Abstract

This study was conducted to find out the effects of accounting information system on the performance of micro finance institutions using CCC branch in Buea as a case study. This study specifically focused on finding out the effects of accounting information system on the performance of micro finance, examining the extent in which manual accounting, computerized accounting system, affect performance. Research design used was case study design. The study carried out in CCC Buea and sample size comprised of 30 clients and staff who benefit from CCC Buea service including branch manager of CCC Buea.

Sampling techniques adopted was Simple random sampling technique used for customers and Purposive sampling technique used in sampling CCC Buea staff. Data was analyzed through descriptive statistics and presented in the form of bar charts, percentages and tables. The study revealed that that much as a computerized accounting system has got satisfactory advantages over manual accounting; it also comes with its disadvantages.

The study also revealed that the advantages of accounting information systems are more paramount as compared to its disadvantages even as far as financial performance is concerned. This therefore zeroes to the computerized accounting as more of an asset than a liability to business operations and performance. It is proposed that the government should provide appropriate incentives to encourage the use of CAS.

CHAPTER ONE

INTRODUCTION

1.1 Background To The Study

Finance has been long considered as “the blood that keeps an economy growing”. This is so because the banking (financial system) of a country is a catalyst for rapid economic growth and development of all other sectors in the economy. Therefore, its stability and growth should be the priority of the government. The recent distress in banking industry in Cameroon and the reform in the sector is seen as a right decision to instill public confidence in the sector.

The coming of the computer age revolutionized the way financial institutions perform their operations. Today’s modern technology brought into use the computer, this technology is the application of science to gathering, recording, processing and communicating of business information by means of electronic media. Most common tool for application is the computer and it involves all the transaction processing system management information system various business support system etc. The computer is a central force in the advancement of various organizations as it is more efficient.

The concept of microfinance dates back before the 19th century where money lenders were unofficially carrying out the role of now formal financial institutions. The unofficial financial institutions comprised of: village banks, rotating saving groups and social venture capital funds to help the poor. These institutions were those that provided savings and credit services for Small and Medium Sized Enterprises and most especially to the poor. They mobilized rural savings and had simple and straight forward procedures that originated from local cultures and were easily understood by the population says (Germidis, 1991).

At its initial stage, accounting information systems were predominantly developed “in-house” as legacy systems (Boockhol, 1999). Such solutions were difficult to develop and expensive to maintain. Today, accounting information systems are more commonly sold as prebuilt software packages from vendors such as Microsoft, Sage Group, SAP, Quickbooks and Oracle where it is configured and customized to match the organization’s business processes. As the need for connectivity and consolidation between other business systems increased, accounting information systems were merged with larger, more centralized systems known as enterprise resource planning (ERP), (Marshall 2009)..

Before the computer age, all major accounting transactions were done manually and this usually took very long periods of time for financial reports to be generated. In the microfinance sector in Cameroon, the regulatory body of financial institutions usually needs their financial reports on a periodic basis. These reports usually involve: balance sheet, income statement and loan portfolio and failure to produce these documents on time can lead to fines and sanctions.

The concept of microfinance dates back before the 19th century where money lenders were unofficially carrying out the role of now formal financial institutions. The unofficial financial institutions comprised of: village banks, rotating saving groups and social venture capital funds to help the poor. These institutions were those that provided savings and credit services for Small and Medium Sized Enterprises and most especially to the poor. They mobilized rural savings and had simple and straight forward procedures that originated from local cultures and were easily understood by the population says (Germidis, 1991).

The CEMAC regulation defines Microfinance as an activity carried out by an institution that do not have the status of banks or financial institutions as defined in the appendix in the convention of 1992 (17th January) to harmonize and regulate the banking activities in the Central African State, and which carry out on a regular basis, loan operations and/or savings collections and offers specific financial services to population who mainly operate outside the traditional banking channel. Accounting systems are responsible for analyzing and monitoring the financial condition of firms, preparation of documents necessary for tax purposes, providing information to support business purposes.

Without such a system it will be very difficult for Microfinance Institutions to determine performance, identify customer/member and supplier account balances and forecast future performance of the organization/institution. The primary purpose of an Accounting Information System (AIS) is the collection and recording of data and information regarding events that have an economic impact upon organizations and the maintenance, processing and communication of such information to internal and external stakeholders (Stefanou, 2006). The common accounting systems used by microfinances in Cameroon include “Alpha Microfinance and Global bank”.

SEFICOOP Limbe makes use of computers in rendering its services to customers. They use GLOBAL BANK software provided by Better Planning Ltd to carry out banking transactions which makes work easier, faster, more accurate and reliable.

1.2 Problem Statement

Before the advent of computerized accounting system, most activities in the financial sector Revolved around manual banking system and or retail banking with its attendance poor services. This system had lots of loopholes such as high cost, time consuming, prone to human errors, difficulty in scaling data, lack of real time insights and limited reporting capabilities amongst others. For Microfinance Institutions to survive in the provision of their services, they need to be conversant with accurate and timely accounting information.

Accounting information is used to measure and communicate financial information of business to make proper decision, planning, controlling, and coordinating activities of the business and for the end users of the accounting information. Because of the progressive growth of information technologies, the Manual Accounting Systems have become gradually inadequate for decision needs.

Thus, public and private sector firms in both developing and developed economies view Computerized Accounting Information System (CAIS) as an important tool to ensure effective and efficient information flow in the recording, processing, and analysis of financial data. Effective and efficient information flow enhances managerial decision-making, thereby increasing the firm’s ability to achieve corporate and business strategy objectives.

However, with the advancement in technologies leading to the invention of computerized accounting systems and its numerous advantages, most MFIs in Cameroon are noted for not fully utilizing the Computerized Accounting Information System. This is attributed to; the poor educational systems of most of the Cameroonian schools that neglect practical/technical education to general which deals mostly with theory, which is probably because of the high cost involved in investing in technical education. The few that exist are too expensive that eliminate most young people who could be determined to learn more on CAIS.

Also, the already existing workers in most MFIs find it as a difficult task to switch from the manual system to computerized system because of the time and cost involved in learning how to use the updated systems. In some cases, some MFIs do not have enough capital to possess the software and hardware needed to management of MFI’S to produce timely financial reports which are one of their major requirements.

At SEFICOOP where they use Global bank as a CAS to carryout transactions such as creating of member accounts, generation of account statements and profit and loss reports, generation of trial balance and amortization schedules. This is therefore the reason why this study aims at finding out the effects of Accounting information system on the financial performance of microfinance institutions with CCC Buea as case study.

1.3 Research Questions

1.3.1 Main Research Question

What is the effect accounting information system on the financial performance of microfinance (case study: CCC Buea)?

1.3.2 Specific Research Questions

1. What is the effect of manual bookkeeping on the financial performance of microfinance?
2. What is the effect of computerised accounting system on the financial performance of microfinance?

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