A CRITICAL ASSESSMENT ON THE IMPACT OF ICT ON THE PERFORMANCE OF MICRO FINANCE INSTITUTIONS IN TIKO MUNICIPALITY

CHAPTER ONE
INTRODUCTION
1.1 Background of the Study

From time immemorial human beings have strived to look for easier and less time consuming ways to go about their various tasks, better ways to document, to classify, to communicate and to analyze data. It is from these needs that led to the establishment of ratios, standards, machines all aimed at improving the way things were done. ICT being one of those innovations aimed at more efficiently carrying out our tasks. ICT which is an acronym for information and communication technologies encompasses the use and application of computers and telecommunications equipment to store, retrieve, transmit and manipulate data .

A century ago, it was literally impossible to hear of people conducting business transactions across different continents, hear of a system that could manage over a thousand inventory items and tell you the exact amount of stock at any given time, a system that could take seconds to analyze and calculate huge amounts of data without any errors. Slightly after the invention of computers, very few institutions and organizations had access to the technology. We have evolved so much that in this age and time we see it them ordinary events and nearly everyone has access to this amazing technology.
In the early years of computers, mostly scientists and the military had access, as years passed ICT has gradually been applied in other fields such as travel, business, accounting, communication, entertainment just to name a few. For easy understanding, ICT could be broken into two parts; hardware and software.

Hardware refer to the physical devices that perform given tasks such as an ATM, whereas software could be seen as those instructions that guide the physical components (hardware) in accomplishing specific tasks for example an operating system such as Microsoft windows that is used in running a computer.
In the domain of business for instance micro finance institution which accounting is part of, there has been a great deal of ICT application that has gone a long way to increase efficiency. We see and interact with such innovations in our daily routines such as withdrawing money off an ATM machine, sending and receiving money from abroad, online banking just to name a few, also there exist software that help in managing all aspects of a business such as recording transactions, keeping track of inventory, managing employees and preparation of reports.

All the aforementioned ICT tools are very much applied in the developed world than in the less developed world like Africa where we mostly just hear of some of these technologies than use it because of lack of finance and lack of knowledge or education.
Nevertheless, some of these technologies are gradually being applied in the less developed world such as ATMs, e-commerce, mobile money and other related software, examples of business related software commonly used in Cameroon are sage accounting 100 used primarily in dealing with the accounting aspects of a business, sage trading 100 used to manage inventory and trading and also QuickBooks which basically manages a business as a whole.

Performance can be seen as the measurement of the overall organization results however economical a company has used the assets from its primary mode of business to get revenue. It represents the accomplishment of a given task that’s measured using predetermined standards of accuracy, completeness, efficiency and effectiveness (Hicks & Niehans, 1998). Performance is measured using key financial ratios such as Return on Sales (ROS) which is profit from the average sales income, Operating Expenses/Operating Incomes (OE/OI) in total refer to those expenses that are resulted from the company operations and operating incomes are also those incomes that are obtained through company’s operations, either capital operation or non-capital, Return on Assets (ROA) to measure the productivity of an asset and Return on Equity (ROE)to measure the profit secured for the owners of a business unit.

As a way of improving efficiency and sustainability, Microfinance performance around the world has adopted different advanced operational methodologies together with Information and Communication Technology (ICT) in order to facilitate its operations, reduction of cost, increasing staff productivity and improved communication and coordination (Bada, 2012). The rationale for this is that, ICT provides opportunities for increased penetration of services, increased competition which should have positive effects on pricing, improved quality of service, a plethora of services, and the utilization of these services to enhance good governance and social-economic development. Adeoti (2011) notices that, ICTs has continued to change the ways banks and their corporate relations are organized globally and a variety of innovative tools are available to boost speed and quality of their service delivery.

The performance of Microfinance adopts ICT so as to facilitate customers’ communication within the organization for sake of reducing cost of preparations in the process of decision making to improve efficiency with all necessary information. Therefore, ICT sophisticates’ technologies to help quality of service and reduces the cost of providing financial services to Microfinance Institutions (Jepra, 2011). Most of Microfinance institutions established websites, which easer the interaction with their clients; they also increased internal use of internet within organizations while others have adopted different accounting packages to help them manage business transaction (ESRF, 2008).

Although there have been increasing in the use of ICT among small and large Microfinance institutions, most of them have not been able to reduce their operating costs and improve their revenue generation, this makes them dependent on donors and hence unsustainable (Kipesha, 2012).
The benefits of investing in ICT in the enhancement of banking service is not only limited to cost reduction benefits but also found to have significant contribution to giving access to customers residing outside the branch network and create opportunities for effective cross-selling. For instance use of debit cards allows customer to transact with other banks through the ATM.

This improves efficiency and increases sales and hence performance (Gerrard and Cunningham, 2003).
These performance ratios are inbuilt functions in most of business managing software. A proper performance provides a full range of accurate and reliable information to compare the actual performance of the company’s activities through specific indicators which are to be obtained from the actual performance and compared either in specific percentages or specific targets and thus determine if there are any deviations (Aldalayeen et al, 2013). From the above, the study seeks to demonstrate the impact of ICT on the performance of micro finance instutitions.

1.2 Problem statement