CHAPTER ONE

INTRODUCTION

1.1 Background to the study

Yearly, the volume of records produced by Microfinance Institutions has been on a geometric rise, due to the expansion and diversification of services, so the means of management of these records through a well-established Records Management System is what has been in constant need, and also evolving since the creation of microfinance Institutions(MFIs).

To fully understand the enormity and significance of records management both in its present context and what it purports for the future, the first thing to understand is its historical foundation.

Back in the 1930s many microfinance institutions had no formal records management programs, and most recording was done on papers without proper filing and classification. A lot of microfinance institutions kept records in whatever form they felt appropriate without the benefit of retention schedules, disposition guidelines or other formal information life-cycle procedures. Need arose based on government regulations, auditing and internal assessment programs to manage the massive volume of records produced.

Business records originated in ancient Mesopotamia, the land between the two rivers, the Tigris and Euphrates. Priests, who were the administrators in the Mesopotamian economy, kept detailed records of royal activities, crops, stock and commercial transactions (Thomas Schubert and Lee 1983).” Cuneiform writing, wedged-shaped character impressed upon soft clay tablets, was used to record the activities of the time” (Krevolin 1986). It is interesting to note that these unwieldy clay tablets were the forerunner present-day, sophisticated electronic equipment used for managing records. These business records, predating the literature of the ancient world, facilitated business transactions and made the effective administration of this ancient civilization possible.

Written records were mandated by Babylonian law for all business transactions (Krevolin 1986). Written records eventually spread worldwide. The Phoenicians, the great traders of ancient world, kept detail business records and developed a simple system of double-entry bookkeeping. The ancient Egyptians, Greeks and Romans were also commercial traders who kept detailed records of transactions (Lundgren & Lundgren 1989). As business flourished in Europe during the middle ages, Italians merchants helped to develop accounting techniques that spread internationally (Feather 1990).

As records grew in volume, repositories for their safe keeping were established. Within these repositories records were preserved and arranged in order to facilitate their access and retrieval (Abbot 1999). Shortly after the French revolution, the national assembly in France established what was to become the first national archives repository in any country (Hare and McLeod 197). This was in recognition that the protection of civil and personal rights is enshrined in public records and that public records define the relationship between the people and government.

In 1934, Theodore Schellenberg of the national archives of the USA invented the lifecycle concept (shepherd & Yeo 2003:5). This concept provided the cornerstone on which modern records management is built. The huge logistical operations of the Second World War (WW II) were responsible for the explosion of paper work, in both the private and public sector. This resulted in an increase need for individuals who could establish the requirements and device the policies, strategies and systems so that information could be recorded and stored and made available when it was needed in an appropriate format.

Widespread use of the computer for record keeping by governments worldwide developed in the 1950s (Kemoni and Wamukoya, 2000). The proliferation of electronic records presents national archives around the globe with a unique opportunity for growth and development.  However, ever since the 1950s, archivists, academics and record managers have been concern about the fragility and impermanence of electronic records. Research and development initiatives during the last two decades (1980s and 1990s) have contributed partial solutions to these challenges but much more remains to be done. By the 1980s most archivists, academics and records managers acknowledged that managing and preserving electronic records were the among the most challenging problems facing their profession (Blouin 1996).

The practice of using computers has grown tremendously with the norm now being for almost every worker to have a PC on his/her desk. Today the computer is performing all the traditional functions of records management and managing records in ways that were not feasible before the computer age.

Microfinance institutions are creating records to help their operations. However, if these records are not managed properly, they will not provide the necessary support and information might be lost causing problems for the institutions. Records should be properly managed to provide an efficient and effective administration that guarantees organizations operate as efficiently as necessary. Records play a significant role in MFIs management commencing its establishment to the stages of development, implementation, monitoring, evaluation and renewal of its operations and these are essential information for the continuous survival of the institutions. Records should be regarded as pertinent as other administrative functions since records are at the heart of MFIs. The purpose of managing records in MFIs is to provide a management framework for the control of financial records as a vital resource for financial management, economic policy development and planning. Equally, records management assist records managers and non-records staff including accounting and audit personnel, to manage financial records in support of public accountability and good governance.

Even though MFIs started earlier in other countries around the world, it started in Cameroon in September 1963 with the St. Anthony’s Discussion Group (Long, 2009). This concept was launched by a certain Rev. Father Anthony Jansen, a Roman Catholic priest from Holland, in Njinikom in the North-West Province (now recognized as the North West Region) of Cameroon. Initially, 16 members of this discussion group started with some small contributions that amounted to FCFA2,100 (US $3.5; the exchange rate at time of writing is US$1 = FCFA582) (Long, 2009). In 1998 the Law 98/99 was passed to recognize MFIs as entities’ within the financial domain and placed under the control of the Ministry of Finance than Ministry of Agriculture.

Following this Law, COBAC was officially recognized as an authority to figure out MFIs and capable of dissolving them if they did not adhere to COBAC rules and regulations. Finally, in 2002, regulation number 01/02/CEMAC/UMAC/COBAC clearly defines and controls the activities of MFIs in Central Africa including Cameroon (Ian, 2009). MFIs are organizations that provide financial services to the needy, such as loan unions, downscaled commercial banks and economic cooperatives (Christen et al., 2003). These organisations might vary in their legal structure, mission, methodology, and sustainability (Siriaram and Upadhyayula, 2004), but they all have one thing in common, they provide a broad range of financial services such as deposits, loans, payment services, money transfers and insurance to the poor and low-income households and their micro-enterprises at cheap and affordable interest rates (Robinson, 2001). Moreover, all the aforementioned services involve various records created, received, used, retained for sometimes until its disposal.

Unfortunately, some of the major losses caused by the MFIs in Cameroon were experienced in the early 1990s.These losses were the result of a range of errors by the MFIs underpricing the risk of loans without appropriate collateral security to the poor and directly competing for customers by opening offices around the country. The MFIs experienced high arrears in loan repayment and bad debts which amounted to around a quarter of the overall total loan portfolio and losses registered in the sector (Elle, 2012). This situation thus prompted changes in the regulation, supervision, monitoring, control and governance of MFIs in Cameroon. Thus these regulations include records management policies regarding the procedures or guidelines from the creation, receipt, maintenance, use and disposal of records.

Most MFIs in Cameroon and Meme division especially manage records ranging from daily operational financial services such as financial records which are payment vouchers (receipts of withdrawal transactions, savings), loans, membership application forms, accounting journals, individual ledgers, cash count and reconciliation reports, cash analysis, withdrawal slips, expense report forms, inspection of collateral report, loan register, legal documents, loan reminder letters, staff assessment, and collateral securities such as deed of conveyances, land certificates, mortgage deeds etc.

Methods used to manage records in microfinance institutions frequently are both manual or paper based and electronic records management.  In most MFIs in meme division, records management is practiced through the opening of accounts, loan application, updating of accounts in customer’s passbooks after transactions, and the corresponding activities are also stored electronically using their various software such as the Alpha software for credit unions meanwhile the manual records are stored in the folders in their filing cabinets. Records management has evolved from a paper based function responsible for the storage of the miscellaneous documents of the institutions to one concerned with the management of specified internal records in a multitude of media, from creation to disposal, through their active use as sources of information and, consequently, ultimate review against retention schedules, for their eventual destruction ((De Wet and Du Toit, 2000).

Looking at the importance of records management and its direct impact to institution’s development and growth in microfinance institutions, this study will seek to explore the types of records produced and managed by microfinance institutions in Meme division, Southwest Region, Cameroon. Clearly focusing on its Impact on administrative operations and accountability, the loopholes that can be adjusted to improve its total performance.

 

1.2 Statement of The Problem

As the world is changing, evolution of technology and modernization are inevitable and we can observe that the things around us are altered. Most often information or records are not regarded as an essential resource that may affect the effectiveness of MFIs. This is as a result of the absence of a legislative instrument (records management policy) to regulate the management of records in these institutions. More so, ignorance has engulfed staff who are involved in records keeping and management to the extent that records are moved from one office to the other, where the staff lack skills to perform proper classification and filing of   manual business records, time wastage in retrieving documents and loss of vital documents. This causes a halt in operations, mistrust and incurs cost to both the institution and its clients hence the situation must be addressed.

Experience has shown that, owing to inefficiency in the practice of records management, MFIs find it very difficult to retrieve records promptly   in case of controls and audits.

The problems of records management identified include; absence of well-defined records management practice or policy, lack of storage space and equipment (when these records are not properly stored, it results to misplacement and loss of some essential documents). Moreover, most MFIs in Meme division have problems in records management because they do not find it necessary to train personnel in the areas of records management thus leading to problems with retrieval and disposal of records.

Computerization has led to rapid and dynamic changes in the way financial institutions operate. Records managers today encounter a much wider range of records, paper-based and electronic than they dealt with ten years ago. Even the strategies adopted for integrating and managing paper and electronic records will be subject to change over time.

The aforementioned are some of the problems of records management in MFIs that necessitated this study, therefore, this study will attempt to address the existing challenges and gaps to improve the records management practices in microfinance institutions in Meme division.

 

1.3 Objectives of The Study

1.3.1 General Objective

The main objective of this study is to investigate records management practices and its impact on the administrative functioning of microfinance institutions in Meme Division of Cameroon.

1.3.2 Specific objectives

The specific objectives of this would be to;

1. To identify the type of records generated by microfinance institutions in Meme Division.
2. To examine the relevance of effective record management practices to the administrative functions of the microfinance institutions.
3. To identify the challenges or problems encounter with record management to the administrative functions of microfinance institutions