Abstract

The purpose of this study is “The Effect of Technology on the Operational Performance of Micro Finance Institutions” Its specific objectives are to examine the effect of e-commerce on operational performance of microfinance institutions, to analyze the effect of IT infrastructure on operational performance of microfinance institutions and to examine the effect of IT knowledge on operational performance of MFIs.

A descriptive research design was adopted as appropriate study designs were a sample of 30 employees of NOFIA microfinance were selected using simple random sampling techniques. It also combined quantitative as well as qualitative research approaches. The quantitative methods of data collection were used in this work were a self-administered questionnaire composed of closed ended, and likert scale questions was used to collect data from the respondents.

Data obtained through a structured questionnaire were analysed using analysed using descriptive statistics and the multiple regression analysis (Ordinary least square Regression technique) with the help of Statistical Package for Social Sciences (SPSS) software. The findings show that technology has a significant impact on operational performance of MFIs.

E-commerce has a negative and significant effect whereas IT infrastructure and IT knowledge has a positive and significant effect on operational performance of NOFIA. The study therefore recommends that for every policy measure taken by NOFIA microfinance to improve technology, e-commerce, IT infrastructure and IT knowledge should be taken into consideration because failure to do so will lead to detrimental effect on operational performance.

It further recommends that MFIs should prioritize training and development of staff on the use of technology, to bridge gaps that may exist in terms of technological knowledge and ensure that staff members are performing optimally when using the technology.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Technological evolution will continue to accelerate the future in this modern world of rapid high-technology changes. Organization productivity depends on the successful incorporation of appropriate technology into the organization. Technological advancements have completely restructured organizations by making their business process highly effective and smooth-running than ever.

Previous studies have proved that technology use strengthens ICT effect. The adoption is likely to be slow in the case where technology requires complex new skills and is expensive to implement and time-consuming (Long Blok & Coninx, 2016). To face the rush of competition and to remain in existence, organizations need to change their strategies, processes, structure, and culture (Keong & Dastane, 2019). Choosing the right model of a planned change is of the utmost importance to ensure that the process of changing takes place without any interruption and the strategic goals of the changes are met.

Many studies examined the impact of information technology on organizations’ performance. Although most of these studies have suggested that IT plays a vital role in improving the quality and quantity of information, its potential for adoption and innovation is often uncertain. Firms allocate their objectives, and those firms that allocate more resources on IT perform better than those firms that allocate fewer resources.

The success or otherwise of any discerning organization in this world of deregulated economies and competitive market depend largely on its ability to strategically outwit her competitors. Outwitting competitors informed by the ability to continually improve on the quality of goods and services being offered.

Many companies in developing countries find it difficult to compete with their foreign counterparts, partly because of their inability to innovate. While the multinationals enjoy necessary incentives that could encourage all round business growth, most local industries lack necessary ingredients such as size of firm, resources (financial, human), legal protection, innovation efficiency in the area of diversification, flexibility to respond to market changes and incentives to use existing and new technology.

The evolution of technological advancement and innovation had been observed since the 20century when the use of information and communication technology experienced worldwide recognition. A number of organizations realized its dynamic development in the mid-18century which was also the advent of industrial revolution (Tom, 1991). Technology advancement and innovation influences various aspects of our daily lives especially in our homes, workplaces, companies and establishments, in schools and universities and the country at large.

Recently, the increasing advancement of technology and innovation has been experienced in global scenario and has become a global village where the utilization of computers and communications are widely available. Today, mobile phones, internet, satellite networks, and others that provide the latest trends in communication are widely used to boost up business performance and are applicable in processing, storing and distributing wide array of reliable information (UNDP, 2001).

According to Evans and Wurster (1997), the changes that are happening in the business environment of most business organizations are the important consideration for technology advancement and innovation. The emergence of technology innovation is the product of the continuous advancement in technology that is growing in response to the dynamic changes brought about by highly competitive business environment.

The technology advancement is an effective operation used in achieving cost-effectiveness, improving efficiency and the quality delivery of products and services to its clientele. The utilization of technology advancement has been instrumental in developing solutions to business problems and challenges as well as trouble shooting technology advancement related problems, developing and maintaining an efficient and effective decision-making processes, meeting the requirements for quality of service and enhance productivity, be competitive in the market place, and become dynamically stable organization (Attewell& Rule, 1984; Molloy& Schwenk, 1995; Boynton,1993).

New information technologies have often used as target users although users in the recent time have had significantly more opportunities to be socialized with information technologies, the rapid pace of technology development usually means that every new technology represent a fairly major change over the previous one. Process of innovation has been studies in a variety of contexts and characterized as a complex behavioral and social phenomenon. Information technology has become an essential part of any business and competitive advantage that can change the business structure. This observation was one of the motives for this study.

The information has become as life hood for business and its decisions, and the organization do their best to enhance the role of information technology to increase its performance and keep life among its competitors in the market.

The objective of information technology in an organization is to provide the management, managers and stakeholders with information for more precise planning, foresting, monitoring and controlling of business.  More so, the use of powerful computers software and network information system have helped organizations to become more flexible, removing layers of redundant management functions, separate work from location and also restraining work flows. The impact of information technology goes beyond a small service department in organization and become a part of the business chain. IT manager moves from back office to the front office and participate for the strategic planning for the organization.

Moreover, information technology increases the relationship between vendors and customers and enables the delivery of service more directly, more rapidly, and electronically to customers.

Information technology also provide important communications and collaboration tools, which support core organizational functions such as inventory control, purchasing, workflow management, human resource management, data management and operations.

New information technology continues to improve communications, access to business information, and our ability to analyze information.

Information technology is no longer a tool to support back office transactions but has begun to affect how businesses organize, do business and compete.

1.2 Statement of the Problem

Despite the increasing adoption of technology in the financial sector, there is a lack of understanding regarding the impact of technology on the operational performance of microfinance institutions (MFIs). As MFIs continue to expand their operations and serves more clients, it is important to determine the extent to which technology can improve their operational efficiency and effectiveness.

Therefore, this study seeks to investigate the effect of technology on the operational performance of MFIs, with the aim of identifying the factors that influence the adoption and implementation of technology in the microfinance sector. By addressing this research gap, the study will provide insights into how technology can be leveraged to enhance the operational performance of MFIs and promote financial inclusion.

MFIs play an important role in promoting financial inclusion and providing access to financial services for low income households and small businesses. However, MFIs often face operational challenges such as high transaction costs, limited outreach, and inefficient processes. To address these challenges, many MFIs have started to adopt and use technology to improve their operational performance. Nevertheless, the extent to which technology can enhance the operational performance of MFIs is not yet clear.

To achieve this aim, your study may consider different aspects of operational performance such as cost efficiency, outreach and customer satisfaction. By analyzing these factors, your study can provide a comprehensive understanding of how technology can affect the operational performance of MFIs and identify best practices for technology adoption and implementation in the microfinance sector.

1.3 Research Questions

1.3.1 Main Research Question

How does technology affect operational performance of a microfinance institution?

1.3.2 Specific Research Questions

1. How does e-commerce affect the operational performance of a microfinance institution?
2. To what extent does IT infrastructure affect the operational performance of a microfinance institution?
3. Does IT knowledge affect the operational performance of a microfinance institution?

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