have?

We need soybeans, firewood, matches and a cooking pot.

Do any of us have these products?

Yes, other groups each have one product.

Can we use any of these items by itself?

No, we can not. All items are needed to cook the soybeans and eat them.

Can we exchange these items among ourselves?

Yes, we can.

Allow the participants five minutes to organize into groups that each have a complete set. Tell the members of the new small groups that have been formed to introduce themselves to the others just as they introduced themselves to the previous small group.

Now have each group use the materials to roast the soybeans and eat them.

After all groups have cooked and eaten their beans, ask them what lessons they have learned from the game. Some of the answers may include:  In order to do some work, co-operation is necessary.  Contribution is needed to achieve results.

Thank the participants for their contributions then explain the following theme clearly. Let them understand before you move ahead.

NB: -Conclude the participants’ contributions by explaining to them that: To get the best result from the training, participants have to exchange their knowledge and ideas freely among themselves during the whole training period in the same way that they have exchanged during the game. Exchanging knowledge and ideas will make them more comfortable in the learning process and they will enjoy the training as they have enjoyed the game.

8 Training Course on IGA Selection, Planning and Management

Topic: Poverty analysis and IGA as a means to increase Family Income OBJECTIVES:

By the end of the Session, participants should be able to:     

TOOL:

Describe how a poor family looks like and discuss the causes Describe a happy family and explain the importance of IGAs Ask some of the key questions asked when selecting IGAs Determine the mistakes that many people make in the selection of their IGAs Be able to describe the five principal points that should be considered before selecting an IGA from a group of alternatives.

PROBLEM TREE

Step 1: Start by preparing the ground for graphics. materials like stone sticks, leaves, cards, etc.

Ask participants to collect local

Then guide learners on the use of graphics and how to draw using local materials.

Next; through a discussion, guide participants to analyze household poverty in their locality.

Using the questions below, On: Do we have any experience of being poor?

Qn: How would you tell that a family is poor?

Qn: How different would a happy or rich family look like?

Step 2: Using a problem tree, we are going to discuss what causes the family to be poor and see its effects on the family. We will use the taproot to indicate the biggest/most critical cause of poverty and the sizes to the roots indicate the gravity of the cause.

On the branches, the biggest branch represents the most felt effect of poverty.

9 Training Course on IGA Selection, Planning and Management

Effects

Causes

Ask; what solutions can we find in order to avoid the condition of remaining poor?

If participants suggest IGAs as a solution, pick from there but if they donâ€&#x;t then introduce it.

Then guide them to define an IGA and to discuss the importance of operating IGAs. Through discussions they should be able to define IGA as: A small economic activity, which is generally operated at or near home using one’s own labour or the labour of family members with the purpose to raise family income. Make sure participants do not confuse IGAs with other activities that are not meant to raise family income. This includes the selling of food meant for consumption to raise money to solve emergencies.

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Step 3: Mention the first Entrepreneurial question 1: WHAT PRODUCT OR SERVICES ARE LACKING IN THIS COMMUNITY? Tell them that there are different ways how one can identify an opportunity in the community and these are some of them;  Services acquired outside your community; (what products or services do people look for outside this community?)  Gaps in the supply and production chain; (what products or services are missing in the supply chain of a particular product or service?)  Products or services supplied by non residents of this community; (what are those products or services supplied by persons outside this community?)  Innovations and creativity; (what new thing is needed by people in this community?)

Then after you have identified the gap, come up with a proposal of an IGA that would fill it and answer the five questions before selecting one for operation. Tell them that they will use their left hand to demonstrate the five questions.

Step 4: Using your left hand raised up and holding the smallest finger, mention the second question: CAN I OPERATE THIS IGA? Ask participants how people in this community usually identify/select IGAs to operate?

Through the discussions participants may mention the following ways:   

See others doing Hear that it is profitable Think that it is easy to operate

Step 5: Read the story below purposefully to enable participants appreciates the effect of not answering the second question.

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THE STORY OF ONEGA AND HIS WIFE ZUBEDA (Note: the facilitator chooses names that are known to the locality/participants) Onega and Zubeda are peasant farmers who, with the current political stability, were able to send their three girls and two boys to primary school.

They planted their first crops in April and harvested the beans and groundnuts in August. The crops were not of particularly high quality because the rains had been poor. Therefore they did not have a surplus for sale. However, Onega usually went to the market once a week, and noticed a lot of produce buyers and sellers who seemed to be making a good profit. This activity also did not seem to require a lot of work, he discussed this idea with his wife, and they agreed that this would be a good way for them to earn some extra money.

They replanted beans and groundnuts in August, hoping for a better second crop. Over the next two months, they continued to think about the possibility of starting a produce buying and selling business. They knew that beans would be harvested by local farmers in November and that would be a good way to start. They could store these beans in their house until February and then re-sell them at a higher price.

Unfortunately, because of the poor yields they could not raise money for the desired business.

So they realized that they would need to borrow from a relative. Onega decided to ask his uncle who had a small business in town, for financial assistance. His uncle agreed to lend them enough money to buy five sacks of beans. When local farmers harvested their beans at the end of November, Onega and his wife went to the local market and bought five sacks, which they transported to their house. They stored them in a small room in their new house and locked the door for safekeeping. The beans that they harvested from their own fields were kept aside for the familyâ€&#x;s consumption.

In mid-January Onega went to the county headquarters to attend a meeting organized by the Boma chief for farmers and addressed by the Agricultural in-charge of the Boma. The meeting was organized so as to answer farmerâ€&#x;s questions about their agricultural activities. Onega told the people present at the meeting about the bean business he and his wife were carrying out. The Agricultural Officer asked if he had been checking on their beans and taking them for to dry on a regular basis. Onega confessed he had not been doing that. The Agricultural Officer warned him that the beans might spoil from infestation by bean weevil if not checked and dried regularly.

As soon as Onega got home he told his wife what the Agricultural officer had told him. They took the beans out and checked them. To their horror, they discovered that two sacks were completely destroyed and the other three sacks had some damage. They decided to sell the three sacks that were still of marketable quality at the next market day before the situation got worse.

Because it was January, the price for good quality beans at the market was higher than in November when they had purchased their beans but less than the price they had expected to get in February. However, nobody would pay this higher price for their beans because they realized that they had suffered some damage. All that they could get from buyers was a price almost the same as that they had paid for the beans in November.

12 Training Course on IGA Selection, Planning and Management

After they had sold the beans and counted the money, Onega realized that he would not be able to repay his uncle. They had purchased five bags, but sold only three at exactly the cost price.

Therefore, they had made a large loss. Onega felt despair because he realized that they had no other way of earning money to repay the loan. Consequently, the activity had an adverse impact on his economic situation rather than improving it.

Now Onega and his wife are both regretting the great mistake they made by starting up a produce buying business. They realized that they should not have started up this IGA without enough technical information. They know now that they should have thought more carefully about this business before starting it up. * * * Discuss the learning from the story. The following questions may be asked to explore the learning:  Why did Onega and his wife start an IGA?  Why weren‟t they able to achieve their objectives by operating the IGA?  What aspects should they have thought about before starting up the IGA? Through discussion let the participants realize the dangers of selecting an IGA without careful consideration of all-important aspects.

Step 6: Tell the participants that you are going to repeat their points and put them in a demonstrative way by using the five fingers of your left hand.

Recite together with the participants the five important points below as you demonstrate with your left hand.

I. II. III. IV. V.

o

Can I operate this IGA? Will people buy my products?

Is this IGA profitable?

How much money do I need to start and operate this IGA? Will income from this IGA, when added to other sources of family income, be enough to meet my household expenses?

Relating each point to Onega's story discuss some of the important questions people ask when selecting IGA’s. The list should include but not limited to:     

Market (Will people buy products?)

Knowledge and skills, time and seasonality (Can I operate this activity?)

Profit (Is the IGA profitable?)

Capital (How much money do I need to start the IGA?) Family expense (Will the income from my IGA if added to other sources of income be enough to meet my family expenses?)

As they mention participants should discuss why it is important to ask the questions.

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Training Course on IGA Selection, Planning and Management

Step 7: Tell participants that in question # 2. i.e Can I operate this activity? One has to think about the following  The level of knowledge s/he has on the proposed IGA  The skill s/he has to operate and mange the IGA  The time available to s/he has to operate and manage the IGA  If the IGA is seasonal or affected by seasons, s/he has to assess whether s/he knows the seasons that are likely to affect the IGA. Note: If s/he does not know how to operate the activity, do not know how to respond to problems or do not have enough spare time to work on it, and can not identify a family member to do it, then it would be wise to identify another IGA. That is answering question # 2 i.e other opportunities.

S/he also has to think about the seasonality of the activity. If it is an off season, then it may be difficult and risky to implement the proposed IGA. Even if it's the right season now, I need to think about how difficult it will be for me to change to another IGA when the season changes.

Allow participants to re-phrase the points in their own words several times. Stress to the participants the importance of each of these points for selection of a suitable IGA. Step 8:

INTRODUCTION OF „THINK ABOUT‟ Time:

15 minutes

Explain to the participants that this training course will be valuable to them only if they spend time between sessions thinking about the learning from the session and how they can apply it to their own lives.

Explain that each session will end with a subject that all participants will be asked to think about over the next week. They may discuss the „think about‟ with other participants, with family members or with anyone else in the community. They should come to the next session ready to discuss their findings.

Conclude the session after giving the home assignment or 'think about' and reminding the participants about the date and time of the next week's training session.

Request participants to think throughout the week about the IGAs that they can undertake for their survival. They should come to the next session with a list of at least three IGAs that might be suitable for them. Those who are already operating IGAs should also review their IGAs in line with the five important points and think of two other possible ones.

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DAY 2 SESSION 2 EXPLANATION FOR THE FACILITATOR: Participants should come to this session with the names of several IGAs that they have identified as being potentially suitable for them. Ask participants to mention IGAs they have identified. Sessions 2 explores the various factors that they should consider before making a final decision about which IGA to undertake. The trainer should make sure that all participants understand that a decision should be reached only after careful consideration of all-important aspects. Participants should be encouraged to think critically about the IGAs that they've identified, and to feel free to add some new options if they choose.

This session discusses in detail the second, third and fourth important points that were identified in Session 1 Question/Point # 2: Question/Point # 3: Question/Point # 4:

Can I operate this IGA? Will people buy the products/services I want to sell?

Is this IGA profitable?

TOPIC: IGA operation, marketing and profit concerns.

OBJECTIVES:

By the end of the session participants should be able to: Explain the importance of examining their skills, knowledge and time availability, Explain the importance of analyzing market issues for the product/service they have selected to engage in  Explain and categorize the different types of costs incurred in IGA operation  Determine whether they are able to price and sell the products from their proposed IGAs.  Calculate accurately the income from their IGAs.

The trainer should be sure to continue the technique started in the last session of demonstrating the points using the fingers of the left hand.

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TRAINING PROCESS Step 1: Tell participants to mention the six key questions one must answer before deciding on any IGA as below; I. What products or services are missing in this community?

II.Can I operate this IGA? III.Will people buy the products I want to sell?

IV. Is this IGA profitable?

V. How much money do I need to start-up and operate each of my IGA? VI. Will the income from this IGA, when added to other family income, be enough to pay household expenses?

Then emphasizes that “If you are going to make a product or provide a service, then you must be sure that customers will want to buy it” and this is the question we are going to address today.

Tell them that; look at your list of business ideas. Ask yourself if people would buy the product or service. And ask “why or why not.”

Possible reasons would be;  Too expensive,  Not needed in the area,  Too much competition Step 2: Tell participants that to answer this question # 3, one must think about various things as indicated below.

Products    

What product or services do I want to produce?

Are my product/service necessities or luxuries?

Are they familiar to the people or new?

Are their similar products on the market? What is their quality and their prices?

Buyers    

Who are the buyers of my products/services?

What quality do buyers want? Can I provide this quality?

What quantity is generally bought by each buyer?

How much income do they have?

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Training Course on IGA Selection, Planning and Management

     

Where do they live?

How will they know about your product or service?

What else do you know about them?

How frequently do they buy? Daily, weekly or monthly?

Does their demand vary in accordance with season?

Does their demand vary according to their wealth?

Sellers/Competition for the product/service you want to sell.

      

Are there any other sellers of the same products or services in the area I want to serve? How many?

Who are they?

Where do they sell?

How do they attract customers?

What is the price charged by other sellers?

What special advantages do any of the competitors have?

What special advantages do I have?

The next stage will be going into a detail feasibility study. What you need to find out is, if you say “YES” to these questions, having done some research, then it is worth you spending much more time on a feasibility study.

Step 3: Then read the following story for participants to internalize the market question;

The Story of AJIRU AND THE TABLECLOTHS Ajiru a mother of four lives in a village near this one. One of her major concerns is her children.

She would like them to go to school, but she cannot afford the school fees exercise books and uniforms that they would need as they join secondary school. She had also liked to have better food and health care for her family. This all costs money. Ajiru has been wondering about how she can solve these problems.

She has saved a little money. Ajiru has saved 200 Pounds and she wants to use this money to start an IGA or an activity that will generate more money. Other women she knows are making tablecloths.

Ajiru also decides to make table clothes. She decides to make four (4) table clothes and sale them 70 pounds each. She will make 280 pounds and she is very excited about the idea.

Ajiru goes to the trading center and buys cloth and cotton threads she needed. To her surprise this uses all her 200 pounds that she has saved hence she had to walk home.

As she walks home she feels happy thinking about money she will make from her tablecloths.

As soon as she gets home she starts on her work. She has very little experience of sewing tablecloths and is not sure about some of the stitches. It took her a lot of time to make 4 tablecloths.

17 Training Course on IGA Selection, Planning and Management

Her sawing took her a lot of time that Ajiru has been neglecting other areas of her life. Her children have been neglected and her work in the house and garden has not been properly done for weeks.

Ajiru thinks that her husband will forgive her and he will be very pleased when she makes 280 pounds from her tablecloths.

Ajiru finishes making her tablecloths and takes them to the market to sell. She feels excited that she will get money for all her hard work and sacrifice.

She is dismayed when she gets to the market. There are many women selling tablecloths and they are all beautifully made and finished. Ajiru‟s looks very poor and beside them her sewing is very bad.

She had hoped that she can sell her tablecloths for 70 pounds however the best tablecloths are selling for that price and Ajiru will get 50 pounds each, is she is lucky enough to sell them at all.

Ajiru stays at the market all day and she is very discouraged. **** After telling the story, discuss the learning from it. Ask participants the following questions.  Why was Ajiru‟s initiative not successful?  Which important factor didn‟t she consider when deciding on the IGA to engage in?  What lesson can we learn from this story?

Guide the participants to discuss the elements of points #2 and #3 while referring to Ajiru’s story.

Probe more on the four aspects under question number two namely: Skills  Knowledge  Time  Seasonality Note: Emphasize that skills and knowledge refer to use of suitable and appropriate:  Tools and equipment  Raw materials  Labor production methods Try to generate a positive attitude among the participants for assessing operational and marketing aspects before the start up of an IGA.

18 Training Course on IGA Selection, Planning and Management

Step 4: Introduce the fourth entrepreneurial question which says: IS MY IGA PROFITABLE? While demonstrating with the third figure of your left hand The trainer mentions that in order to establish the profitability of an IGA, one has to figure out if there will be any money left at hand after I have paid all the expenses. To estimate the income I will get from this activity, I should:   

Calculate the cost of the inputs (exclude start up cost), as well as selling costs.

Calculate the total value of sales.

Estimate income by subtracting costs from sales.

By doing this I can appraise the level of income for each of the IGAs that I have under consideration. If the IGA is not at all profitable, then I should drop it.

Then mention that; the first step in finding out the income from an IGA is proper categorization of the costs. Say that there are two basic categories of costs namely Start-up Costs and Working Costs1.

Tell them that; Start-up costs are incurred only once - before starting up the activity - or very infrequently. These costs are incurred before your first sales and the business begin to generate its own money. Examples of costs that are incurred only once are buying equipment, rent, which can be used for a long time. Costs that are incurred only occasionally include tools and other items that last for more than one production cycle, but that do not last for many years.

Then tell them that; Working costs are incurred during each production cycle. It is the money needed to keep the business going. These costs vary with the level of production. Examples are raw materials, transport, labour and other inputs.

The working costs turn over, or revolve, from one production cycle to the next. Raw materials and other inputs are transformed into products that are sold, and some of the money earned from the sale must be used to purchase new inputs. Thus, it is essential to know the amount of money required for the working costs, and to deduct it from total sales before using the remainder to pay personal expenses.

Next; define Income as the money available for personal use after the working costs have been subtracted from the sales value of all the products and by-products.2 Ask participants; Do you know how to estimate the income from your proposed IGAs? 1

Working Costs included both permanent and non-permanent Variable Costs. These two categories have been combined to reduce the complexity of the analysis for non-literate participants.

2 Start-up costs mainly fixed costs 2

This simple method for calculating income does not take account of depreciation of the fixed assets of the IGA. The need to set money aside for equipment replacement is introduced later in the training course, under the section on savings.

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Training Course on IGA Selection, Planning and Management

Then conclude your definition that income is estimated by subtracting the costs required to produce and sell a given quantity of products/service from the expected sales value.

Explain to them that the income estimation will be correct only if they estimate accurately the costs that are incurred for both the production and sale of the products namely Start-up costs and Working costs.

Step 5: Using a matrix, discuss with participants on how to calculate income from a given IGA. NOTE: This demonstration shows participants how to categorize the costs of their IGAs and calculate the income that can be earned from them. A later session on management will teach them how to keep the working costs separate from the money that is available for personal expenditure.

Start by suggesting one IGA as an example e.g. roadside table and ask participants to mention the costs they would incur to run the IGA (a table, tins, a box, sweets, biscuits, matchbox, and cigarettes)  

Ask them which of the items would they buy once in a while and which items very often?

Tell the participants that items, which need to be purchased only once, or from time to time, are known as start-up costs. They normally last for many production cycles.

Let them give examples of such items and costs

Ask participants for some examples of start-up costs of other IGAs. 

Tell them that; items which need to be purchased every time we produce a product, are called working costs. If we engage in trading activities rather than production activities, the working costs are the costs of items, which we purchase and then re-sell.

Ask participants for some examples of working costs from other IGAs. Explain how working costs revolve from one production cycle to the next. Say that the working costs go out from our hand when we purchase raw materials and other inputs, pay for transport and other selling costs. The money comes back in to our hand when we sell the finished products.

Now, inform the participants that: The amount of working costs depends upon the quantity of production. If we produce and sell more units, we need more money for working costs.

Ask participants to collect local materials, which they would sell in their business participants collect local materials like stone, stick, leaves bottle tops etc.

Then following the procedures below, calculate the income from the IGA Start by;  Arranging the participants so that they are sitting in a circle with a mat on the ground inside the circle.

20 Training Course on IGA Selection, Planning and Management

Ask and guide one participant to draw the table below; Item

Quantity

Bicycle transport 50 kgs Cigarettes (10 packets of 5 10pckts(2pkt different brands) brand) Sweets and gum 1 pckt of @ Matches 1 pckt.(10b) Batteries 1dozen Paraffin 20 liter Tea 1 pckt.

Salt 10kg Soap 10 bars Sugar 10kg Total costs

Total Cost Price Pounds 150 / Pounds. 90 Pounds. 500 Pounds. 35 Pounds. 250 Pounds.150 Pounds. 200 Pounds. 500 Pounds. 800 Pounds. 1000 Pounds 3,675

Total selling Price Pounds 225 Pounds. 100 Pounds. 600 Pounds. 40 Pounds. 350 Pounds.170 Pounds. 300 Pounds. 550 Pounds. 850 Pounds. 1500 Pounds 4,685

Demonstrate this concept; use the local materials like stone to represent different units of money, other materials to represent the different items of the roadside table or any other common business in the locality. 



  

Ask the participants to name the items that will be sold at the roadside table As they mention each item, ask them to draw a picture or put a local material to represent that item on the mat/ground. Be sure that the participants do not confuse the working costs with the start-up costs Ask participants to consider the market of the items in their locality and decide the quantity of the first item that will be purchased. Then ask them if they know the wholesale price in town for this item. If they do not know, tell them the unit price (as shown in Example 1) and ask them to calculate the total price by multiplying the quantity to be purchased by the unit price. Remember: do not provide participants with the information if they can agree on a price themselves. It does not have to be the same price as that shown in Example 1.

Ask a participant to count out the sticks, leaves or stones representing the correct amount of money, and place this money on or next to the correct picture.

In this way, find out the working cost for each item by multiplying the unit cost price by the number of units, counting the money and keeping the amount alongside the respective picture.

Finally, ask a participant to sum up the costs for all the pictures and any other expense incurred to find out the total amount of money needed to pay the working costs. Ask them to keep this cash at the bottom total row under total cost price column

Next;   

Ask them to calculate the total sales price of the first item that was purchased in the preceding step.

Ask a participant to take the sales value in money and put it next to the picture.

In the same way, find out the sales value of all the other items that will be sold at the roadside table and place the correct amount of money next to each picture.

21

Training Course on IGA Selection, Planning and Management



Finally, ask the participants to take the money from all the pictures of the products and add it up to determine the total sales.

Then,  

Ask a participant to remove money from the total sales pile that is equivalent to the working costs.

Then ask her/him to count the money remaining in his/her hand. Tell the participants that this is the amount that was earned from the roadside table.

22 Training Course on IGA Selection, Planning and Management

Ask; are there any questions before we proceed.

Step 6: Profit And Loss Calculation Tell the participants that by this time they have learned about two types of costs: start-up costs and working costs. Now they will learn how to calculate the income of an IGA. Using the example above: (Total sales - Total costs/Expense = Income) Explain that: Income = Sales - Working Costs Explain that, to calculate income from an IGA, we have to: Calculate working costs for a definite quantity of production.

Calculate the sales value of that quantity of goods.

Subtract the working costs from the sales value. The money remaining in hand is your income.

Tell them that: If working costs are larger than the sales value, then you know that the business is a losing concern.

A participant may ask why we do not subtract start-up cost from sales in order to get income.

Explain to the participants that start-up expenses are usually incurred to purchase items that can be used on several production cycles. It would not therefore be appropriate to subtract the startup costs from the first sales only as they will continue to serve you for several cycles of production. You will be introduced to how to save for such in the last session. Explain that some of the start-up items may be items you already have.

Note: Ask participants whether they have understood the process of income calculation clearly.

If they have any ambiguity, explain the confusing aspects.

Before concluding the session, ask participants to name the five important points and to tell the three points that have been covered in today's discussion.

Finally, give the home assignment to 'think about' in the next week.

THINK ABOUT Request the participants to think throughout the next week about: 

The operational and marketing aspects of the IGAs that they are considering undertaking.



The level of production for each of the IGAs that are under consideration.

23 Training Course on IGA Selection, Planning and Management



The start up costs, working costs and sales for each IGA, given the level of production desired.



The expected income from each IGA.

If they have any difficulty in calculating, advise them to seek help from another member of the group.

Based on the findings from this 'think about', they may want to drop some IGAs from consideration at this time. They should not make a final decision yet.

24 Training Course on IGA Selection, Planning and Management

DAY 3

SESSION 3

EXPLANATION FOR THE FACILITATOR: As mentioned in previous sessions, the decision on which IGA to select depends on a number of factors, including the operator's skill and knowledge, the market situation and potential profitability. These factors, which are important points # 2, # 3 and # 4 need to be examined for each IGA that is under consideration Objectives: On completion of this session the participants will be able to:  Determine the total amount of money required to start-up and operate the family‟s IGAs.  Categorize different types of family expenses, and determine whether the income from the IGA is needed to help pay weekly or occasional household expenses.  Apply all five important points to select the most suitable IGA from a group of alternatives.

Notes to the trainer; PLEASE READ THESE NOTES BEFORE YOU GO FOR THE SESSION This session covers points # 5 and 6. It determines cash needs of your business and whether the IGA will help cover family expenses.

The session starts by reviewing previous concepts. Points # 5 and # 6 are then introduced. Both of these points refer to all the family‟s IGAs, rather than just the IGA that the participant is intending to start-up.

Thinking about the amount of money that the family needs to start up and operate all its economic activities is the fourth important point. The IGA that is started up as a result of this training should not be thought about in isolation from the other income flows within the family.

Any shortage of money in a family IGA may lead to diversion of funds away from the participant's activity to one that is operated by another member of the family.

So the fifth important question is the capital requirement: How much money does the family need to start-up and operate all its IGAs? Where will we obtain these funds?

Low income earners obtain their required money from various sources: Their own savings (in cash or in assets), from rotational savings and credit associations (VSLAs), relatives, local moneylenders or NGOs. One source may not supply the total amount of money required for all the family's IGAs. This session calls upon participants‟ previous experience with VSLAs as a means of mobilizing savings for capital accumulation or meeting unforeseen expenditures. Before obtaining money from any source, participants should think carefully about their total capital requirement.

25 Training Course on IGA Selection, Planning and Management

Sometimes available funds are almost fully expended on start-up costs, leaving insufficient funds for paying working costs. In this case, the production and thus income from the IGA may not be sufficient to repay loans that have been taken. The participant may be worse off rather than better off after starting up the IGA. Thus, accurate calculation of both start-up costs and working costs is essential for all the family‟s IGAs. The total then needs to be compared to the amount of capital available to determine if it will be enough. The need to calculate the funds required for all family activities should be fully discussed during the session, with reference to all the points mentioned above.

TRAINING PROCESS Step 1: Start the session by reciting the fifth entrepreneurial question below.

Question 4: How much money do I need to start and operate this IGA? Step 2: Referring to the previous session, ask several participants to tell what they have found after the think about on the costs, sales and income of their possible IGAs. To lead the discussion, the following questions may be asked: Have we calculated the costs, sales and income for each of our possible IGAs? Has any of us dropped any IGAs from consideration based on the findings?

If yes, could you please tell us the reasons?

Has anyone added any new activity?

After a short discussion, move to the next step. 

Remind the participants about the five important points by showing the five fingers of your left hand.

Explain that so far in the training course, three important points have been discussed. Use the fingers of your left hand to show these three points. Ask the participants to name these three important points. Mention that every time they think about starting up an IGA, they should give careful consideration to each of these three points.

Now mention that there are two other important points that should be thought about before making a decision. These two points relate to all the family‟s activities, not just the new activity that may be started up.

Step 3: Showing the fourth finger of your left hand, tell the participants that the fourth important point is the total amount of money that is needed to start-up and operate all the family’s activities. Explain to the participants that the decision to start-up an IGA should not be made until the total funds required are determined. This includes both start-up costs and working costs. Ask the participants if they can remember the difference between start-up costs and working costs. Clear this point before continuing.

26 Training Course on IGA Selection, Planning and Management

Next ask the participants to suggest one IGA e.g. Pancake making or any IGA participants are familiar with and identify required items and raw materials, cost them and total the start-up costs and the working costs of the IGA. Note: Explain that if they cannot acquire the required amount of money, they should not undertake the IGA even if it has all of the other advantages. Furthermore, they should ensure that any other family IGAs have adequate funds before they move ahead.

Ask the participants why it is important to think about this point before making a decision about a new IGA. The following points might come out through discussion:    

If all the cash is spent on start-up costs, then there won‟t be enough to pay the working costs and the business may fail.

If one activity uses up most of the family‟s cash, then there may not be enough to finance other necessary activities.

They may need to divert funds from the selected IGA to other family activities. This could lead to its failure, if money is not available to pay all start-up and working costs.

If all the family‟s savings is invested in IGAs, then it will be difficult to cope during an emergency such as sickness or crop failure.

Step 4: Now listen to the story below and as you listen to this story, think about the four questions so far discussed.

THE STORY OF OKELLO’S FAMILY Okello and his wife Akuru live in a small trading center in Yei town. Okello is a tailor and has had a successful tailoring business ever since he learned this skill from his father at an early age.

His wife Akuru raises vegetables that she sells at the weekly market. Some of these vegetables are also consumed by the family, which includes three sons and two daughters still living at home.

Their oldest son Onen has recently returned home to start a new life, after his contract work with Kakira Sugar Works ended. Onen appealed to his parents for a loan to start up a drug store in the trading center. He decided on this business because he was fairly knowledgeable about medicine, having done some part-time work in a drug store while in Kakira. He also observed that there were no other drug stores nearby and he lacked his father‟s tailoring skills, because he went to work in Kakira when he was still young rather than learning tailoring from his father.

Amina grew up in town she does not have the knowledge of vegetable growing like her motherin law Akuru.

Okello and his wife are reluctant to lend their son the one hundred thousand requested because they noticed recently that their sewing machine, which has served them well for many years, is no longer working properly. They have taken it to Arua several times to have it repaired and were recently told that the next time it stopped working it might be impossible to fix it.

Therefore, Okello and his wife do not want to withdraw money from their joint savings account at the Centenary Bank until they need it to buy a new sewing machine. They also need to keep some money there in case there is a family emergency.

27 Training Course on IGA Selection, Planning and Management

They know that their son Onen spent the terminal benefits provided to him by the Sugar Corporation rather than investing it in some new business. So they wondered why they should support their son‟s business idea. However, Onen is now hanging around town unemployed. As a result, Okello and his wife have to provide food and lodging for Onen, his wife Amina and their two small children. They are all living with Okello and Akuru until they can start earning for themselves.

Onen has recently attended a training course on IGA Selection, Planning and Management organized by ZOA. He assures his parents that he has learned some skills that will help him to manage the business successfully. One thing that ZOA has taught him is to think about all the family‟s needs for capital rather than just the new activity that is being started. He tells his parents that he would like to discuss this with the family before his parents makes a decision about the loan. *** Tell the participants that they will now form small groups to discuss the situation and make a decision about what is best for this family. Each person in the small group should take the role of one of the persons named in the story: Okello, Akuru, Onen or Onen‟s wife Amina. This means that each person in the small group should present the point of view of the family member whose role he or she is playing. After presenting the various points of view, they should come to an agreement about the right course of action.

Break the participants into small groups of four persons each. Allow each group about 30 minutes to decide what the family should do. At the end of the given time, have all the participants come back together into a large group.

A spokesperson for each small group should tell the large group what they decided, and why.

After each presentation, discuss the decision taken, answering all these questions:    

What are the advantages of the decision taken?

What are the disadvantages?

Does this decision expose the family to a lot of risks?

Are there any alternatives that would be less risky?

Step 5: Tell participants that we are going to discuss the different sources of funds to finance IGA. Ask them: What are the common sources of funds/money that people in this area use?

Ask and guide one volunteer to draw this matrix below; Some of the identified alternatives might be loans from moneylenders, a bank, NGO/MFI, savings associations, personal savings or relatives.

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Demonstration Interest rate

Easy to Duration get/ for Access paying back

Scores

Ranks

Borrowing from a Relative Loan from the Banks MFI Loan from VSLA Personal savings Business men/women Note: You can have more than the three columns depending on what conditions the participants rise.

Ensure that the points below are covered.  Loans from moneylenders usually have high interest. This makes it more difficult to earn a profit from the activity.  Banks may have a lower interest rate, but have a lot of requirements that poor people have trouble fulfilling.  Funding from MFI‟s should be emphasized with a clear explanation on the common basic requirements from these institutions; o Interest rate o Repayment frequency o Meetings o Group securities  Loans from all sources must be repaid. If the business fails, the borrower will lose some of his assets. In the case of Bank‟s, a loan in default must be repaid by the other members of the group.  Loans from a revolving fund. Using own savings is less risky than using loans.

Step 6: Mention the sixth Entrepreneurial question i.e Question: Will the income from this IGA, when added to other family income, be enough to pay household expenses? 

Raise your left hand, showing the five fingers, and remind participants about the five important points. Now holding the fifth finger of your left hand, tell the participants that the fifth important point that should be considered before selection of an IGA is coverage of family expenses. Does the family need income from the participant’s IGA to cover weekly household expenses or to help cover expenses that occur from time to time?

Say that in order to examine this point, we have to determine the following:  The family's weekly household expenses.  The family's weekly income.

29 Training Course on IGA Selection, Planning and Management

 The difference between weekly income and expenses.

Then explain that household expenses can be broken down into two main categories: Weekly expenses and occasional expenses. Discuss the differences between the two categories in a participatory way. You may lead the discussion with the following questions:  What expenses does our family incur that must be paid for with cash?  For which items do we need cash very frequently?  For which items do we need cash only occasionally?

Note: Through discussion it should be clear that:  The expenses that are incurred almost every day are called weekly expenses. These include items such as paraffin, salt, matches, tea and sugar.  The expenses that are incurred only from time to time are called occasional expenses.

These include items like: School fees, Medicine, Clothes and building Explain to the participants that not all-family situations are the same. What may be called occasional expenses in one family may be a weekly expense in another family. An example may be that; if one member of the family is suffering from an ailment, which requires daily use of medicine, it becomes a weekly expense. In calculating expenses try to be reasonable.

Training technique o Give the participants a few minutes to individually calculate their weekly family expenses. o Ask the participants to use any local material like the stones or sticks to represent money and ask them to count out the amount that is needed for each item that is usually purchased on a weekly basis. o After they have done this, they should add up the total amount that is required each week.

Remind participants that occasional expenses should not be added in. o After they have finished the exercise, they should place the pile representing weekly expenses on their left-hand side. o Allow sufficient time for each participant to complete this exercise. o Ask for several volunteers to share their calculation with the group. If no one volunteers to share, do not force anyone to share. (No one should be forced to provide information to others about their personal finances.) o Ask participants to think about the money that their family members earn. Mention that family income can be broken down into two categories:  

Money that family members earn and bring home on a daily or weekly basis.

Money that family members earn that is available for expenditure only from time to time.

Step 7: Ask the participants to watch the following demonstration. Explain that the cup represents the household, the water represents the family income and the holes represent family expenses.

30 Training Course on IGA Selection, Planning and Management

Then pour water into a tin cup with many holes in the bottom.

Ask participants to explain the meaning.

Note: Through discussion, the following points should be clear. Remember to say that: When household expenses are greater than income, the cup will be empty and one will remain poor. In order to break the vicious circle of poverty, an IGA may be undertaken to bring in more income.

Then invite them to discuss the following question: Is it easy or is it hard for me to cover weekly household expenses with present weekly family income?

It may emerge from the discussion that participants‟ fall into three groups: Those who cover their weekly household expenses.  With great difficulty, most of the time  Fairly easily, most of the time  With difficulty or ease according to the season Note: Be sure that the last point - seasonality - is discussed.

Ask participants to give examples of how income flows within their families vary from season to season. During this discussion, you should make sure that participants are not asked to state how much income is earned from various activities. They should instead talk about the types of income earning activities - both wage labor and IGAs - that are seasonal and how the changing income from these activities affects their ability to cover basic household expenses.

They may mention the following as examples:   

When cash crops are sold When wage labor is in market demand When it is harvesting period for other crops

Step 8: Tell participants that; now each one of you identify the amount that their families earn weekly from all sources during this season. Income sources that do not give regular weekly income should not be included in the exercise.

Note to the Trainer: If some participants do not know the family's regular weekly income because their spouses manage all the family money, ask them to estimate to the best of their ability. The exercise will have value in showing them the process to follow, even if their estimate is not completely right.

Tell them that I will give you the opportunity to talk over the learning from the session with their spouses during the week and they may then get a more accurate idea. Each one of you participant should count out the play money from the selection that was given in the preceding step for each source of weekly income. After you have identified and counted the amount from each source, you should add it all up, and place it on your right hand side.

Step 9: After everyone has completed this exercise, ask each participant to compare the right hand pile (representing weekly income) with the left-hand pile (representing weekly expenses).

After everyone has been given a few minutes to do this, divide the participants into two groups: 31 Training Course on IGA Selection, Planning and Management

 Those who have an excess of weekly income over weekly expenses  Those who have an excess of weekly expenses over weekly income Next; Ask; whose weekly household expenses are higher than their weekly income. After identifying them, discuss the following questions;  Should this situation affect your choice of IGA? Why?  What types of IGAs are suitable for a person whose weekly family expenses can't be covered by weekly family income on a regular basis?

Participants in this group should mention their need for IGAs that give quick short-term earnings. Ask participants from this group to identify IGAs that have this characteristic.

32 Training Course on IGA Selection, Planning and Management

The activities, which offer income on a daily basis or weekly basis, include:     

Roadside table.

Kiosk.

Bicycle transport.

Drug shop.

Tea room / restaurant.

Next, ask the participants from the second group, that is, the group whose regular weekly income is greater than their regular weekly expenses if their choice of IGAs would necessarily be the same as the first group. Find out from the participants how the suitable IGAs for this group might be different from the suitable IGAs of the first group. Participants may mention that IGAs, which offer long-term earnings, that is, those that offer income only occasionally, after a cycle longer than a week, might be suitable for them. Ask them to mention the suitable IGAs for this situation.

IGAs with long-term earnings include: Vegetable growing Poultry keeping Cattle keeping Goat keeping Seedling nursery Next, mention that even those IGAs with short-term earnings may be seasonal, and thus not have the ability to meet weekly household expenses all the year round.

Ask them; please mention short time IGAs which are seasonal. They may mention   

Cooked food like maize or potatoes Fruit selling Retail in honey

Ask participants that; what you will do if the demand for your products is greatly reduced during the low season. Participants may mention:  They could stop the IGA  They could reduce production levels  They could reduce family expenses  They could change to another IGA Ask participants that; is there any danger in shifting to other IGAs. Caution them that this should be done only after considering all the five important points that they have learned so far during this training course. They should never switch IGAs on the basis of profitability alone.

Ask participants that: what conclusions can be drawn. Points that should come out include: I must think about whether or not my family needs my income to help pay for basic weekly household expenses before I select an IGA.

33 Training Course on IGA Selection, Planning and Management

I need to think about the fact that many IGAs are seasonal. I may need to change IGAs according to the season, but I need to give careful thought to all the five important points before doing this.

Every time I think about changing my IGA, I should think about my current family income. There may be some seasons when other family members are earning well, so I can have a long-term IGA such as a vegetable garden. But if other family members are not earning well, I need to have a short-term IGA such as a small trading business.

Step 10:

Making a Decision

Tell the participants that: You have now learned the Six Important Points that should be considered before deciding to undertake an IGA. Ask the participants to name all the important points namely; I. What products/services are lacking in this community?

II. Can I operate this IGA? III.Will people buy the products I want to sell?

IV. Is this IGA profitable?

V. How much money do I need to start-up and operate each of my IGAs? VI. Will the income from my IGA, when added to other family income, be enough to pay household expenses?

Note: Tell the participants that they are now at the point in the training course when they should make a decision about which IGA to undertake, based on an analysis of the Six Important Points. Tell them that this week‟s THINK ABOUT will ask them to make this decision.

Then ask if there are any points that need to be clarified about any of the learning from the training so far. Clear all questions before concluding the session.

THINK ABOUT In the coming week, participants should think about:   

The total funds required to start-up and operate each of the IGAs that are under consideration.

Whether or not the family needs money for other family IGAs. How the family will acquire the total funds that it requires for all the family IGAs. Participants should think of the resources they have and are willing to commit. Sources, 34

Training Course on IGA Selection, Planning and Management

which are not under ones‟ control like loans, should not be planned for starting an IGA. Participants should come with those sources in mind for the next session. If starting an IGA depends on sources of funds not within the participants reach, s/he should consider dropping the IGA. 

Which of the IGAs under consideration will best meet the needs of the family to cover expenses

Finally, a decision should be reached about the most suitable, based on an analysis of all the five important points.

ALL PARTICIPANTS SHOULD DECIDE BY THE NEXT SESSION WHICH IGA THEY WANT TO UNDERTAKE AFTER CONSIDERING ALL THE FIVE IMPORTANT POINTS. THEY SHOULD COME TO THE SESSION PREPARED TO MAKE A BRIEF PRESENTATION ON THEIR SELECTED IGA.

35 Training Course on IGA Selection, Planning and Management

DAY 4

SESSION 4 HOW DO I PLAN FOR START-UP OF AN IGA?

EXPLANATION FOR THE FACILITATOR: Participants should come to this session having made a firm decision about the IGA that they want to start up now. Each participant should be able to state the five important points, and explain how his or her decision was reached using these points.

Given the seasonal rhythms of rural life, and the changing opportunities and risks that are present in varying degrees according to the season, it must be expected that some participants will want to change their IGAs from time to time. Therefore, the decision-making process is just as important as the decision itself. The facilitator should place emphasis in Step 1 on why an activity has been selected. S/he should not allow a participant to merely mention the IGA that has been selected.

The training course then moves into the area of basic planning and management. Planning is presented in a very simple way, as the sum of two parts: Tasks and resources.

Objectives: By the end of the session participants should be able to: o Confidently explain why they have chosen a specific IGA, with reference to all five important points. o Describe two important areas of a business plan: The tasks that must be accomplished and the resources that are required. o Explain why planning is essential. o Identify, for their chosen IGA, the tasks that must be accomplished, who will do them and how much time they will take. o Determine, for their chosen IGA, the quantity of resources needed for the start-up and operation, and the total capital requirement TOOLS: TASK-DURATION CALENDAR

PROCESS: Step 1: Tell participants that the first three sessions looked at IGA selection and now they will look at how to plan their selected IGAs. Ask the participants; have you all made a decision on the IGA you want to undertake? Call upon a volunteer who is willing to tell the group how he/she came up with that IGA to do so.

Use the questions below to guide the participant and the discussion.  

Which IGA have you selected?

Why did you decide upon this IGA?

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36

    

Did you think about whether you have the right skills and knowledge?

Did you think about where and how you will sell your product?

Did you calculate the amount of money that you can earn from this IGA? Did you think about the amount of money that is needed for start-up and working costs, and where you will obtain it?

Did you consider whether or not the income from your IGA is needed for weekly family expenses?

Next: After the first presentation, ask who else has chosen this same IGA. Invite these participants to add other points that they did not consider in their decision.

Continue with a participant with a different IGA, using the same technique for about three to four different IGAs.

Step 2: Then ask participants; now that you have all made an IGA selection what do you think is the next step? Ask them; What do you understand by planning? Through discussion, it should emerge that planning for the start-up of the IGA should be done now. They may mention planning and then; Explain that planning is a complex process, but that it can be thought of as comprising two main areas: tasks and resources.

Tasks: All the things we need to do from beginning to end in order to earn money from the IGA. Resources: All the things we need to obtain to get the IGA started up and running well.

Conclude by saying that: Planning can be thought of as the process of organizing the resources to perform the tasks.

Tell participants that they will now play a game that looks at the tasks and resources of one IGA which is familiar to them that they should select e.g. fish smoking. The participants should do this as one joint group.

Note; o Prepare the ground for the graphics and ask participants to collect local materials like charcoal, ash, stones, sticks, leaves, e.t.c. In this session it would be good to bring four different colors of seeds for the detailed planning. o Ask the participants to draw a task-duration calendar with the tasks/activities column on the left, resources column in the middle and duration column on the right of the calendar (See calendar below). The resource column is further split into three to cover equipments, family members who should carry the tasks and cash required. The duration for the IGA should be decided by the participants in terms of hours, days, weeks or months.

37 Training Course on IGA Selection, Planning and Management

Explain that prior to detailed task and resource planning, it is essential to decide on the quantity of production:  What product or products do I want to produce?  How much of each item do I want to produce?

Ask the participants why is it important to determine the quantity of production first? Make sure that participants understand the relationship between production quantity, resources and tasks before continuing:  Working costs are directly related to quantity; as quantity rises, so do working costs.  Similarly, greater quantity means that more time must be allocated to completion of the tasks.

Step 3: Move to task planning. Remind the participants that; you must think about every task that needs to be accomplished, from the purchase of the raw materials right through to the selling of the final product.

Ask them; what types of tasks are common to all IGAs. From this discussion it should emerge that:   

Common tasks include purchasing the equipment and raw materials, and selling the product.

IGAs that transform a raw material into a finished product also have a set of tasks associated with the production itself.

Trading activities have no other tasks.

Then, ask the participants to identify a common or of their IGA and mention all the activities from the first step up to the last that have to be done in this selected IGA e.g. fish smoking. As they mention ask them to pick any local material or draw a picture to represent that activity/task and put it in the first row under the task column. They should decide on the correct order in which these tasks must be done and place the local material/cards in the same order.

Next, move to resource planning. Explain that you must make sure that you can obtain and pay for all the resources that you need for the desired quantity of production.

Explain that resource planning relates mainly to answering the following types of question:  What equipment and tools are required?  How many do I need of each?  Do I need to buy all these items?  Can they be rented or borrowed?7  When do I need to have these items?  What raw materials are required?  Do I have to pay a market tax?

Ask and guide one person to draw the matrix below;

38 Training Course on IGA Selection, Planning and Management

Example of the completed graphic Fish smoking Days Tasks

Resources

Equip ment

Persons

Cash

1

2

3

4

5

6

7

8

9

10

11

Buying the fish Cleaning Smoking Packing Transporting Selling

39 Training Course on IGA Selection, Planning and Management

12

Decide when each of these resources needs to be acquired, and place the local material/card next to the task when the resource is first needed. If a particular resource is needed for more than one task, place the local material/card representing the resource next to the first task only. This shows that the resource only needs to be purchased or obtained once during the production cycle, even if it's used during several tasks.

Next, move to person planning. Tell them they should identify the family member(s) who is most likely to do the first task and place a local material/ picture of this family member(s) next to the task. Continue until all the tasks have people pictures placed next to them. They can be guided using the questions below: For every task, ask the following questions.  Who will buy the equipment, raw materials and other inputs?  How will they be transported to the production site?  What are the steps in the production process?  How much time is required for each of these activities?  Can my family members and I spare this amount of time?  Who will sell the products?  Where will they be sold?  How will the products be transported to the market?  How much time will it take to sell the products?

Step 4: o Then start to remove a local material to show a change in the situation of the IGA: Either a resource is now lacking, or a person is not available for a specific task. As the local material is removed, the participants discuss the consequences of this change in the circumstances of the IGA. o Then place the local material back, and remove a different material and the participants discuss the implications of the second change. The process continues for as long as time permits. This part of the exercise makes the participants aware of the dangers of inadequate planning of the IGA. Step 5: Finally, Tell the participants that they will now continue to the detailed planning and can use different seeds for quantity of production and shade the time. Instruct them as follows:  

 

Decide on a suitable quantity of production for the IGA, and indicate this quantity above the pictures of the IGA using seeds. The participants can use any quantity they think a village person would be capable of producing.

Decide on the time period for each of the activities in this IGA. This is the period from the start of the activity until the products are sold. Indicate the time period in each column on the top of the calendar using a different type of seed (the participants decide what duration/period one seed represents, one day, one week one month or one hour).

Consider each of the specific resource areas. For each resource, decide on the number/quantity required. This quantity should be represented by a third type of seed placed beside the resource picture.

Determine the unit price of each item, and multiply the price by the quantity to get the total cost of each item. Count out the correct amount of money and place next to the seeds that indicate the quantity.

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Training Course on IGA Selection, Planning and Management

 

After considering all resource areas, add up the total costs. Total costs should be stated as the sum of two separate parts: The start-up costs and the working costs.

Ask the participants to estimate their total sales expected and deduct the working cost to find out if the IGA is good.

Step 6: Now divide participants into four groups and ask each group to perform a similar exercise for one IGA selected by each group As the groups work on the exercise, move around to each group to observe their work and help them as necessary.

After the groups have finished, have participants gather around the first group's work. The group should explain their work to the other participants. If there is time, the other group can then share their work.

Before finishing the session, reinforce the learning from the session. Also emphasise that when the expected income is small and the work is labour intensive it may not be worth undertaking the IGA. If the IGA requires destroying the environment it may not be worth undertaking. Then give the home assignment or 'think about'.

Step 7: Give an assignment i.e Think about.

THINK ABOUT Request the participants to:  

Finalize their operational plans, including production levels, start-up costs, working costs, and task planning.

Decide how they will obtain the capital required to pay both start-up and working costs.

They should never plan with resources they do not have and have no control over. They only plan with resources they have and have control over.

41 Training Course on IGA Selection, Planning and Management

DAY 5

SESSION 5 MANAGING IGAs

EXPLANATION FOR THE FACILITATOR: Session five identifies cash management and risk management as the most important areas of management for the owner/operators of IGAs. Although loan management is considered to be another key area, this topic is not discussed in Session four (except as a component of cash management) Objectives: By the end of the session participants should be able to:  Explain the importance of managing the cash that flows into the IGA from the sale of products.  Describe the four areas where incoming cash should be allocated.  Determine the amount of money from the IGA that will be available for personal expenditure and savings, after replenishment of funds for working costs and loan repayment (if applicable).  Decide how to keep the different categories of money separate.  Minimize the risks to the well being of the family and the IGA, by understanding the importance of controlling credit to customers and of saving money on a regular basis.  Record keeping/ simple book keeping for the some how literate ones.

Notes to the trainer If the facilitator links some of s/his participants to sources of credit, it is recommended that a session on loan management be developed and implemented for use with these participants.

The intermingling of business funds and household funds is common among the operators of IGAs, and often leads to de-capitalization of the activity. This happens when household expenses exceed the amount that is being earned from the activity. Because IGA owners rarely, if ever, pay themselves a regular salary, cash is expended on household expenses as and when it's needed. Lack of records makes it difficult to track and thus control these expenses. The result may be a depletion of the IGA's working capital, and a failure to notice the situation, until it is too late.

Learning how this situation may arise, the dangers it presents and how the IGA's cash situation may be managed is the focus of the first half of Session four. Participants are first exposed, to the situation of a woman who is unable to restock the items in her grocery shop despite a good profit.

After discussion of the causes of this situation, participants are told that cash that comes in from sales should be allocated to four categories: Working costs, loan repayment, household expenses and savings. Furthermore, funds should be allocated to the loan repayment and working costs 42 Training Course on IGA Selection, Planning and Management

before spending on household expenses or setting aside money for savings. This is the central concept of cash management that the facilitator should stress.

PROCESS: Step 1: Start the discussions by asking the participants if they have all finalised the capital requirement for their selected IGA. Tell them that they will now, one at a time explain to the group  The name of their IGA  How they intend to finance the start-up and working costs of their selected IGA. Ask; what do you understand by the term management?

Step 2: Begin by explaining that the session will consider issues related to the management of the IGA. Tell the participants that they will first discuss the situation of a woman who had a management problem. They should listen to the explanation of her situation and then discuss the possible causes.

43 Training Course on IGA Selection, Planning and Management

SITUATION: WHAT ARE THE PROBLEMS IN ATIM’S SHOP? Six months ago Atim started a small grocery shop in her village with Pounds.1000 obtained by selling some of the goats owned by her family and selling produce which she had grown.. The start was fine and promising. In order to expand her business she got a loan from a revolving fund in the village. She kept her shop open for the whole day and remained busy selling the products. She kept the cash received from sales in a wooden cash box. From time to time, she used some of the money in the cash box for reinvestment in stocks. She also used money from the same cash box for family expenses.

One day an extension agent from ZOA came to visit Atim to see how her shop was progressing.

The extension agent noticed that stocks of many items were low and that many of the tin boxes used to stock items such as biscuits and popcorn were completely empty. The extension agent tried to find out from Atim whether the shop's condition was due to a low profit that made her reluctant to restock the items. But from the conversation, the extension agent realized that the income earning prospect from the shop was still excellent. She should have plenty of money in the cash box to restock her shelves on a regular basis, to expand the business and to pay necessary household expenses on a regular basis.

Atim asked the extension agent to refer her to ZOA and the Commercial Bank‟s Loans officer.

She said that she needed another loan so that she could restock the shop. But the extension agent was confused. He wondered why Atim needed a loan when she was apparently making a good profit. * * * Step 3: After telling the story, ask the participants the following question:  What do you think could be the cause of Atim's problems?

Allow the participants to discuss and come up with a number of possible answers. These might include the following: 

Atim withdraws money from the cash box to pay household expenses. May be she is spending more than she can afford, given her level of earnings from the shop.



She may be giving away items to friends and relatives, thinking that the amounts are small.

But over time, this could be a reason that her stocks are being depleted.



She may be giving credit to customers, and not getting all this money back.



She might have needed advice on how to run the business when it expanded.

Step 4: If participants do not name all of the above points, mention them yourself. Then explain that these types of problems are common for IGA holders. For this reason, they need to actively manage the cash and credit from their IGAs. Tell the participants that this is the most important aspect of management that they must understand if they are to run their IGAs profitably.

Mention that other things to manage include loan and human resources.

44 Training Course on IGA Selection, Planning and Management

Next: Remind the participants that at the time of IGA start-up, cash flows into the business from a combination of personal savings and loans, which are used to pay the start-up costs and the first batch of working costs. After that, production takes place and cash flows into the business from sales.

Then explain that this cash must be carefully managed. Tell the participants that one of the most important points that they should remember when managing their IGAs is that the cash received from sales should be allocated to different categories before any of it is spent.

Next: Ask the participants In what categories would you allocate the cash you have received from your IGAs? Listen to their responses.

Tell them that there are four important areas they need to allocate their cash in before spending.

These are:    

Working costs/ Re-stocking Loan repayment Household expenses Savings

The facilitator can illustrate this using a cross sign as below. Draw it on the ground.

1. Restocking

2. Loan Repayment

3. Family expenses

4. Savings

Briefly discuss each of these areas. Working costs and household expenses have all been covered in previous sessions. Mention that savings are needed to pay for occasional expenses, prepare for unforeseen events, and replace start-up costs that wear out or break down. Make sure that the participants understand each of the categories before moving on.

Then tell the participants that the cash received from sales should be allocated to working costs and loan repayment before spending on household expenses or setting aside money for savings. Ask participants why this is so. Make sure that the following important points are brought out through the discussion:

45 Training Course on IGA Selection, Planning and Management

a)

Setting aside money for working costs



The working costs for the first production cycle were paid for from the initial capital that was obtained from savings or a loan. Now that the money has been spent, replenishment of funds for working costs must be made from the cash received from sales.



If this is not done, the business will not have enough money to keep buying the raw materials and other inputs. Remind the participants that this was what happened to Atim‟s grocery shop.



Production will gradually be reduced which will lead to reduced sales.



Reduced sales will reduce the ability to repay the loan and to earn money from the IGA.



Eventually the business will fail due to this 'crisis of working capital'.

b)

Setting aside money for loan repayment

Loans must be repaid. If they are not, the participant will suffer the consequences of default: 

She will be more indebted.



She will be pressured by other members of the SLA group, by the bank or by the NGO.



She may lose membership in the savings and credit group.



Even if she remains a member, s/he will lose her/ his goodwill and may not be eligible for future loans.



She will lose her peace of mind.



Ultimately, she will have to repay the loan, if necessary by selling household goods, which will only make her more vulnerable than she was before.

Tell the participants that the cash available for family expenses may not be as much as they expected, after they have replenished their working capital and made their loan payment. Tell them that this could happen even if they calculated their expenses correctly during the selection process (Sessions 2 and 3). Mention that the income from the IGA that they calculated during the selection process is different from the cash available for consumption for two reasons: It did not take into account the cost of credit. This is the interest and fees that they must pay to the moneylender, bank or NGO for the use of the loan money.

It did not take into account the formation of capital. A large part of the loan installment is repayment of the principal borrowed to pay for start-up and working costs. Once the loan is repaid, the capital invested in the IGA belongs to them.

46 Training Course on IGA Selection, Planning and Management

Make sure that all the participants understand these two points.

Then remind them of the discussion about Atim's Grocery Shop. Tell them that Atim's cash problem may have been partly caused by the loan repayment burden. The earning power of her IGA was not enough to allow her to repay the loan easily as well as maintain her family at a decent standard.

Ask the participants if they can think of any possible solutions to Atim‟s problem. Through discussion, the following possibilities should emerge: 

She should stop giving credit and/or giving away items.



She should reduce household expenses to a minimum for the time being. After the loan is repaid, her capital will have increased. She may be able to take a second loan to expand the scale of operation or to take up a second IGA. Both of these steps will increase her earning power.



Atim‟s family might have more capital that could be introduced into the IGA. This would allow her to operate at a larger scale or to introduce a second IGA at the present time.



She can see if there is any way to reduce the costs of the IGA.

Participants may mention Atim‟s suggestion of taking another loan at the present time.

Emphasize that this is not a good solution to the problem, as she is already indebted.

Consequently, another loan will make her more vulnerable.

Conclude this step by emphasizing the point that cash received from sales must be allocated to loan repayment and working costs before being used for consumption. Failure to manage the cash is one of the biggest dangers that poor people face in managing their IGAs. Step 5: Tell the participants that they will now work in small groups to practice what they have just learned. Divide the participants into four small groups. Then tell them the story of Ochanda‟s Hotel here below.

OCHANDA’S HOTEL Ochanda is running a hotel at the nearest trading center. This hotel is the only earning source for Ochanda, his wife and their four children.

To start the hotel, Ochanda sold a cow and used the money for buying tables, plates and other requirements of the hotel and the hotel was doing well. In order to expand he took a loan of Pounds. 5000 to increase the amount of supplies of cassava flour, meat, oil and beans. He needs to pay back 6% of the loan every week.

Each week he needs to buy more stocks to replenish those that have been used up. This includes: Millet flour:

50 Kg. @ pounds 20 per Kg. 47

Training Course on IGA Selection, Planning and Management

Meat: 10 Kg. @ pounds 100 per Kg. Cooking oil: 5 Liters. @ pounds 10 per Liter.

Beans: 10 Kg. @ pounds 40 per Kg. Others (tomatoes etc.)

Pounds 20 Fire wood Pounds 50 Ochanda has just counted his money and found that he has pounds 500 in the cash box that came in from the sales through out the week. Please help him to answer the following questions: Tell participants to specifically present item per item in ¼ one  

How should Ochanda allocate this cash?

Do you have any ideas for how he can keep the money for loan repayment and working costs separate from the money for household expenses and savings?

Step 6: Tell each group to collect some stones and any other local material that they can use to represent Ocanda‟s cash. Tell them that they should first count out Ug shs 50,000 as the amount of money that Ochanda has just counted. Explain to the groups that they should divide the money according to the process that they have just learned, and then discuss possible ways to keep the different categories of money separate.

Then give each group sufficient time to complete the activity. If necessary, provide the groups again with the financial information on loan repayment and cost of the hotel supplies that was presented in the story.

After finishing the group work, have the participants gather around Group 1. Ask Group 1 to explain how they allocated the money. If they failed to allocate the cash to loan repayment and working costs before household expenses and savings, invite a discussion on this point. If there is any error in the calculation, this should also be pointed out, preferably by one of the participants. Finally, get their suggestions for keeping the different kinds of money separate.

Then have Groups 2 through 4; explain their allocation. Each group should have the same allocation for loan repayment (A) and working costs (B). However, they will have different allocations between household expenses and savings. Have each group explain how they made their decision. Tell the participants that the importance of savings will be discussed in more detail later in the session.

Step 7: Summarize the participants' suggestions for keeping the different kinds of money separate.

After a full discussion, move to the topic of risks and unforeseen events.

Step 8: The facilitator should lead the participants to discuss the common risks and unforeseen events that can affect an IGA. They may mention things like:   

Loss customers Giving out things on credit then the customer fails to pay back Spending a lot of time going to these customers to ask them for repayment. This is time that could have been spent on the IGA. Theft of stalk 48

Training Course on IGA Selection, Planning and Management

 

Forgetting how much credit is owed to you.

Natural disasters like  Drought  Hailstorm  When a family member falls sick  Fire  Accidents

Ask the participants what the results of those risks and unforeseen event will be for the IGA? They need to mention things like:    

There will be less cash coming in from sales.

This will make it harder to allocate the cash successfully among the four categories (working costs, loan repayment, household expenses and savings).

Uncontrolled credit could eventually lead to failure of the IGA. Sickness will force you to use money set aside for working costs to pay for the doctor's visit and for medicine.

Tell participants that unforeseen expenses and events are out of our control while risks are things that we expect will happen to our IGAs. Now ask them if other IGAs also have business risks. Invite a short discussion on the risks of the IGAs mentioned by the participants.

Ask the participants if these risks and unforeseen events can be managed. If any participant thought it was possible, ask how s/he would do that. S/he may mention:   

Taking help from relatives and neighbors.

Taking another loan to get the IGA started again.

Using personal savings.

If no participant offers the above suggestions, mention them yourself. Then ask the participants:  

Which of these solutions makes you more vulnerable than you were before?

Which solution preserves your control over your life?

Participants should say that the first two options make them more vulnerable and the third preserves their financial independence.

Now tell the participants that savings are very important because they help you to plan for and manage the risks that may endanger the well being of the family and the IGA. Savings allow you to:    

Cover occasional expenses.

Manage risks that are related to the operation of an IGA, such as theft or spoilage.

Manage the risks of unforeseen expenses or events.

Increase your capital, so that the IGA can grow without an increasing burden of debt.

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Training Course on IGA Selection, Planning and Management

This is why savings is one of the four categories where cash from the IGA should be allocated.

Although it may be difficult, saving a small amount of money from each production cycle is essential if the risks are to be successfully managed. The importance of saving is emphasised to cater for unforeseen events.

Conclude the session by reviewing the learning. Then move to the course closing.

Step 9:

CLOSING

Time:

15 minutes.

Next, allow the participants to speak, if they so wish.

Conclude by congratulating the participants on their successful completion of the course, and wishing them well with the implementation of their IGAs. Begin discussions of follow-up activities and linkages (discussed elsewhere.)

50 Training Course on IGA Selection, Planning and Management

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