PROJECT REPORT ON

ROLES OF BOTSWANA SAVING BANK

IN POVERTY ALLEVIATION

BY

KAGISO MOSWANG

Roll No. 13-MD-139

SUBMITTED IN PARTIAL FULFILLMENT OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION - (2013-2015)

Department of business management

University of college of commerce and business management

OSMANIA UNIVERSITY, HYDERABAD- 500007

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DECLARATION

I hereby declare that this Project Report titled Roles of botswana saving bank

in poverty alleviation submitted by me to the Department of Business Management, O.U.,

Hyderabad, is a bonafide work undertaken by me and it is not submitted to any other University

or Institution for the award of any degree diploma / certificate or published any time before.

KAGISO MOSWANG

Name of the Student Signature of the Student

CERTIFICATION

This is to certify that the Project Report title Roles of botswana saving bank in poverty

alleviation submitted in partial fulfilment for the award of MBA Programme of Department

of Business Management, O.U. Hyderabad, was carried out by KAGISO MOSWANG under my

guidance. This has not been submitted to any other University or Institution for the award of

any degree/diploma/certificate.

Name and address of the Guide Signature of the Guide

ACKNOWLEDGEMENT

I have taken efforts in this project. However, it would not have been possible without the kind

support and help of many individuals and organizations. I would like to extend my sincere

thanks to all of them.

I would like to express my gratitude towards my parents for their kind co-operation and

encouragement which help me in completion of this project.

I would like to express my special gratitude and thanks to industry persons for giving me such

attention and time.

My thanks and appreciations also go to my colleague in developing the project and people who

have willingly helped me out with their abilities.

I have taken efforts in this project. However, it would not have been possible without the kind

support and help of many individuals and organizations. I would like to extend my sincere

thanks to all of them.

I am highly indebted to DrV.Sudha for her guidance and constant supervision as well as for

providing necessary information regarding the project & also for their support in completing the

project.

I would like to express my gratitude towards my parents & member of Botswana Savings Bank

for their kind co-operation and encouragement which help me in completion of this project.

I would like to express my special gratitude and thanks to industry persons for giving me such

attention and time.

My thanks and appreciations also go to my colleague in developing the project and people who

have willingly helped me out with their abilities.

Table of contents

DECLARATION ........................................................................................................................ i

CERTIFICATION ..................................................................................................................... ii

ACKNOWLEDGEMENT ........................................................................................................ iii

Executive Summary ...................................................................................................................... 1

CHAPTER ONE: .......................................................................................................................... 2

INTRODUCTION ......................................................................................................................... 2

1.0 Background of the study .......................................................................................................... 2

1.1 Statement of the problem ........................................................................................................ 3

1.3 Objectives of the study ............................................................................................................ 3

1.4 Sample Research questions ..................................................................................................... 3

1.5 Significancye / justification of the study ................................................................................. 4

1.6 Scope of the study ................................................................................................................... 4

1. 7 Research Methodology ........................................................................................................... 4

1.9 Research Design ..................................................................................................................... 4

1.10 Data sources .......................................................................................................................... 4

1.11 Sampling technigues ............................................................................................................. 5

1.12 Data collection techniques ..................................................................................................... 5

1.13 Procedure and ethical considerations ................................................................................... 6

1.13 limitations/anticipated problems .......................................................................................... 6

1.14 Data analysis and dissemination of research findings. ........................................................ 6

CHAPTER TWO ........................................................................................................................... 8

2.0 LITERATURE REVIEW AND CONCEPTUAL FRAMEWORK ........................................ 8

2.1 WHAT IS POVERTY?........................................................................................................ 8

2.2 CAUSES OF POVERTY .................................................................................................... 9

2.2 POVERTY REDUCTION ................................................................................................. 11

2.3 LEGAL FRAMEWORK GUIDING THE POVERTY ERADICATION INITIATIVE .. 11

2.5 ISSUES FOR CONSIDERATION IN IMPLEMENTING THE POVERTY

ERADICATION PACKAGES ............................................................................................. 13

2.6 FINANCIAL INSTITUTION ............................................................................................... 16

2.6.1 What is Financial Institution .............................................................................................. 16

2.6.2 Types of Financial Institutions and Their Roles ............................................................. 16

2.7 Micro Finance Institutions and Poverty Alleviation ............................................................ 23

2.8 ROLE OF MICRO FINANCE INSTITUTIONS IN POVERTYALLEVATION ............... 24

2.9 Research gape ........................................................................................................................ 26

CHAPTER THREE ..................................................................................................................... 27

COMPANY/ORGANIZATION PROFILE ............................................................................... 27

3.0 ABOUT BOTSWANA SAVINGS BANK ........................................................................... 27

3.1 CORPORATE STRUCTURE OF BSB ............................................................................... 28

CHAPTER 4 ................................................................................................................................ 31

RESEARCH FINDINGS AND DISCUSSION ......................................................................... 31

4.3 Roles of Botswana Saving Bank in poverty alleviation .................................................... 32

4.4 Limitations of Botswana Savings Bank in Poverty Alleviation ............................................ 33

Chapter 5 ..................................................................................................................................... 35

Summary, Conclusion and Recommendation ............................................................................. 35

5.1 Summary ............................................................................................................................... 35

5.2 Conclusion ............................................................................................................................. 37

5.3 Recommendation .................................................................................................................. 38

Reference ..................................................................................................................................... 39

Questioners .................................................................................................................................. 40

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Executive Summary

The purpose of the study was to identify the roles of BSB in poverty alleviation and to identify the

challenges or limitations facing BSB poverty alleviation effort.

BSB was selected as the case study because of its involvement in community and to low income earners

in the society.The project is qualitative based research.

To achieve this objective, secondary data and primary data were obtained from BSB Human Resources

department whereby questionnaire method and intrviews were used in obtaining the data.Secondary data

were obtained through BSB corporate social responsibility reports and other data obtained from the BSB

website.

In the findings roles of BSB in poverty alleviation were identified , these includes

Provides decent housing for physically challenged people

Donation of houses to Moreomabele orphan families

Promoting youth empowerment against crime , HIV/AIDS and poverty alleviation

Supporting education

Provision of loans

Provision of financial advice to Small Medium Enterprises (SMEs)

The challenges or limitations facing BSB in poverty alleviation efforts were also identified

which include:

Lack of cooperation from society

Lack of support from government

Lack of knowledge by the society on how to get loans

Failure of society to pay loans

Lack of loan security from society

Management objective conflict

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CHAPTER ONE:

INTRODUCTION

1.0 Background of the study

The relevance to the study is as the result the challenges facing most developing countries in

fighting the poverty.

poverty eradication has become a buzz- word since beggining of the millenium, as the

international communinityshifted from the paradigm of poverty alleviation to that of poverty

eradication. Mafeje(2001:22) notes that the new paradigm is not only a process to get the poor

to pass a certain level of income or consumption, but also to achieve "a sustained increase in

productivity and an integration of the poor into the process of growth".

In order to achieve this, the poor must have access to resources within an effective policy and

institutional framework. Thus, a developmentalist approach is envisioned. Poverty eradication is

therefore crucial to sustainable economic and social development in developing countries,

Botswana included.

Poverty in Botswana is associated with institutional and structural constraints (Kerapeletswe

and Moremi, 2001), and this has led to increasing demands to develop policies and associated

development efforts that address poverty eradication. At independence, Botswana was among

the world's twenty poorest countries in per capita terms. The country's main sources of income

were cattle, subsistence agriculture and remittances from migrant workers in South Africa. Over

30 percent of Batswana men between the ages of 20 and 40 worked in South Africa.

However,Botswana's economic growth began not long after independence and has been well-

sustained since then, with annual growth rates reaching as high as 13%. By 1997, GDP per

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capita was USD3,21O. However, the benefits ofthis growth were very unevenly distributed. The

government of Botswana responded with various polices to assist vulnerable groups such as the

destitutes, the elderly and remote-area dwellers. Despite these efforts, however, many people

continue to live in poverty.

1.1 Statement of the problem

Poverty profiles in Botswana indicate that rural households are more likely to be poorer than

urban and urban village households; the headcount indices for rural areas, urban villages and

urban areas stood at 44.2, 24.9 and 10.8 percent in 2002-03, respectively. The areas most

suffered by poverty were Rural South-West (49.7 percent), Rural North-West (41.5 percent),

and Rural North-East (37.8 percent). The results also indicate that the elderly and children are

more likely to be poor than the other age cohorts. Moreover, female headed households are

more likely to be poor than their male-headed counterparts.

Widowed and separated households are also likely to be poorer compared to the households

headed by married. Education plays a significant role in reducing poverty; the more educated

the head of the household, the more likely is the household to escape poverty. The government

has been doing its level best to reduce the poverty within the country.

With that brief in mind this project would like to find out the role of financial institutions in

eradicating poverty.

1.3 Objectives of the study

To identify the roles of Roles of botswana saving bank in poverty alleviation

To identify challenges facing botswana saving bank in poverty ellaviation

1.4 Sample Research questions

i. What are the roles of botswana saving bank in poverty alleviation

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ii. Please identify any limitation that hinder botswana saving bank in poverty alleviation

1.5 Significancye / justification of the study

The study will have a lot of significance to the researcher and to botswana saving bank . These

significance include

i. The study is part of my fulfillment of my masters degree in business administration

ii. After the research has been done the result will be disseminated to financial insitution

that involved in the research and other financial insitution. The research will come up

with the specific roles of financial insitution in poverty eradication . But also the study

will help to identify challenges that face financial insitution in poverty eradication and

therefore come up with strategies for solving those challenges.

1.6 Scope of the study

This study was conducted within BOTSWANA SAVING BANK in Botswana

1. 7 Research Methodology

The methodology that was applied by the study was chosen in order to acquire information and

interpret conclusions about the role of financial insitution in poverty eradication and challenges

facing financial insitution in poverty eradication .

1.9 Research Design

In order to capture the reliable data qualitative approache will be used. Qualitative approach will

underline the quality of the usage of financial institution in poverty eradication.

Due to the nature of the project topic and the objective of the project Exploratory research

design will be used, in exploratory research design case study analysis will be considered. The

case study study will be BOTSWANA SAVING BANK.

1.10 Data sources

Both primary data source and secondary source will be used;

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Primary data will be collected using Questionnaire, focus groups and individual interview

schedules and observation checklists to examine the above named research objectives.

Secondary data will be collected from related existing written material sources including

papers, journals, National and institutional policies, previous conducted surveys, proceedings

as well as periodic reports.

1.11 Sampling technigues

If at all possible the researcher would prefer to study the entire population, but it is impossible

to do this and therefore the researcher must settle for a sample. According to Black and

Champion (1976), the sample is a portion of elements taken from a population, which is

considered to be representative of the population.

In order to collect primary data the questionnaire survey technique and interview survey will be

used.

For the purpose of this study purposive sampling method will be used this is due to the reason

that the study will be qualitative in nature and purposive technique is suitable.

1.12 Data collection techniques

Two main data collection method will be used and these include;

i. Questionnaire method

ii. Interview method

The questionnaire survey

Cohen (1989) defines a questionnaire as a self-report instrument used for gathering information about

variables of interest in an investigation.

For this study both structured and non structured questionnaire has designed in order to all for the

responses. The both methods will be used at the same time in order to give the researcher to get the

reliable information from the interviewer.

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Structured questioner helps the researcher to ensure that all respondent reply the same set of questions.

Kothari (2004) and this method is simple to administer and it helps to understand the meaning of the

questions clearly.

Unstructured questioner will give an opportunity the interviewer to give out his/her opinions to the

questions.

The interview survey

The technique of personal interviewing will be undertaken in order to reach the objectives since

it is the most flexible and productive method of communication, and also provided with: The

skill of guiding the discussion back to the topic outlined when discussions are unfruitful while it

has the disadvantages of being very costly time consuming and can introduce bias through the

desires of the respondent to please the interviewer (Aaker& Day, 1990: 164).

For the purpose of this study semi-structured face to face interviews will be contacted involving

two interest groups: The management team and other staffs. The choice will be based on the

researchers knowledge about different educational professionals among the interviewees, and

their different occupation.

1.13 Procedure and ethical considerations

The permission to conduct the research shall be obtained from the relevant authority.

Questionnaire shall be administered to targeted groups. Participants/organizations will be

assured of the confidentiality of the information they will provide.

1.13 limitations/anticipated problems

Due to the confidentiality of financial institution the researcher might get diffucult in getting all

the information needed.

1.14 Data analysis and dissemination of research findings.

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The data after being collected will be processed and analyzed in accordance with the outline laid

down for the purpose of developing the research plan. Kothari (2005: page 122.) The data will

be brought together and analyzed using data analysis software such advanced excel.

Along with the fact that the thesis produces from this study will be for masters in business

administration for the researcher but also the findings will be useful in other dimensions. The

findings will be disseminated to the financial institutions, decision makers, and lecturers.

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CHAPTER TWO

2.0 LITERATURE REVIEW AND CONCEPTUAL

FRAMEWORK

Botswana has adopted an aggressive response to poverty, and designed policies and

programmes aimed at poverty eradication. Results from Household Income and Expenditure

Surveys (HIES) for 1985, 1993 and 2002 suggest the global poverty target Halve, between

1990 and 2015, the proportion of people whose income is less than US$1 a day - was met in

2007

2.1 WHAT IS POVERTY?

Poverty is about not having enough money to meet basic needs including food, clothing and

shelter. However, poverty is more, much more than just not having enough money.

The World Bank Organization describes poverty in this way:

Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to

see a doctor. Poverty is not having access to school and not knowing how to read.

Poverty is not having a job, is fear for the future, living one day at a time.

Poverty has many faces, changing from place to place and across time, and has been

described in many ways. Most often, poverty is a situation people want to escape. So

poverty is a call to action -- for the poor and the wealthy alike -- a call to change the

world so that many more may have enough to eat, adequate shelter, access to education

and health, protection from violence, and a voice in what happens in their communities.

In addition to a lack of money, poverty is about not being able to participate in recreational

activities; not being able to send children on a day trip with their schoolmates or to a birthday

party; not being able to pay for medications for an illness. These are all costs of being poor.

Those people who are barely able to pay for food and shelter simply cant consider these other

expenses. When people are excluded within a society, when they are not well educated and

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when they have a higher incidence of illness, there are negative consequences for society. We

all pay the price for poverty. The increased cost on the health system, the justice system and

other systems that provide supports to those living in poverty has an impact on our economy.

While much progress has been made in measuring and analyzing poverty, the World Bank

Organization is doing more work to identify indicators for the other dimensions of poverty.

This work includes identifying social indicators to track education, health, access to services,

vulnerability, and social exclusion.

There is no one cause of poverty, and the results of it are different in every case. Poverty varies

considerably depending on the situation. Feeling poor in Canada is different from living in

poverty in India or Botswana. The differences between rich and poor within the borders of a

country can also be great.

Despite the many definitions, one thing is certain; poverty is a complex societal issue. No

matter how poverty is defined, it can be agreed that it is an issue that requires everyones

attention. It is important that all members of our society work together to provide the

opportunities for all our members to reach their full potential. It helps all of us to help one

another

2.2 CAUSES OF POVERTY

Poverty has various causes, while some of them can be removed by various measures,

eliminating the most complicated underlying causes remains a challenge for both developed and

developing nations

Some of the causes of poverty include changing trends in a country's economy, lack of

education, high divorce rate which causes feminization of poverty, having a culture of poverty,

overpopulation, epidemic diseases such as AIDS and malaria, and environmental problems such

as lack of rainfall

To mention but few other causes of poverty includes

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War

Disease

Declining union influence

Economic structures

Lack of education

Parents leaving the family

Divorce

Teenage pregnancy

Domestic abuse

Employment abuse

Immigrant status

Minority status

Physical and mental illness and disability

Loss of job

Low wage rates

Oppression

Theft

Disasters

Flood

Lack of or inability to afford adequate health insurance

Lack of awareness of government policy

Industrial change

Overpopulation

High growth rate of population

Lack of job opportunities in secondary sector

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Lack of land resources

Lack of industrialisation

Over dependence on agriculture

Inflationary pressure

Unemployment

Drug abuse

Income inequalities

Accidents

2.2 POVERTY REDUCTION

Poverty reduction means a sustained decrease in the number of poor and the extent of their

deprivation. This requires that the root causes and structural factors of poverty be addressed.

Redu cing poverty places a focus on people's capabilities to avoid,or limit, their deprivation

2.3 LEGAL FRAMEWORK GUIDING THE POVERTY ERADICATION INITIATIVE

The Poverty Eradication Initiative operates within an environment where there are legal

instruments, acts and policies implemented as a matter of control of various small businesses.

The expectation is that businesses set up under the Poverty Eradication Programme operate

within the current legal framework.

Botswana was classified as one of the ten poorest countries at the time of independence

in 1966 and currently it is classified as a middle income country. Though Botswana has

achieved such economic growth, the country still faces socio economic challenges such as

poverty. The spread of poverty is geographical with some areas heavily affected than others.

Botswana has introduced several initiatives to combat poverty and these include programs for

orphans and destitute persons, subsidized Self Help Housing Agency (SHHA) and

agricultural schemes. Despite these efforts, results from the Botswana Core Welfare Indicator

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Survey (BCWIS) 2009/10, reveal that the poverty headcount rate stands at 20.7%, which is

relatively high for a middle income country.

Botswanas goal is to surpass the Millennium Development Goal target of reducing extreme

poverty by half by 2015. Therefore; Botswana has taken a bold step to shift from poverty

reduction to poverty eradication. This has prompted the Government to come up with a

Poverty Eradication Programme which is aimed at improving the livelihoods of Batswana by

addressing all aspects of poverty including among others; the policy environment, the

institutional framework and the establishment of sustainable economic empowerment

projects. The Poverty Eradication Programme will aid in attaining food security, and at a

minimum sustainable livelihoods amongst disadvantaged individuals and/or families.

The Guidelines for Implementing Poverty Eradication Packages are therefore developed to

provide all-embracing guidance in the implementation of empowerment projects in

support of the overall Poverty Eradication Programme.

2.4 OBJECTIVES OF THE IMPLEMENTATION GUIDELINES

The objectives of the implementation guidelines are to:

Provide an environment for smooth and transparent

implementation and coordination of sustainable poverty

eradication projects.

Harmonize procedures for implementation of

poverty eradication projects with a view to ensuring

efficient utilization of resources.

Provide a coordinated platform for all stakeholders

in the Implementation of poverty eradication projects.

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2.5 ISSUES FOR CONSIDERATION IN IMPLEMENTING THE POVERTY

ERADICATION PACKAGES

Community Mobilisation

The concept of community mobilization involves public educat ion about the

program, identification of projects and their goals, and activities to be undertaken. This will

involve facilitating the efforts of individual beneficiaries, and groups to appreciate the

importance of the program and participate in all decision-making processes. This process

will enhance ownership of the end product.

There will be need to involve community leaders (e.g. District Extension Teams, Member

of Parliament, Kgosi, Councilor and Village Development Committees, Ward

Development Committees, Village Health Committees, Village Youth Committees, Village

Farmers Committees, Faith Based Committees, Village Extension Teams, etc.) who can

assist in realising the desired change. Individual and group counseling needs to be an

integral part of this phase.

Needs Profiling

The purpose of needs profiling is to identify the needs, capabilities and capacities of the

clients to inform project selection, possible training and services required. In this instance,

the purpose will be to determine the needs of the people and the relevance of the project to

be embarked on.

Identification of the Project

There are numerous projects that the beneficiary can choose from. The list is not exhaustive.

The selection of the project by the client will be based on the clients identified needs, interest

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as well as availability of resources after validation of the project. The project will have to be

suitable to the area.

Training

The beneficiaries will be trained in entrepreneurial skills on the project they have chosen.

The professionals therefore, have to identify training needs and design relevant training.

The trainers will use multi disciplinary approaches in designing training programs and a r e

ex pec ted to coordinate t h e i r activities for effective service delivery.

Development of a Project Plan

A plan in any undertaking is an important tool because it provides guidance on what is to be

done and how that task is to be carried out. The beneficiary should be in a position to

understand what needs to be done for the success of the project. Implementers and

beneficiaries should be sensitized to appreciate the importance of developing and owning a

Project Plan.

Resource Mobilisation

This part sensitizes implementers and beneficiaries that resources have to be mobilized

and these include land, finances, transport machinery and human resources.

Implementers should work within the recommended budget line for the project. As much as

possible, it is critical to use locally available raw materials.

Marketing

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Beneficiaries will be expected to market their products within their local communities.

Available possible avenues include among o thers , door to door, market days,

Womens Expo, shows, exhibitions.

Gender

Gender considerations are a n integral part of any programme. These would include

taking into account the needs of a multiplicity of vulnerable groups.

People with Disability

The projects selected should take into account the interests and needs of people with

disabilities. People with Disabilities (PWDs) are people within the community who are

disadvantaged due to physical or mental impairment that has occurred due to illness,

accident or genetic condition. The Poverty Eradication Programme (PEP) is aimed at

empowerment of Women, Youth, PWDs and other disadvantaged sections of the society

thereby allowing them to overcome poverty, and end inequality.

Providing sustainable and formal employment for PWDs through PEP initiatives will in turn

allow them a degree o f independence, financial security and bring them closer to

mainstream into society. It is therefore incumbent upon the Government to take affirmative

action for PWDs to ensure that they are included in any programme designed to elevate the

status and well-being of the disadvantaged in the community and by doing so, raise them

from a position of government-dependency to that of financial independence, self-reliance

and dignity.

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Psycho-social Support

Each beneficiary must be recognized as an individual with his/her own strengths and

weaknesses. Therefore each person must be treated with respect and dignity,

recognizing that he/she is unique. Psycho-social support will be provided to enhance

self-esteem of the beneficiaries.

Confidentiality

Issues discussed between the beneficiary and the appraisers should remain confidential.

2.6 FINANCIAL INSTITUTION

2.6.1 What is Financial Institution

A financial institution is an establishment that conducts financial transactions such as

investments, loans and deposits. Almost everyone deals with financial institutions on a regular

basis. Everything from depositing money to taking out loans and exchanging currencies must be

done through financial institutions.

2.6.2 Types of Financial Institutions and Their Roles

A financial institution is an establishment that conducts financial transactions such as

investments, loans and deposits. Almost everyone deals with financial institutions on a regular

basis. Everything from depositing money to taking out loans and exchanging currencies must be

done through financial institutions. Here is an overview of some of the major categories of

financial institutions and their roles in the financial system.

Commercial Banks

Commercial banks accept deposits and provide security and convenience to their customers.

Part of the original purpose of banks was to offer customers safe keeping for their money. By

keeping physical cash at home or in a wallet, there are risks of loss due to theft and accidents,

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not to mention the loss of possible income from interest. With banks, consumers no longer need

to keep large amounts of currency on hand; transactions can be handled with checks, debit cards

or credit cards, instead.

Commercial banks also make loans that individuals and businesses use to buy goods or expand

business operations, which in turn lead to more deposited funds that make their way to banks. If

banks can lend money at a higher interest rate than they have to pay for funds and operating

costs, they make money.

Banks also serve often under-appreciated roles as payment agents within a country and between

nations. Not only do banks issues debit cards that allow account holders to pay for goods with

the swipe of a card, they can also arrange wire transfers with other institutions. Banks

essentially underwrite financial transactions by lending their reputation and credibility to the

transaction; a check is basically just a promissory note between two people, but without a bank's

name and information on that note, no merchant would accept it. As payment agents, banks

make commercial transactions much more convenient; it is not necessary to carry around large

amounts of physical currency when merchants will accept the checks, debit cards or credit cards

that banks provide.

Investment Banks

The stock market crash of 1929 and ensuing Great Depression caused the United States

government to increase financial market regulation. The Glass-Steagall Act of 1933 resulted in

the separation of investment banking from commercial banking.

While investment banks may be called "banks," their operations are far different than deposit-

gathering commercial banks. An investment bank is a financial intermediary that performs a

variety of services for businesses and some governments. These services

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include underwriting debt and equity offerings, acting as an intermediary between an issuer of

securities and the investing public, making markets, facilitating mergers and other corporate

reorganizations, and acting as a broker for institutional clients. They may also provide research

and financial advisory services to companies. As a general rule, investment banks focus

on initial public offerings (IPOs) and large public and private share offerings. Traditionally,

investment banks do not deal with the general public. However, some of the big names in

investment banking, such as JP Morgan Chase, Bank of America and Citigroup, also operate

commercial banks. Other past and present investment banks you may have heard of include

Morgan Stanley, Goldman Sachs, Lehman Brothers and First Boston.

Generally speaking, investment banks are subject to less regulation than commercial banks.

While investment banks operate under the supervision of regulatory bodies, like the Securities

and Exchange Commission, FINRA, and the U.S. Treasury, there are typically fewer

restrictions when it comes to maintaining capital ratios or introducing new products.

Insurance Companies

Insurance companies pool risk by collecting premiums from a large group of people who want

to protect themselves and/or their loved ones against a particular loss, such as a fire, car

accident, illness, lawsuit, disability or death. Insurance helps individuals and companies manage

risk and preserve wealth. By insuring a large number of people, insurance companies can

operate profitably and at the same time pay for claims that may arise. Insurance companies use

statistical analysis to project what their actual losses will be within a given class. They know

that not all insured individuals will suffer losses at the same time or at all.

Brokerages

A brokerage acts as an intermediary between buyers and sellers to facilitate securities

transactions. Brokerage companies are compensated via commission after the transaction has

http://www.investopedia.com/terms/f/finra.asp#axzz1ZISod4Tn

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been successfully completed. For example, when a trade order for a stock is carried out, an

individual often pays a transaction fee for the brokerage company's efforts to execute the trade.

A brokerage can be either full service or discount. A full service brokerage provides investment

advice, portfolio management and trade execution. In exchange for this high level of service,

customers pay significant commissions on each trade. Discount brokers allow investors to

perform their own investment research and make their own decisions. The brokerage still

executes the investor's trades, but since it doesn't provide the other services of a full-service

brokerage, its trade commissions are much smaller.

Investment Companies

An investment company is a corporation or a trust through which individuals invest in

diversified, professionally managed portfolios of securities by pooling their funds with those of

other investors. Rather than purchasing combinations of individual stocks and bonds for a

portfolio, an investor can purchase securities indirectly through a package product like a mutual

fund.

There are three fundamental types of investment companies: unit investment trusts (UITs), face

amount certificate companies and managed investment companies. All three types have the

following things in common:

An undivided interest in the fund proportional to the number of shares held

Diversification in a large number of securities

Professional management

Specific investment objectives

They are different type of Investment Company

Unit Investment Trusts (UITs)

A unit investment trust, or UIT, is a company established under an indenture or similar

agreement. It has the following characteristics:

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The management of the trust is supervised by a trustee.

Unit investment trusts sell a fixed number of shares to unit holders, who receive a

proportionate share of net income from the underlying trust.

The UIT security is redeemable and represents an undivided interest in a specific

portfolio of securities.

The portfolio is merely supervised, not managed, as it remains fixed for the life of the

trust. In other words, there is no day-to-day management of the portfolio.

Face Amount Certificates

A face amount certificate company issues debt certificates at a predetermined rate of interest.

Additional characteristics include:

Certificate holders may redeem their certificates for a fixed amount on a specified date,

or for a specific surrender value, before maturity.

Certificates can be purchased either in periodic installments or all at once with a lump-

sum payment.

Face amount certificate companies are almost nonexistent today.

Management Investment Companies

The most common type of Investment Company is the management investment company,

which actively manages a portfolio of securities to achieve its investment objective. There are

two types of management investment company: closed-end and open-end. The primary

differences between the two come down to where investors buy and sell their shares - in the

primary or secondary markets - and the type of securities the investment company sells.

Closed-End Investment Companies: A closed-end investment company issues shares in

a one-time public offering. It does not continually offer new shares, nor does it redeem

its shares like an open-end investment company. Once shares are issued, an investor

may purchase them on the open market and sell them in the same way. The market value

21

of the closed-end fund's shares will be based on supply and demand, much like other

securities. Instead of selling at net asset value, the shares can sell at a premium or at a

discount to the net asset value.

Open-End Investment Companies: Open-end investment companies, also known

as mutual funds, continuously issue new shares. These shares may only be purchased

from the investment company and sold back to the investment company. Mutual funds

are discussed in more detail in the Variable Contracts section.

Nonbank Financial Institutions

The following institutions are not technically banks but provide some of the same services as

banks.

Savings and Loans

Savings and loan associations, also known as S&Ls or thrifts, resemble banks in many respects.

Most consumers don't know the differences between commercial banks and S&Ls. By law,

savings and loan companies must have 65% or more of their lending in residential mortgages,

though other types of lending is allowed.

S&Ls emerged largely in response to the exclusivity of commercial banks. There was a time

when banks would only accept deposits from people of relatively high wealth, with references,

and would not lend to ordinary workers. Savings and loans typically offered lower borrowing

rates than commercial banks and higher interest rates on deposits; the narrower profit margin

was a byproduct of the fact that such S&Ls were privately or mutually owned.

Credit Unions

Credit unions are another alternative to regular commercial banks. Credit unions are almost

always organized as not-for-profit cooperatives. Like banks and S&Ls, credit unions can be

chartered at the federal or state level. Like S&Ls, credit unions typically offer higher rates on

deposits and charge lower rates on loans in comparison to commercial banks.

http://www.investopedia.com/terms/m/mutualfund.asp

22

In exchange for a little added freedom, there is one particular restriction on credit unions;

membership is not open to the public, but rather restricted to a particular membership group. In

the past, this has meant that employees of certain companies, members of certain churches, and

so on, were the only ones allowed to join a credit union. In recent years, though, these

restrictions have been eased considerably, very much over the objections of banks.

Shadow Banks

The housing bubble and subsequent credit crisis brought attention to what is commonly called

"the shadow banking system." This is a collection of investment banks, hedge funds, insurers

and other non-bank financial institutions that replicate some of the activities of regulated banks,

but do not operate in the same regulatory environment.

The shadow banking system funneled a great deal of money into the U.S.residential mortgage

market during the bubble. Insurance companies would buy mortgage bonds from investment

banks, which would then use the proceeds to buy more mortgages, so that they could issue more

mortgage bonds. The banks would use the money obtained from selling mortgages to write still

more mortgages.

Many estimates of the size of the shadow banking system suggest that it had grown to match the

size of the traditional U.S. banking system by 2008.

Apart from the absence of regulation and reporting requirements, the nature of the operations

within the shadow banking system created several problems. Specifically, many of these

institutions "borrowed short" to "lend long." In other words, they financed long-term

commitments with short-term debt. This left these institutions very vulnerable to increases in

short-term rates and when those rates rose, it forced many institutions to rush to liquidate

investments and make margin calls. Moreover, as these institutions were not part of the formal

banking system, they did not have access to the same emergency funding facilities.

23

2.7 Micro Finance Institutions and Poverty Alleviation

MFI schemes were initiated to meet different objectives. The most commonly mentioned

objectives include: poverty alleviation and improved living standards, offering financing to the

poor, women s empowerment, and the development of the business sector as a means of

achieving high standards and reducing market failure. Empirical evidences and surveys give

mixed results on the performance of MFIs. In some cases debacle stories have been reported,

yet there have been success stories. In other cases the reasons for failures or successes have not

been well documented

.Recent studies show that, linking MFIs with other interventions such as poverty alleviation

often complicates the functioning of MFIs by pushing them to areas not considered sustainable.

This implies that there is a conflict in measuring financial performance and poverty alleviation.

Most of sustainability indicators focus on the MFI as a profitable institution (loan repayment,

profitability and degree of subsidization). Thus for an MFI to meet the microfinance best

practices, as given by Consultative Group to Assist the Poorest (CGAP), and be financially

sustainable, it has to regard itself as a business venture. As a consequence of this and especially

in the rural areas, very few people qualify for a business loan

Manandhar and Pradhan (2005) state that microfinance is an effective development tool for

poverty reduction since the financial services enable the poor and low income households to

take advantage of the economic opportunities to increase their living standards through self-

employment. They further note that it is now accepted that the poor do not have much money,

so low income households need financial support.

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The importance of microfinance particularly in the countries perceived to be poverty stricken

has been increasing in recent times which have led to policy makers of many countries to adopt

national micro-finance policies and programmes (Manandhar & Pradhan, 2005).

The increasing number of microfinance practitioners around the globe is an indication that

microfinance sector can play an important role not only to help attain the government s policies

on poverty reduction but also to help increase the income level of people living with poverty.

Micro financing is an increasingly common weapon in the fight to reduce poverty and promote

economic growth and well-being of individuals. Dupas and Robinson (2008) affirm that in

Botswana, employment in small and medium enterprises has been estimated to account for more

than 20% of adult employment and for 12- 14% of national Growth Domestic Product.

Worldwide, these businesses are typically extremely small-scale and the majority typically

starts with no employees other than the owner and very low levels of working capital (Dupas

and Robinson, 2008).

Todaro and others (2006) confirms that the first goal of the Millennium Development Goals

(MDGs) is to eradicate poverty and hunger by year 2015. The MDGs seeks to reduce by half the

proportion of people whose income is less than $1.22 a day and those who suffer from hunger.

2.8 ROLE OF MICRO FINANCE INSTITUTIONS IN POVERTYALLEVATION

Self Employment

Poverty reduction through self employment has long been a high priority for the Government of

India. Microfinance is an experimental tool in its overall strategies. Most of poor people manage

to optimize resources over a time to develop their enterprises. Financial services could enable

the poor to leverage their initiative, accelerating the process of generating incomes, assets and

economic security. However, conventional finance institutions seldom lend down-market to

25

serve the needs of low-income families and women-headed households. Therefore fundamental

approach is to create the self employment by financing the rural poor through financial

institutions. Microfinance, thus, creates the hope and increases the self-esteem of the poor by

giving the opportunities to be employed

Women Empowerment

In rural areas women living below the poverty line are unable to realize their potential.

Microfinance programmes are currently being promoted as a key strategy for simultaneously

addressing both poverty alleviation and womens empowerment. The self help groups

(SHGs) of women as sources of microfinance have helped them to take part in development

activities. The participation of women in SHGs made a significant impact on their

empowerment both in social and economic aspects. Vast sections of the rural poor are even now

deprived of the basic amenities, opportunities and oppressed by social customs and practices.

Several programmes were implemented by various governments andnongovernmental

organizations to uplift them both economically and socially. It has been an accepted premise

that women were not given enough opportunities to involve themselves in the decision making

process of the family as well as in the society. Hence, women were the main target groups under

SHG programme. Microfinance can provide an effective way to assist and empower poor

women, who make up a significant Proportion of the poor and suffer from poverty

Poverty Reduction Tool

Microfinance can be a critical element of an effective poverty reduction strategy. Improved

access and efficient provision of savings, credit, and insurance facilities in particular can enable

the poor to smooth their consumption, manage their risks better, build their assets gradually, and

develop their micro enterprises. Microfinance is only a means and not an end. The ultimate goal

is to reduce poverty. Government, NGOs and other financial institutions have introduced

various welfare schemes and activities to reduce poverty. Microfinance,

26

by providing small loans and savings facilities to those who are excluded from commercialfinan

cial services has been developed as a key strategy for reducing poverty throughout the world.

2.9 Research gape

From the literature review little of the role of financial institution in poverty alleviation has been

presented, only role of micro finance institutions to poverty alleviation have been identified.

This gives the room for the researcher to find more about the role of financial institution in

poverty alleviation, taking Botswana Saving Bank as the case study.

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CHAPTER THREE

COMPANY/ORGANIZATION PROFILE

3.0 ABOUT BOTSWANA SAVINGS BANK

Botswana Savings Bank is an autonomous financial institution wholly owned by the

Government of Botswana. The Bank is a member of the World Savings Bank Institute- an

association of Savings Banks represented in over 90 countries worldwide.

The bank is required to carry out its business according to sound commercial principles and in

accordance with the Banking Act of 1995. The banks aim is to cultivate a strong saving habit

among Batswana and to promote the culture of self-development; to improve the standard of

living of Batswana.

Mandate

BSB plays an essential role of mobilizing savings and providing banking services throughout

the country. BSB has a strong and lasting relationship with Botswana Post which enables BSB

to provide its services through the postal network. Plans are at an advanced stage to merge the

two institutions

Management

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3.1 CORPORATE STRUCTURE OF BSB

29

PRODUCTS

BSB products have been grouped into three areas: Investments, Loan and Savings.

INVESTMENTS

i. Corporate Savings Account

Corporate Savings Account is an ideal savings for corporates that allows entities to make

deposits and withdrawals at BSB branches and Post Offices country wide.

ii. Corporate Fixed Deposit

This is for corporate entity looking to invest for lucrative returns? BSB has a flexible Corporate

Fixed Deposit that allows individual corporates to invest funds with the Bank for a minimum

period of three (3) months, with a tailor made maximum period.

LOANS

i. Ipelegeng Personal Loan

This is for those already members of Botswana Savings Bank? BSB offers them a chance to

enjoy BSB Ipelegeng Loan Scheme which is available to Save-As-You-Earn, Thobo or Sesigo

Savings Account holders.

ii. Guaranteed Motor Vehicle Scheme

Looking for your own wheels? BSB offers government or qualifying parastatal employees an

opportunity to own their rides through a Motor Vehicle Guaranteed Loan.

iii. Guaranteed Residential Property Scheme

This is for a government or qualifying parastatal employee looking to finance your property,

then BSB is the right partner! Guaranteed Residential Property is a facility tailor made for you.

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iv. Motheo Personal Loan

This is for those intending to drill a borehole, travel on a holiday vacation, purchase a little car

or pay school fees etc? BSB Motheo Personal Loan is the answer to all your wishes. It is a loan

for every life style and you dont need to be an existing BSB customer.

SAVINGS

i. Fixed Deposit

Let your money work for you with our highly flexible Fixed Deposit Account that offers very

attractive interests.

ii. Letlole National Savings Certficate (NSCs)

This is for those looking for a whooping return on Investment over three (3) years? Then Letlole

is what you need.

iii. Thobo Savings Account

Those in need of a short term savings plan? Thobo savings account will assist you accumulate

money over a one (1) year period.

iv. Save- As- You- Earn

This is for employee from a reputable organization who is interested in building a strong base

for investment? Then Save As You Earn is what you need

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CHAPTER 4

RESEARCH FINDINGS AND DISCUSSION

This chapter explain the result of the findings, the section included in ths chapter include basic

information which will have type of financial institution where the project were conducted,

organisation policy against povert alleviation, roles of Botswana Saving Bank in poverty

alleviation and limitation of Botswana Saving Bank in poverty alleviation.

4.1 Basic information

Type of the financial Institution:

Botswana Saving Bank is the commercial bank. Bank is an autonomous financial institution

wholly owned by the Government of Botswana. The Bank is a member of the World Savings

Bank Institute- an association of Savings Banks represented in over 90 countries worldwide.

The bank is required to carry out its business according to sound commercial principles and in

accordance with the Banking Act of 1995. The banks aim is to cultivate a strong saving habit

among Batswana and to promote the culture of self-development; to improve the standard of

living of Batswana.

4.2 Organization policy against poverty alleviation

The financial sector in Botswana is still largely rudimentary and not lived up to playing a major

role in financing economic development in a backward economy. Reforming this sector is a key

issue in the process of growth and poverty reduction in Botswana. However, while financial

sector development may be conducive to economic growth, promoting pro-poor growth often

32

requires the design of institutions and policies that widen access to credit by the poor and micro

entrepreneurs.

Also Botswana Saving Bank has implemented different policy to alleviation poverty in so doing

the bank is participating in different activities to reduce poverty through corporate social

responsibility. The corporate social responsibility is one of the key functions in helping

alleviating poverty in Botswana, for example activities such as helping Physically Challenged

Person, providing loans to SMEs, provision of housing facilities to poor people.

4.3 Roles of Botswana Saving Bank in poverty alleviation

From the findings different roles and activities were identified that helps in poverty alleviation.

These roles are played through social corporate responsibility activities. Below are the activities

being done by Botswana Saving Bank that helps in poverty alleviation.

Provides Decent Housing for a Physically Challenged People

Botswana Savings Bank (BSB) Provides Decent Housing for a Physically Challenged Person in

Tshane Botswana Savings Bank (BSB) donates houses to people living with disability in

Tshane area. The events are officiated by Honourable Assistant Minister of Presidential Affairs

and Public Administration.

Donation of houses to Moreomabele Orphan Families

The events are officiated by Honourable Minister of Finance and Development Planning; these

houses are built under the Banks corporate social investment program and are in support of the

Presidential Housing Appeal.

Promoting youth empowerment against crime, HIV/AIDS and poverty alleviation

Botswana Savings Bank and North East in participate in special promoting youth empowerment

programme against poverty alleviation, crime and HIV/AIDS pandemic in the border

villages.The objectives of the project are to bridge the gap between communities and private

33

sector participation in the upliftment of the lives of Batswana. The project intends to assist

communities find solutions to complex issues like poverty, crime and HIV/AIDS. Youth

empowerment against crime and HIV/AIDS project in villages of Mabudzane, Tsamaya,

Themashanga, Jackalas II and Siviyawas launched at Tsamaya village.

Supporting education.

Botswana Savings Bank Bringing supports education through providing financial assistance for

example Metsimasweu Community Junior Secondary School received a cheque of P10, 000

from Botswana Savings Bank as a donation to help in the school activities. This was done

during the Schools prize giving ceremony where, BSB Managing Director was a key note

speaker

Another example Botswana Savings Bank extended a helping hand by donating computers to

Noka Ya Botshelo Primary School in Kasane

Provision of Loans

Botswana Savings Bank plays an important role of providing loans to Batswana especially low

income earners with reasonable interests. This plays a very important role of reducing high

rates of unemployment especially to the youth and this result in poverty alleviation.

Provide Financial Advices to SMEs

As a way of alleviating Poverty in Botswana, Botswana Savings Bank provides financial

advices to SMEs on how to start businesses. This in turn creates a lot of jobs for most of

Batswana especially the youth.

4.4 Limitations of Botswana Savings Bank in Poverty Alleviation

Botswana Saving Bank faces different challenges in poverty alleviation efforts as follows:

Lack of Support from the Government

34

There is lack of support from the Government which is a challenge to Botswana Savings Bank

to attain its objective of alleviating Poverty.

Lack of Cooperation from society

The society is not cooperative enough especially when it comes to providing the required

documents for the processing of the loans. This leads to a lot of stress for the bank in

following the applicant to provide the documents which results in delay of loan approval.

Lack of knowledge from the society on how to get loans

A lot of people in the society will have a desire to apply for loans but lack of knowledge on

what to do to get a loan will be a stumbling block to them.

Failure of the society to pay the loans

Failure of the society to pay the loans is one of the limitations of Botswana Savings Bank

because this will lead to a great loss to the bank. If loans are not paid it will mean that more

loans cannot be given by the bank.

Lack of loan security from the society

For the bank to provide a loan there has to be loan security from the society, so a lot of people

are not able to apply for loans because they do not have loan security to secure their loans.

Management Objective Conflict

There is a management objective conflict between theobjective of alleviating poverty and the

social corporate responsibilities objective.

35

Chapter 5

Summary, Conclusion and Recommendation

5.1 Summary

The purpose of the study was to identify the roles of BSB in poverty alleviation and to identify

the challenges or limitations facing BSB poverty alleviation effort.

BSB was selected as the case study because of its involvement in community and to low income

earners in the society.The project is qualitative based research, To achieve this objective,

secondary data and primary data were obtained from BSB Human Resources department

whereby questionnaire method and intrviews were used in obtaining the data.Secondary data

were obtained through BSB corporate social responsibility reports and other data obtained from

the BSB website.

In the findings roles of BSB in poverty alleviation were identified , these includes

Provides decent housing for physically challenged people

Donation of houses to Moreomabele orphan families

Promoting youth empowerment against crime , HIV/AIDS and poverty alleviation

Supporting education

Provision of loans

Provision of financial advice to Small Medium Enterprises (SMEs)

The challenges or limitations facing BSB in poverty alleviation efforts were also identified

which include:

Lack of cooperation from society

Lack of support from government

36

Lack of knowledge by the society on how to get loans

Failure of society to pay loans

Lack of loan security from society

Management objective conflict

37

5.2 Conclusion

In conclusion , although the findings tried to show the roles of BSB in poverty alleviation but

there is no clear evidence that shows to what extent the BSB activities have helped in poverty

alleviation.

There is a contradiction between the objectives of alleviating poverty and the social corporate

responsibilities objectives.

In the effort to poverty alleviation there is a lot of limitations that are identified both internally

and externally which are

Lack of cooperation from society

Lack of support from government

Lack of knowledge by the society on how to get loans

Failure of society to pay loans

Lack of loan security from society

Management objective conflict

This report was of great help since it highlighted the activities that BSB does as the pay

back to the society as the means of alleviating poverty.

38

5.3 Recommendation

There is a need of having a clear objective between social corporate responsibility and BSB

objectives of alleviating poverty.

Government should increase support commercial banks that are involved in poverty alleviation,

for example low interest rates on loans from the central bank , provision of subsidies to

commercial banks.

There should be different trainings to the society about how to get loans and procedures

involved and advising them the importance of cooperation to improve the standard of living and

reducing poverty

The government should put proper ways or means of giving title deed of land to the society

/owners so that it can be easier for them to use as collateral security during application of a

loan from the bank.

39

Reference

Aigbokhan, B., E. & Asemota, A., E. 2011. An assessment of microfinance as a tool for poverty

reduction and social capital formation: evidence on Nigeria. Global Journal of Finance and

Banking Issues, Vol. 5. No. 5. [Online]. Available: http://www.globip.com/pdf_pages/glob

alfinance-vol5-article4.pdf

Akanji, O., O. 1999. Microfinance as a strategy for poverty reduction. CBN Economic &

Financial Review, Vol. 39 No. 4. pp. 111-134

Bichanga W. O, Njage M: Effects of micro finance institutions on poverty reduction in Kenya.

ISSN: 2347-3215 Volume-2 Number 2 (February-2014) pp.76-95

Sonia Chawla: Micro finance: a tool for poverty alleviation, Volume 3, Issue 1 (January 2013)

Botswana Saving Bank Website: http://www.bsb.bw/

Http://www.investopedia.com/walkthrough/corporate-finance/1/financial-institutions.aspx

http://www.globip.com/pdf_pages/globfile:///E:\alfinance-vol5-article4.pdffile:///E:\alfinance-vol5-article4.pdffile:///E:\alfinance-vol5-article4.pdf

40

Questioners

1. What describes the type of financial institution?

a. Commercial Bank ( )

b. Investment Bank ( )

c. Insurance Bank ( )

d. Brokerage ( )

e. Others please specify _____________________________

From your experience and the nature of the organization please answer the below questions

2. How often does your organisation take part in poverty alleviation actvities

a. Very often

b. Often

c. Not at all

3. Does your oaragnisation policy or objectives say something about poverty

alleviation?

a. Yes ( )

b. No ( )

4. If YES what does it say

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

5. What are the efforts/roles played by your organisation to reduce poverty ( Poverty

alleviation) in Botswana

i. __________________________________________________________________________

ii. __________________________________________________________

iii. __________________________________________________________________________

iv. __________________________________________________________________________

v. __________________________________________________________________________

6. Please identify any limitation that hinder financial insitution in poverty eradication

i. ____________________________________________________________________

ii. ____________________________________________________________________

iii. ____________________________________________________________________