ABSTRACT

This study examines the effects of Computerized Accounting Systems (CAS) on the quality of financial reporting in Microfinance Institutions (MFIs) in Cameroon, with a focus on People’s Finance PLC in Yaoundé. The research evaluates how CAS influences the understandability, accuracy, and reliability of financial statements, addressing gaps in existing literature regarding CAS adoption in resource-constrained settings. Using a descriptive survey design, data were collected from 20 employees through structured questionnaires and analyzed using Pearson correlation and descriptive statistics.

The findings reveal strong positive correlations between CAS and financial reporting quality, with significant improvements in understandability (r = 0.754), accuracy (r = 0.843), and reliability (r = 0.781). Despite these benefits, challenges such as high costs, human intervention risks, and IT expertise gaps were identified as barriers to effective CAS implementation.

The study concludes that CAS adoption enhances financial reporting quality in Cameroonian MFIs but recommends addressing implementation challenges through targeted training, affordable solutions, and regulatory support. These insights are valuable for MFI managers, policymakers, and CAS developers aiming to improve financial transparency and operational efficiency in similar contexts.

Keywords: Computerized Accounting Systems, Financial Reporting Quality, Microfinance Institutions, Understandability, Accuracy, Reliability.

 

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

1.1.1 Historical Background

The evolution of accounting systems in microfinance institutions (MFIs) mirrors global technological advancements in financial management. Early MFIs relied entirely on manual bookkeeping, which was time-consuming and error-prone (Ledgerwood, 2013). In Cameroon, the microfinance sector emerged in the 1990s, primarily using paper-based systems due to limited technological infrastructure (Nguena & Tsafack, 2021). These methods hindered scalability and transparency, creating a need for more efficient solutions.

The introduction of computerised accounting in the 2000s marked a turning point for financial reporting globally (Granlund, 2011). However, adoption in Cameroon’s MFIs lagged due to high costs and low digital literacy (Tamba & Nkeng, 2020). Early adopters reported improved efficiency, but systemic barriers like electricity shortages and software affordability persisted. This historical delay explains the current gap in research on CAS effects in Cameroonian MFIs.

Globally, CAS became a standard for financial institutions by the 2010s, driven by regulatory demands for accuracy and real-time reporting (IFAC, 2015). In contrast, Cameroon’s MFI sector struggled with partial digitisation, blending manual and automated processes (Acha & Ndiege, 2021). This hybrid approach often compromised data consistency, highlighting the need for full CAS integration.

Today, as Cameroon pushes for financial inclusion, understanding CAS’s historical trajectory helps contextualise its potential to transform MFI reporting. Lessons from early adoption failures can guide current implementations to avoid past pitfalls (Ngwafor & Asongu, 2022). This study builds on this historical foundation to evaluate CAS’s modern impact.

1.1.2 Conceptual Background

Financial reporting quality is measured by key attributes: understandability, accuracy, and reliability (IASB, 2018). Understandability ensures users can interpret financial statements without specialised knowledge. Manual systems often fail here due to unstructured data presentation (Mbarga, 2019). CAS addresses this through standardised templates and automated formatting, enhancing clarity for diverse stakeholders.

Accuracy refers to error-free financial data, critical for decision-making (Fouda, 2018). Manual processes are susceptible to human mistakes, while CAS minimises these through automation. For example, built-in validation checks reduce miscalculations in income statements. This study examines whether CAS delivers measurable accuracy gains in Cameroonian MFIs.

Reliability ensures financial statements are verifiable and consistent (IASB, 2018). CAS enhances reliability by maintaining digital audit trails and enabling real-time updates. In contrast, manual systems lack traceability, making fraud detection harder (Nguena & Tsafack, 2021). This research assesses whether CAS improves these metrics in practice.

Challenges like cost and training gaps often undermine CAS benefits (Ngwafor & Asongu, 2022). For instance, staff resistance to new systems can perpetuate errors despite advanced software. This study explores these barriers to identify solutions for optimising CAS adoption.

Ultimately, CAS aims to bridge the gap between regulatory expectations and MFI capabilities. By aligning reporting practices with international standards, MFIs can attract investment and ensure compliance (Ledgerwood, 2013). This study’s conceptual framework ties these elements to measurable outcomes.

1.1.3 Contextual Background

Cameroon’s microfinance sector presents unique challenges and opportunities for computerised accounting system (CAS) adoption. With over 700 registered microfinance institutions serving approximately 4.5 million clients (Microfinance Barometer, 2023), the sector plays a crucial role in financial inclusion, particularly for rural populations and small businesses. However, the adoption of modern accounting technologies remains uneven across different regions and institutional sizes.

The regulatory environment significantly influences CAS implementation in Cameroonian MFIs. The Banking Commission of Central Africa (COBAC) mandates financial reporting standards for all licensed MFIs, creating pressure for accurate and timely reporting (COBAC, 2022). However, many smaller MFIs struggle to meet these requirements due to limited resources and technical capacity. This regulatory tension creates a compelling case for CAS adoption, yet practical barriers persist, particularly for institutions operating in rural areas with poor digital infrastructure.

The Cameroonian context presents distinct technological and operational challenges for CAS implementation. Urban MFIs, particularly in Douala and Yaoundé, have made greater progress in digitising their accounting processes, benefiting from better internet connectivity and access to technical support (Nguena & Tsafack, 2023). In contrast, rural MFIs face significant hurdles, including unreliable electricity, limited internet access, and lower levels of digital literacy among staff and clients. These contextual factors create a digital divide in accounting practices across the country’s microfinance sector.

Emerging fintech solutions and mobile banking platforms offer new opportunities for CAS integration in Cameroon’s unique financial ecosystem. Partnerships between MFIs and mobile money providers have demonstrated how technology can overcome some infrastructure limitations (Acha, 2023). Cloud-based accounting solutions are becoming increasingly viable, potentially reducing upfront costs and technical barriers. This evolving context makes the current study particularly timely, as it examines how CAS can be effectively implemented across Cameroon’s diverse microfinance landscape to improve financial reporting quality.

1.1.4 Theoretical Background

This study is anchored in three key theoretical frameworks that help explain the relationship between computerised accounting systems (CAS) and financial reporting quality in microfinance institutions.

Systems Theory provides a foundational lens for understanding how CAS implementation affects MFIs as complex organisations. Kast and Rosenzweig (1972) argue that organisations function as unified systems where changes in one component create ripple effects across others. In this study, Systems Theory helps analyse how CAS adoption influences not just accounting processes but also related areas like decision-making, internal controls, and stakeholder relationships. The theory suggests that successful CAS integration requires aligning technological changes with organisational structure and human resource capabilities.

Positive Accounting Theory, developed by Watts and Zimmerman (1986), offers insights into why MFIs might adopt CAS. This theory posits that organisations choose accounting methods that maximise their economic efficiency and satisfy stakeholder demands. Applied to our research, it helps explain how regulatory pressures, competitive forces, and management incentives drive CAS adoption decisions in Cameroonian MFIs. The theory also helps predict how different MFIs might respond to the costs and benefits of implementing computerised systems.

Resource-Based View (RBV) Theory, articulated by Barney (1991), frames CAS as a strategic resource that can provide a competitive advantage. RBV suggests that organisations gain sustainable benefits from valuable, rare, and difficult-to-imitate resources. In this study, we examine whether CAS represents such a resource for MFIs, potentially improving their financial reporting quality, operational efficiency, and market positioning. The theory helps assess whether MFIs with advanced accounting systems outperform those relying on manual methods.

1.2 Statement of The Problem

Microfinance institutions (MFIs) in Cameroon face significant challenges in financial reporting quality due to reliance on manual accounting systems. These systems often produce errors, delays, and inconsistencies, undermining stakeholder trust (Nguena & Tsafack, 2021). Computerised Accounting Systems (CAS) could address these issues, but their actual impact on financial reporting remains unclear. This study examines whether CAS improves the understandability, accuracy, and reliability of financial statements in Cameroonian MFIs.

A critical concern is whether CAS enhances financial statement understandability for non-expert users like regulators and donors. Manual reports are often complex and poorly formatted, reducing accessibility (Mbarga, 2019). CAS may simplify reporting through standardised templates and automated processes. However, limited research exists on its effectiveness in Cameroon’s unique MFI context, where literacy and technical barriers persist.

The accuracy of financial data is another challenge, as manual entry increases misstatement risks (Fouda, 2018). CAS promises error reduction through automation, but its implementation faces hurdles like high costs and staff resistance (Ngwafor & Asongu, 2022). Without proper training and infrastructure, CAS may fail to deliver expected improvements. This study evaluates whether CAS adoption translates to measurable gains in reporting accuracy for Cameroonian MFIs.

Finally, CAS could strengthen reliability by providing audit trails and real-time verification (IASB, 2018). Yet, compatibility issues and limited technical expertise may hinder its potential (Acha & Ndiege, 2021). This research identifies these barriers while assessing CAS’s role in improving financial reporting quality. The findings will guide MFIs, policymakers, and developers in optimising CAS adoption for better financial transparency.

1.3 Objectives Of The Study

1.3.1 General Objective

The main objective of the study is to assess the effects of computerised accounting on the quality of financial reporting in microfinance institutions in Cameroon.

1.3.2 Specific Objectives

1. To assess the effect of Computerised Accounting Systems (CAS) on the understandability of financial statements in MFIs in Cameroon.
2. To evaluate the impact of CAS on the accuracy of financial reporting in MFIs in Cameroon.
3. To examine the influence of CAS on the reliability of financial statements prepared by MFIs in Cameroon.
4. To identify the challenges associated with using CAS in generating quality income statements in MFIs in Cameroon.

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