Abstract

This study aimed at assessing effect of Information and communication technology on the performance of SMEs in Buea municipality, Cameroon. Specially, the study was aimed to examine the effect of hardware on the performance of SMEs and to assess the effect of software on the performance of SMEs in Buea. The descriptive survey method was used wherein 40 SMEs in Buea where surveyed.

Data was obtained through a structured questionnaire designed for that purpose and the data was analyzed using descriptive statistics (frequency, percentages, charts and tables) and inferential statistics (correlation analysis) with the help of Statistical Package for Social Sciences (SPSS). The hypothesis was tested through a correlation test, and it revealed that there is a positive relationship between ICT and performance of SMEs with a correlation coefficient of (r = 0.562) whereby 26.3% of performance of SMEs could be attributed to ICT components. The study concluded thus that ICT has a significant impact on SMEs performance.

The study thus recommended that SMEs should get specialized, independent consultant, this is due to the fact that sometimes SMEs choose technologies that may not be right for the SME at a given time, and also SMEs might fail to choose systems that will support business over long time. The study also recommended that the governments should be encouraged to support software development and in particular the capacity development of skilled labors in the applications of ICT.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

In reality, Small and Medium Enterprises occupy a very important place in developing, as well as developed countries’ economy, considering its contribution to national income, employment, exports, and entrepreneurship development (Storey D. J. 1994). ICT adoption plays a very significant role in Small and Medium Scale Enterprises because it facilitates its operations, reduction of cost, increasing staff productivity and improved communication and coordination (Bada, 2012).

Considering the level of investment required for ICT in Small and Medium Scale Enterprises it is essential to adopt ICT in order to provide 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 and also ensure production continuity.

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 (Regina, 2015).

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, small and medium size 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 SMEs 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 small and medium size businesses (Jepra, 2011).

Most of businesses 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 enterprises, 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 SMEs activities 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 effect of ICT on the performance of small and medium size enterprises in Buea.

1.2 Problem statement

Competition has forced firms to invest in ICT to realize increased efficiency and quality service delivery. The advantage of investing ICT in firms is not only limited to cost reduction but also innovation. Investment in modern technologies for example ICT enhances convenience by extending access to customers residing outside the branch network and creating opportunities for effective cross-selling. This in turn increases sales and profitability of the firm (San-Jose, Ituralde & Maseda, 2009).

Despite the fact that small and medium size business activity has recently increased considerably due to ICT adoption, the significant growth is lacking and SMEs are still far from reaching a significant portion of the population that lacks access to formal financial services. There are still reports on several occasions of wrongly allocation of loan, poor outreach, frauds, and misappropriation of loan services and many more.

Esther Wambui Chege (2016) in her study of 78 financial establishments in Kenya found out that more than 80% of the customers had adopted mobile banking technology; adoption of mobile banking had reduced customers’ queues in the halls, improved in the noninterest revenue to the institutions, reduced the level of operational costs and increased the frequency of customer transactions. Also, the research found out that the adoption of electronic money transfer had improved efficiency in the institutions operations, reduced staff costs, increased noninterest revenue and reduce fraud cases.

Namchul Shin (2001) examined data from two data sources: the data set of IT spending by large U.S. firms included in the Computerworld annual survey from 1988 to 1992 and the Comp stat database. The results showed that IT does not directly improve performance, but that IT can improve micro finance performance when used in conjunction with vertical disintegration and diversification.

These findings imply that IT alone does not bring success. Despite the fact that it is an important component, it is not sufficient in itself and should be coupled with organizational changes. Firms that do not make adequate organizational changes and develop appropriate business strategies may fail to take full advantage of IT capabilities.

The results are also in line with recent findings showing that increased IT investment is associated with increased diversification and decreased vertical integration. Furthermore, the findings provide partial support for the argument that by lowering buyers’ search costs; IT lowers the price paid for products or services and thereby reduces firm profitability. His findings also support the argument that by improving scope economies and coordination IT can shape appropriate business strategies, and at the same time the economic benefits of IT can be leveraged by such business strategies.

It is for these reasons that this research “ the effect of ICT on the performance of SMEs in Buea” aims at highlighting the very important role of ICT on performance, and this will be done by answering the main question “Does information technology affect the performance of SMEs in Buea?” as well as the following specific questions:

1. What is the effect of hardware on the performance of SMEs in Buea?
2. What is the effect of software on the performance of SMEs in Buea?

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