Financial Education for Youth, Small, Micro and Medium Enterprises

Basic Level
Financial Training
2016 E.C. nbe.gov.et

List of Tables (VI)

List of Figures (VI)

Introduction (VIII)

Module Objectives (IX)

Module One: Business and Entrepreneurship Introduction (1–10)

1.1. Business Introduction (3)
1.2. Business Plan (4)
1.3. Business Plan Contents (5)
1.4. History: Coffee Center (6)
1.5. Business Model Canvas (7)
1.6. Summary (9)
1.7. Questions on Business and Entrepreneurship (10)

Module Two: Goal Setting (11–26)

2.1. Understanding Goals (13)
2.2. Understanding Financial Goal Placement (14)
2.3. Time Limit in Goal Setting (16)
2.4. Personal Financial Management (17)
2.5. Why Do Some People Struggle to Reach Their Money Goals? (20)
2.6. Financial Goal Placement Formula (21)
2.7. Financial Goal Sequencing (22)
2.8. Summary (25)
2.9. Questions on Goal Preparation (26)

Module Three: Budgeting (27–44)

3.1. Budget Concept (29)
3.2. Budget Characteristics (30)
3.3. Benefits of Having a Budget (30)
3.4. Essentials for Effective Budget Preparation (31)
3.5. Why Is Budgeting Crucial for Business Success? (32)
3.6. Types of Budgets (33)
3.7. Budget Preparation Processes (35)
3.8. Considerations When Hana and Kuma Prepare a Budget (36)
3.9. Best Practices and Characteristics of Budget Preparation (36)
3.10. Do Not Exceed Your Budget (42)
3.11. Summary (43)
3.12. Questions on Budget Preparation (44)

Module Four: Accounting Management / Basic Accounting Points (45–62)

4.1. Concept of Accounting Management (47)
4.2. Benefits of Accounting Management (47)
4.3. Basic Accounting Concepts and Principles (48)
4.4. Key Steps for Effective Accounting Management (49)
4.6. Accounting Formula (57)
4.7. Nature and Benefits of Tax (59)
4.8. How Is Tax Managed? (61)
4.9. Summary (61)
4.10. Questions on Basic Accounting Management (62)

Module Five: Savings (63–72)

5.1. What Is Savings? (65)
5.2. Reasons for Saving (65)
5.3. Savings Goals (67)
5.4. Methods for Saving Money (68)
5.5. Criteria for Determining a Savings Location (69)
5.6. Creating a Saving Plan (70)
5.7. Summary (71)
5.8. Questions on Savings (72)

Module Six: Investment (73–79)

6.1. Definition of Investment (75)
6.2. Considerations for Making Investment Decisions (76)
6.3. Diversified Investment (77)
6.4. Summary (78)
6.5. Questions on Investment (79)

Module Seven: Financial Sources (80–89)

7.1. Why Finance? (82)
7.2. Financial Source (82)
7.3. Sharia-Compliant Financial Services (83)
7.4. Why Debt Financing? (85)
7.5. Responsible Debt and Loan Management (86)
7.6. Characteristics and Benefits of Long-Term Loans (87)
7.7. Potential Sources for Business Expansion (88)
7.8. Summary (88)
7.9. Questions on Financial Sources (89)

Module Eight: Financial Services (90–100)

8.1. Definition of Financial Services (92)
8.2. Formal Financial Service Providers (92)
8.3. Standard Financial Services (94)
8.4. Account Opening Process (95)
8.5. Benefits of Standard Financial Services (96)
8.6. Drawbacks of Standard Financial Services (97)
8.7. Informal Financial Service Providers and Services (97)
8.8. Benefits of E-Standard Financial Services (98)
8.9. Drawbacks of E-Standard Financial Services (98)
8.10. Summary (99)
8.10. Questions on Financial Services (100)

Module Nine: Digital Financial Services (101–116)

9.1. Definitions/Glossary (104)
9.2. Digital Finance (104)
9.3. Digital Financial Services (DFS) (104)
9.4. Channels (104)
9.5. Financial Technologies (Fintech) (106)
9.6. Types of Digital Financial Services (106)
9.7. Steps for Withdrawing Money from ATM (109)
9.8. Benefits of POS for Small, Micro and Medium Enterprises (110)
9.9. Benefits of Digital Financial Services (110)
9.10. Challenges of Digital Finance (111)
9.11. Overcoming Challenges in Digital Financial Services (113)
9.12. Summary (115)
9.13. Questions on Digital Finance (116)

Module Ten: Risk Management and Insurance (117–128)

10.1. What Is Risk and What Do You Know About Risk Management? (119)
10.2. Understanding Risk (119)
10.3. Types of Risks (119)
10.4. Risk Management Process (122)
10.5. How Does Insurance Work? (124)
10.6. Types of Insurance (125)
10.7. Steps to Obtain an Insurance Policy (126)
10.8. Pension Plan (127)
10.9. Summary (127)
10.10. Questions on Risk Management and Insurance (128)

References (129)
Annex (130)
Annex 1: Glossary (130)

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Introduction

Financial knowledge is the ability to understand finance. It refers to a collection of skills and knowledge that enables an individual to use financial services effectively, make informed and timely financial decisions. Financial education is not achieved through service delivery alone; structured training steps are required. Financial education provides a pathway to increase financial knowledge, fostering awareness of good income, expense, and budget management methods.

Borrowing, saving, other financial services such as insurance, and money transfer are covered with comprehensive understanding. Participants in finance are equipped with educational information and tools to make better financial choices, achieve their financial goals, and strengthen economic security.

Considering the cost of educational programs, taking steps for financial education can be highly cost-effective, especially for segments with low financial knowledge. To prepare a standardized national document at the Mastercard Foundation level, St. Mary’s University developed this document in close collaboration with First Consult and the National Bank of Ethiopia.

This document contains ten distinct and related modules listed below:

1. Business and Entrepreneurship Introduction
2. Goal Setting
3. Budgeting
4. Basic Accounting Management
5. Savings – You Can Do It
6. Investment
7. Financial Sources
8. Financial Services
9. Digital Financial Services
10. Risk Management and Insurance

Module Objectives

This training module aims to provide the necessary knowledge, skills, and attitudes to help trainees manage their finances optimally. It is also designed to contribute to developing Ethiopia’s financial inclusion and financial literacy strategies.

Scope

The module is prepared at a basic level, primarily focusing on youth and small, micro, and medium enterprise (SME) operators. Regarding the learning process, urban participants generally have abundant inputs, better services, and textbook-like educational tools. Considering this, efforts were made to minimize the geographical learning gap between rural and urban trainees as much as possible. To achieve this, improving rural participants' educational opportunities to match the urban level is required.

Training Delivery Method

The module is designed to serve as a financial training manual for youth and SME operators. To ensure complete financial knowledge transfer, the module content is tailored to address participants' specific needs. Thus, it serves as a guideline, reference source, and working document for the National Bank of Ethiopia and other financial institutions.

The Trainer’s Manual is prepared to serve as the foundation for this module. This manual guides system understanding, training preparation, material collection, educational setup, and participant interaction. All trainers and operators delivering training to youth must complete the Trainer Training (ToT) provided by experts or sector specialists who participated in this module preparation. During the three-day session, participant numbers are strictly recommended not to exceed 20 to ensure thorough coverage. To guarantee high-quality training, at least two experts and one assistant coordinator must be present. To obtain a complete certificate, trainees must attend all training sessions across the ten modules. The training is delivered in three chapters/phases.

Chapter 1: Covers the first three modules: Business and Entrepreneurship Introduction, Goal Setting, and Budgeting. After completing the three-day training, participants return for the second round with tasks assigned to trainers. Detailed tasks are explained in the Trainer’s Manual.
Chapter 2: Covers the next four modules: Basic Accounting Management, Savings, Investment, and Financial Sources. After completing the four-day training, participants return for the third round with trainer-assigned tasks. Detailed tasks are explained in the Trainer’s Manual.
Chapter 3: Covers the final three modules: Financial Services, Digital Financial Services, and Risk Management & Insurance. This final chapter takes three days. Upon completing all ten modules, trainees receive a participation certificate.

To make the training content engaging and useful, sessions are designed with interactive activities, exercises, and off-class tasks that reflect the daily lives of youth, small, micro, and SME operators. Trainees are recommended to know English and the local language. Trainers must use an adult learning method that addresses participants' unique educational needs. Applying these adult learning experiences and principles increases the likelihood of trainees appreciating the training and changing their financial culture. Adults learn more through student-centered teaching methods.

Adults should have the opportunity to express their views on new events, compare them with their own situations, adapt to them, and find ways to apply them practically (the nine principles and experiences of adult learning are listed below). Therefore, trainers should act as facilitators rather than lecturers. Additionally, trainers must demonstrate that the training content aligns with trainees' knowledge and understanding.

Table 1: Nine Principles and Experiences of Adult Learning

Principle	Description
Relevance	• Students learn more when their own knowledge and experiences are drawn upon. • Education meets the student's practical needs (e.g., work and family matters).
Discussion	• Education is a two-way process; students should have the opportunity to interact with teachers and among themselves.
Active Participation	• Education requires students to discuss in groups and small teams to exchange experiences.
Quick Application	• Students must be able to immediately apply new knowledge practically.
20/40/80 Rule	• Students remember more when supported by visible materials. Humans naturally recall 20% from hearing, 40% from hearing and seeing, and up to 80% from hearing, seeing, and doing.
Knowledge-Skill Interaction	• Learning must involve thinking, emotion, and application.
Respect	• Students desire to feel respected and equal.
Confirmation	• Students should receive adequate encouragement even for minor efforts.
Safety	• Students want to know that others respect their ideas and contributions, do not belittle them, and do not let them down.

The first seven principles are designed around educational tasks, while the last two are applied during training delivery.
Relevant Text: From Microfinance Opportunities

Training Evaluation

To achieve the module's objectives and expected learning outcomes, training sessions are designed by the National Bank of Ethiopia and other stakeholders. As stated in the Trainer’s Manual, trainers are expected to prepare detailed descriptions of training programs and reports, incorporating survey results and participant feedback. At the end of each training period, evaluation methods used may vary depending on trainers' approaches.

However, generally, trainers are expected to encourage participants to conduct group discussions and prepare themselves for focused main agenda discussions. Finally, they evaluate participants' conceptual understanding, practical knowledge, exercises, and tests using the Kirkpatrick Four-Level Training Model to ensure effectiveness and success. The model helps assess financial training programs and learning outcomes using standard tools. It serves as a tool to determine strengths and weaknesses in the financial training process, covering four levels: Reaction, Learning, Behavior, and Results.

Figure 1: Kirkpatrick Four-Level Training Model

Level	Description
Reaction	Measures whether students find the financial training engaging, comfortable, and relevant to their work.
Learning	Measures whether students acquire the intended knowledge, skills, attitudes, beliefs, and determination.
Behavior	Measures the impact of training.
Results	Evaluates based on the organization's business outcomes.

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Module One: Business and Entrepreneurship Introduction

Welcome to Module One of the Financial Education Training. In this module, entrepreneurs learn the basic concepts and practical skills needed to establish a successful organization. Additionally, the module guides you in understanding business model contents and business plans.

Introduction

Dear Participants;
Discuss what group businesses are and the types of business organizations.

Training Objectives

By the end of this module, participants will be able to:

• Define entrepreneurship and describe entrepreneur characteristics;
• List their business activities;
• Understand what a business plan is;
• Prepare a simple business plan.

Training Methods

• Brainstorming
• Training
• Preparation approach
• Exercises
• Case studies
• Discussion
• Role-play

Module Content

• Business introduction
• Business plan
• Business plan contents
• Business Model Canvas
• Module summary

Duration: 7 hours

Training Materials

• Visual explanations
• Posters
• Whiteboard
• Markers
• Notebooks
• Pencils/Pens

1.1. Business Introduction

A business organization, also known as a firm, is an institution engaged with customers through goods, services, or both, with the aim of profit. The 2013 E.C. (2021 G.C.) Commercial Law indicates the following organization types:
a) General Partnership: A business organization comprising partners, each jointly and individually responsible for their own and the partnership's obligations. Any contrary agreement cannot be raised against third parties. b) Limited Partnership: Covers partners with different debt types, including general partners fully jointly and individually responsible for partnership obligations, and limited partners responsible only up to their contribution. c) Limited Liability Company: A business organization established by two or more persons to provide professional services, where partners' liability is limited to their contribution amount. d) Joint Venture: A business organization established by agreement between two or more persons. It has no legal personality; its existence is unknown to third parties. Registration formalities required by other business organizations do not apply to joint ventures. e) Share Company: A capital-predefined organization divided into shares, with debts paid only from the company's assets. Shareholders' obligations are limited to their contributed capital. f) Private Limited Company: Capital is fully paid in advance, divided into shares, and members are not liable for company debts up to their share amount. Company shares need not be open to public registration. g) Single Person Limited Liability Company: A business organization established by a single person's decision. The company has a separate legal identity from its members. A member is not liable for debts up to their paid capital. Entrepreneurship differs from being a business owner. Entrepreneurs are distinct from traditional traders, holding old ideas while operating. Entrepreneurship involves future planning, identifying opportunities, creating business vision, understanding growth, and preparing for risks.

Dear Participants;
Write the name of a role model entrepreneur you consider, and list the key characteristics that make them an effective entrepreneur.

Important Message

Entrepreneur:

• Has dreams and vision.
• Possesses the ability to identify and monitor business activities.
• Conducts business operations.
• Gathers physical, financial, and human resources needed to run the business.
• Sets goals for themselves and others.
• Takes appropriate steps to ensure success.
• Assesses all or the main portion of risks.
• Is an entrepreneur, not just a job seeker.

1.2. Business Plan

Organizing your ideas and data to start a business is called creating a business plan. When preparing to open your own business, following your plan ensures nothing escapes you; it serves as a guide. Preparing a business plan is essential. You must decide whether to start your business or not. Starting a business completely changes your life, so ensuring you make the right decision is crucial. The business plan helps determine whether starting your business is the correct choice.

• Preparing to start your business better: Organizes your ideas on how to start and manage your business more effectively. The business plan serves as a guide, ensuring you follow it correctly.