Simple inlay designs aren't difficult to do; here's an example shot from The Workingpersons 11 construction guide photo sequence showing simple engraving with a sharp pointed scribe. The tip is just a sharpened piece of 1/16" high speed steel drill bit stick in a simple aluminum holder. Scribed lines can be easily filled with a fine point Sharpie permanent marker followed by a polishing with 400 grit to clean up the lines. Quick and easy.
I realize that you started off asking about engraving without a lot of expensive tools, but in reality you can do all of the engraving on a banjo with a really good scribe, one square or onglette graver and one liner (optional). In my humble opinion, buying one or two quality gravers is worth the effort if you really want to go for it. If its a one time or occasional thing, the scribing method is just fine and is a safer bet to stay out of trouble. I made most of the gravers I used for the first ten years out of old files, drill bits and other small tools...
A square graver will allow you to add depth and sweep and gradually deepen the lines to provide more contrast. If you are willing to invest some and plan to do more of this consider buying a handle and pre sharpened square graver from Steve Lindsay's hand engraving tool site, a little expensive but well worth it.
Using the scribe to lay a path first can help you stay out of trouble when using a graver. Many engraving tools are much too long for good control for this purpose, I like a total length including handle of about 2 1/2" to 3" max (the Lindsay and some GRS square gravers are in this range).
Fine carbide replaceable tipped scribes for scrimshawing are the best that I've found for this purpose (search Ebay, there are some good ones) and they would work really well for the scribe engraving methods described here too.
The small thin clear plastic drawing templates (squares, circles, ovals, etc) can be really useful for guiding your scribe when first starting out. I often engrave from inside out towards the edges to fatten the lines, but you need good control and can get into trouble if you haven't practiced. Some lines should deepen going out, and some only look right when getting deeper heading in from the outside edge.
Be careful when using Sharpies to blacken if followed by some peghead finishes (lacquer), as it can be a problem. Test it first....
Buy a .005 drawing pen at a craft or art store and draw lines on your inlays to see what they will look like before cutting them.....always worth the time. Or, make copies of the pattern and do it on paper first.
The beauty of hand engraving over scribing is the ability to create thick and thin lines. From bold to hair-line delicate, as in the vintage piece above. Of course, it takes a lot of skill and practice to be able to do it. You can't just buy a graver and jump right in, as I've learned the hard way. Good engraving, like good banjo playing is an art that requires you pay some dues. I'd love to do it but I just don't have the time and dedication. I sure do admire those who can.
You have all inspired me to dabble in this fine art.
Glenn's very nice response here only hinted at the fine work he does. If you want further inspiration be sure to check out his inlay folder on his home page here at the hangout. Click HERE for what a few peaceful hours spent surrounded by nature can produce.
I remembered a banjo accessories box that I posted a while back that is an excellent project to dip a toe in the waters for a whole bunch of banjo making techniques, including inlay and simple engraving. (They make great holiday gifts for friends, too!)
Photos from the "Banjo Accessories Box" folder in my home page photos section: