Abstract

This study was aimed at examining the role of the accounting information systems on the performance of selected microfinance institutions in Buea. The specific objectives of the study were: first to examine the relationship between data storage and performance; second to examine the relationship between information quality and organizational performance.

The study used a descriptive survey design with the sample of the study consisting of the employees (accountants and managers) of the selected microfinance institutions in Buea municipality.

Data were collected from 30 correspondents using questionnaires. Data analysis was performed using SPSS, descriptive statistics including frequency tables were used to present the data. The study found that there was a significant positive relationship between data storage and performance. The results further disclosed that there was a positive relationship between information quality and performance of the selected microfinance institutions in Buea.

Generally, the result revealed that the accounting information system has an overall significant effect on the performance of selected microfinance institutions in Buea municipality.

The study recommended that personnel should be well trained before being permitted to use the accounting information system in order to carry out service efficiently and effectively, it further recommended that microfinance institutions should get accounting information system comprises of the entire structure of the organization other than adopting a system for each department which is very expensive.

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Microfinance is increasingly becoming an important asset class for investors (Biesland, mersland and Strom, 2015). Globally, the growth in the microfinance market continues and soon the microfinance sector is expected to become the world’s largest banking market in terms of the number of customers (Bies et al 2015).

During the last three decades, microfinance has captured the interest of both academics and policymakers. The industry has been growing at a significant rate and in several countries, it has become an important sub-sector of formal financial markets (Asseta, Hermes, and Meesters, 2010).

According to Robenson (1999), microfinance institutions is defined as a development tool that grants or provides financial service and products such as very small loans, micro-savings, micro-insurance, and money transfer to assist the very or exceptionally poor in expanding or establishing their businesses.

In Cameroon, MFIs can be traced as far back as 1963 when the first credit union was established in the Northwest Region by the St. Anthony’s discussion group (Long, 2009). This idea was introduced at Njinikom in the northwest region of Cameroon by a certain Rev. father Anthony Jansen, a Roman Catholic priest from Holland.

However, it was not until the late 1980s as a result of the commercial banking sector in Cameroon experiencing a serious crisis with many major banks becoming illiquid and/or insolvent that microfinance and microfinance institutions gained ground.

On a global note, the microfinance industry has realized an important growth rate and as the number of microfinance institutions and customers continues to grow, regulation of the industry becomes a question of interest since the sustainability of these institutions is highly debated. A more efficient micro-financial sector may eventually translate into higher rates of economic growth and thus the ability of governments to alleviate poverty.

Despite the increasing regulation of the microfinance sector in Cameroon and the constant efforts being made by the government authorities to enhance the performance of these MFIs, the sector still faces a lot of challenges. Regular news about the microfinance sector in Cameroon is the constant close down of several microfinance establishments or the sudden and spectacular bankruptcy of some MFIs which reduces customers’ confidence.

The ever-growing need for businesses development, growth, and expansion in today’s contemporary business environment has necessitated managers to consider more advanced management strategies targeted at improving decision-making in organizations. Most of these strategies are tailored towards sustaining business in wake of rapid technological innovations, increase awareness, and challenging demands from customers.

One of such strategies is the adoption of information systems within the business organization (Davoren, 2019). An accounting information system, therefore, is a structure that a business uses to collect, store, manage, process, retrieve, and reports financial data so that it can be used by accountants, consultants, business analysts, managers, chief financial officers, auditors, regulators and tax agencies.

The main components of AIS includes people, procedures, data, software, and hardware. Such software include; The Alpha software, Peachtree, Quick books, and Sage software. An accounting information system is as essential as it helps organizations to fulfill their statutory obligations of preparing and publishing certain accounting records. It analyses data and provides reliable and accurate financial information and also protects a firm accounting data from theft. The business started embracing accounting information systems during the year 1955 when a company bought its first computer purely for accounting purposes.

Accounting practices were streamlined in the 1960s when the US transportation industry developed the EDI (Electronic data interchange) which was embraced by a lot of companies till then. And around the years 1978 and 1998, the peachtree and QuickBooks software introduces respectively.

Recently, the objectives of business organizations have shifted from the earlier times which were only working towards profit-making and survival. Today, the objectives of business organizations and financial institutions are beyond profit-making but include; gaining competitive advantage, sustainability, surviving turbulence environment, customer satisfaction, and effective decision making. In achieving these objectives, Technology cannot be cut out.

One of the paramount technology systems in financial institutions is Accounting Information System (AIS). AIS contains a series of devices used to undertake a set of common business functions such as accounting, human resources management, and stock management.

The core nature of comprehensive AIS is to computerize business processes and most importantly, to produce data in real-time. The main benefits of optimal use of AIS in an organization are a better adaptation to a changing environment, better management of arm’s length transactions, and a high degree of competitiveness. The organizational performance comprises the actual output or result of an organization measured against its intended outputs (or goals and objectives).

Performance according to Conway (2009) is the activity that guarantees that goals are being met in an efficient way. It is from the financial statements that an organization’s performance can be relied on. Organizational performance can be viewed from two perspectives that is financial and non-financial performance. Financial performance is used as a general measure of a firm overall financial strength.

In this work profitability is the main financial measure to measure a firm’s performance. Though other includes earning per share, profit margin ratios, liquidity, return on capital and return on equity. While non-financial performance is the measure that gives out information on the company’s performance in non-monetary or monetary terms.

Though one can’t express non-financial measures in monetary terms, this measure can be quantitative and qualitative. They include social reporting, clear social objectives, product and service varieties, learning and growth, employee satisfaction, and employee training. So, therefore, this research work shall be based on the financial performance of MFIs.

1.2. Statement of the problem

The need for information is basic for concrete decision-making and to ensure organizational growth. There has been a remarkable advancement in accounting information systems designed for microfinance institutions to adapt for their operation.

Adaption of accounting information systems by MFIs can resolve and support automation and procession of a large amount of data and produce timely, quality, and accurate information. Oguntimehin (2001) submitted that organizational performance is the ability to produce desirable results.

Therefore, this is serious omissions particularly as technology is changing. MFIs need to change to adopt information technology than relying on the use of manual approach of bookkeeping accounting which can be inefficient and thus, leading to delay in the procession of reports, difficulties in retrieving information, poor data quality, and storage, delay in decision making regarding investments and low productivity experienced, (Maureen, 2014).

However, if the accounting information system is not widely adopted by all or many MFIs in Cameroon, most MFIs will remain behind and be out-competed by their rival firms or fail (Augustine, Maurine and Jian 2014). The main concern of this research work is to examine the role of AIS on the performance of MFIs in Buea municipality.

1.3. Objective of the study

1.3.1. Main objective

To examine the role of the accounting information systems on the performance of microfinance institutions in Buea municipality.

 1.3.2. Specific objective

1. To ascertain the impact of data storage on performance
2. To determine the relationship between information quality and performance

1.4. Research question

 1.4.1. Main question

What is the role of the accounting information system on the performance of microfinance institutions in Buea municipality?

1.4.2. Specific question

1. Does data storage affect performance?
2. Is there any relation between information quality and performance?

1.5. Research hypothesis

H0: There is no significant relationship between AIS and the performance of selected micro finance institutions in Buea municipality.

Ha: There is a significant relationship between AIS and the performance of selected MFI in Buea municipality.