Abstract

Many failures in most MFIs have been attributed to eminent weaknesses in Accounting Information Systems or the inadequacy of such systems.

This study seeks to examine the Impact of Accounting Information Systems on the Performance of Microfinance Institutions.

The importance of AIS in every entity cannot be over emphasized as it serves as a fundamental tool for periodic checks and balances.

This study examines the impact of AIS on the performance of MFIs, with a focus on the problems associated with these systems, validates their functionality and rounds up with some major recommendations pertaining to the institution of good AISs.

The study is localized at a long time serving MFI within the Cameroon business environment from where research data was gathered through the use of interview questionnaires. Following respondents’ views, AIS in this MFI Is strong on a hundred percent agreement note.

This has been confirmed by a student’s (X²), one chi test carried out at 4 degrees of freedom and 5% confidence limit on the field data collected, (related problems of accounting information systems, the impact of the working measures put in and the functionality of the accounting information systems), to say that AIS significantly affects the performance of MFIs.

On this note, it is strongly recommended that every microfinance institution should attach much importance and control over its accounting information systems to guarantee effective service delivery and superior performance.

CHAPTER ONE

INTRODUCTION

 1.1 Background of the study

Accounting information system is the system of collecting, storage and processing of financial and accounting data that is used by decision makers of an organization (Naranjo, 2004).

An accounting information system is generally a computer data base method for tracking accounting activities in conjunction with information technology resources.

The resulting statistical report can be internally or externally management by others interested parties including investors, creditors and tax authorities.

Zulkarian Muhammad Sori (ZMS) is a private limited company in Kuala Lumpur in Malaysia that operates in construction industry.

Accounting information system (AIS) assists them to come up with monthly reports for the top managers and enable them plan, control and decide on resource allocation.

These accounting information systems supports the resources management and help the ZMS pursue its projection of continuing business profit.

In this industry, once the financial information is entered into the accounting information system, it generates financial report and statement which is used to ensure profitability.

A good number of companies in Africa have embraced the many advantages AIS offers, such as the recording, storing and processing of information.

In the past years, the banking industry in Libya has experienced very significant development, which was the direct result of various factors and one of the most important being, the implementation of AIS and associated technologies. (Kum and Davidson, 2004).

Organizations in Nigeria have also put in place AIS to enable them work effectively and efficiently. To their organization, accounting provides information that is useful to the people (Mill, 2009).

Also, companies in Cameroon make use of AIS. Companies like CAMTEL, NESTLE, for example, banks and others use AIS in their different organizations with other microfinance institutions.

A microfinance institution (MFI) is a financial institution specializing in banking services for low-income groups or individuals.

An MFI provides account services to small balanced accounts that would not normally be accepted by traditional banks and offers transaction services for amounts that may be smaller than the average transaction fees charged by mainstream financial institutions (Roodman, 2010).

Microfinance has gain a universal recognition as an important tool for reducing poverty in many developing countries today.

The performance concept relating to MFI is a vital and crucial issue for many reasons such as to ensure donors or investors effective and efficient utilization of billions of donors injected in MFI.

Information is a very important element at the heart of many MFI’s. MFI maintains a large amount of critical data which needs to be stored, manipulated, and presented in a coherent way so that the end-users can effectively make sound business decisions.

In others to manage this vital data, a viable information system is necessary, as it will act as a conduit through which raw data is manipulated into accessible and usable information (Main, 1999).

Information system helps microfinance track, analyses, and report on all their operations (Mittchel, 2000).

Many small MFI’s can initially manage with manual ledgers of spreadsheets, but in order to grow and become truly sustainable, an information system needs to be introduced to tracks all financial transactions and create report for management and regulatory affairs departments.

Lee (2008), reported that the application of online banking can reduce operational cost time and monitor all transactions continuously.

Seevanyana (2009), of Uganda, also reported that the use of information computer technology (ICT) has improved efficiency, services and performance of MFI. Khalil et al (2013), reported that the use of an accounting information system (AIS) has saved time and improved the accuracy and security on transactions.

However, not many MFI’s have adopted information technology systems. The problems encountered at the low level of human resources technology adoption.

Ulrich (1988), stated that the key to success for change lies in the human resources, none as the initiators and continuous agent of change, the process and culture jointly improving the ability of the organizational change.

1.2. Problem statement

It is important to know that both financial and social performance perspectives are important in the performance of MFI. Financial performance is important if an MFI is to survive. While social performance is important if donors and borrowers are to be served well.

For example, the satisfaction of donors or an improvement in the living standards of the poor borrowers can be measured only by social indicators (Gemunu, 2012).

The accounting information system emerged as a solution to the weaknesses in the traditional performance measurement systems that relied on financial indicators and reports such as the profit and loss statement and balance sheet.

Those latter financial reports indicate the financial performance or the outcomes at the end of the reporting period.

Also as more and more microfinance institutions want to increase their activities, managers become increasingly aware of the need to improve their information.

For many institutions, methodological issues, staff development, and even financing are no longer the critical component of growth. Instead, the most vital need is often a system to track their efficiency in a timely and accurate manner.

Thus, the placement of such systems can make the difference between the success and failure of various operations within the institutions

Therefore, the accounting information system goes beyond identifying financial and social dries of measuring performance. It looks at the “cause-effect” relationship or links between this indicator and how they relate to achieving the corresponding strategic goals or objectives.

The fundamental research question of our study related to applying the accounting information system concept to microfinance institutions can be as stated:

What is the impact of accounting information systems on the performance of microfinance institutions?

Specific questions to be asked as related to our problem are:

1. How does AIS affect the financial performance of microfinance institutions (CCC PLC)?
2. To what extent does AIS affect the social performance of CCC PLC?

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