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Impact of ICT Utilization on Efficiency and Financial Sustainability of Microfinance Institutions in Tanzania

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Problem Statement: This article examines the impact of ICT adoption on efficiency and financial sustainability of Microfinance Institutions in Tanzania. Most of microfinance institutions in Tanzania operate in losses due to high costs associated with operations and service delivery to the poor. Evidences around the world have reported increased importance of ICT usage as a means for cost reduction, better service delivery, increased efficiency and high customer satisfaction in Microfinance Institutions. The article seeks empirical evidences on the level of ICT usage and its impact on efficiency and financial sustainability of Microfinance institutions in Tanzania. Methodology: The study used DEA model to estimate technical efficiency of Microfinance institutions in Tanzania. Financial self sufficiency was estimated using operating self sufficiency ratio while ICT usage level was measured using ICT usage index. Regression analysis model was used to test for association and cause and effect between ICT with efficiency and financial sustainability. Results: The study reports the presence of positive but weak association and insignificant course and effect between ICT usage with efficiency and financial sustainability. ICT adoption was found to have a positive correlation with efficiency and financial sustainability in Microfinance Institutions. The correlation results imply that ICT usage has a positive impact on efficiency and sustainability as they move in the same direction. The strength of the impact was found to be low due low investments in ICT among Microfinance firms. Conclusions: Microfinance Institutions in Tanzania should increase their ICT investments; expand their customer base and increase ICT usage level to realize the benefit of ICT in their organizations. The Government of Tanzania should review the current ICT policy in order to create better and supportive ICT policy than the current policy.
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Special thanks to the Faculty of Science and Technology,
Mzumbe University
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International Journal of Interdisciplinary Studies on Information Technology
and Business
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Accelerated advancements in the information technology (IT) era affect many aspects of the human's
social life; thus it has been observed that the business sphere is already changing in the information
technology era. Interdisciplinary Studies on Information Technology and Business (ISITB) journal
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IT engineering ICT.
Call for paper Issue 3, June 2013
The International Journal on Interdisciplinary Studies in Information Technology and Business now
invites researchers and scholars to submit original papers (unpublished work) for the second issue of
journal which will be published in June 2013. The focus of this issue is on five tracks but not limited to
following topics.
1.Information Technology
Software processes and software
engineering
Databases and database systems
Computer networks and electronic
communication
Information systems and information
management systems
Architectural design and orientation
Systems requirements engineering
Information technology management
2.Businesses
Business process management
Marketing and marketing management
Finance and accounting management
Business process re-engineering
Industry engineering and management
Production and operations management
Business process modeling
Trust, security and readiness issues in
businesses
3.Information Technology in Business
iii
Electronic business, electronic commerce
and electronic governance
Electronic supply chain and procurement
management
Collaborative networks in businesses
Virtual teams and virtual organizations
Electronic service science
Information technology in outsourcing,
insourcing and backsourcing
4.Information Technology in Business
Knowledge
Electronic learning in university and
academic businesses
Electronic teaching in university and
academic business
Electronic student assessment
Knowledge creation, acquisition, sharing
and loss in information technology
environment
Preserving and managing business
knowledge in an organization
Emerging trends in information
technology outsourcing and required
knowledge
5.Case studies in Information Technology
and Businesses
Information technology projects in
business industries
Information technology projects in
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Important Dates:
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nd
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th
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Submit by email to the editor-in-chief: Prof. dr. Msanjila S.S. (simon.msanjila@gmail.com) or through
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(ISITB) Business and Technology Information on Studies Interdisciplinary
NAISIT
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simon.msanjila@gmail.com Email: Tanzania, University, Mzumbe , Msanjila S. S.
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Tanzania University, Mzumbe Kamuzora, Faustine
Tanzania Agriculture, of University Sokoine , Sanga Camilius
Portugal Lisbon, of University New Abreu, Antonio
Brazil Catalina, Santa of Federal University Baldo, Fabiano
Interdisciplinary Studies on Information Technology and Business (ISITB)
NAISIT
Volume 1, Issue 1: January -March 2013
Table of Contents
1
DATABASE MARKETING STRATEGIES IN THE INDUSTRY: CASE OF
KENYAN ORGANIZATIONS
ISMAIL ATEYA LUKANDU, Strathmore University, Kenya
BEATRICE AKONG’O DIMBA, Strathmore University, Kenya
VINCENT OTEKE OMWENGA, Strathmore University, Kenya
15
WEB-BASED SYSTEM FOR MONITORING AND EVALUATION OF
AGRICULTURAL PROJECTS
CAMILIUS SANGA, Sokoine University of Agricultue, Tanzania
KADEGE FUE, Sokoine University of Agricultue, Tanzania
NEEMA NICODEMUS, Sokoine University of Agricultue, Tanzania
F.T.M. KILIMA, Sokoine University of Agricultue, Tanzania
42
ANALYZING INTER-ORGANIZATIONAL TRUST WITH MULTI-MODEL VIEW
SIMON SAMWEL MSANJILA, Mzumbe University, Tanzania
60
IT AND MOBILE PHONES – A RICH WAY FOR BANKING BUSINESS
UMANATH KUMARASAMY, TCS E-Serve International Limited, India
67
IMPACT OF ICT UTILIZATION ON EFFICIENCY AND FINANCIAL
SUSTAINABILITY OF MICROFINANCE INSTITUTIONS IN TANZANIA
ERASMUS FABIAN KIPESHA, Dongbei University of Finance and Economics, China
83
THE INFLUENCE OF BUSINESS PROCESS RE-ENGINEERING ON SERVICE
QUALITY: EVIDENCE FROM SERVICE INDUSTRY IN TANZANIA
JOSEPH SUNGAU, Mzumbe University, Tanzania
PHILIBERT C. NDUNGURU, Mzumbe University, Tanzania
JOSEPH KIMEME, Mzumbe University, Tanzania
This is one paper of
Interdisciplinary Studies on Information Technology and
Business (ISITB)
Volume 1, Issue 1: January -March 2013
Interdisciplinary Studies on Information Technology and Business (ISITB)
Volume 1, Issue 1: January -March 2013 (67 - 82)
67
ISSN 1923-970X (Print) - ISSN 1923-9718 (On-line) - ISSN 1923-9726 (CD-ROM), Copyright NAISIT 2013
Impact of ICT Utilization on Efficiency and Financial Sustainability of
Microfinance Institutions in Tanzania
ERASMUS FABIAN KIPESHA
Dongbei University of Finance and Economics,
Post Code 116025, Hei Shi Jiao,
Dalian, P.R. China
ekipesha@yahoo.co.uk
ABSTRACT
Problem Statement: This article examines the impact of ICT adoption on efficiency and financial
sustainability of Microfinance Institutions in Tanzania. Most of microfinance institutions in Tanzania
operate in losses due to high costs associated with operations and service delivery to the poor. Evidences
around the world have reported increased importance of ICT usage as a means for cost reduction, better
service delivery, increased efficiency and high customer satisfaction in Microfinance Institutions. The
article seeks empirical evidences on the level of ICT usage and its impact on efficiency and financial
sustainability of Microfinance institutions in Tanzania. Methodology: The study used DEA model to
estimate technical efficiency of Microfinance institutions in Tanzania. Financial self sufficiency was
estimated using operating self sufficiency ratio while ICT usage level was measured using ICT usage
index. Regression analysis model was used to test for association and cause and effect between ICT with
efficiency and financial sustainability. Results: The study reports the presence of positive but weak
association and insignificant course and effect between ICT usage with efficiency and financial
sustainability. ICT adoption was found to have a positive correlation with efficiency and financial
sustainability in Microfinance Institutions. The correlation results imply that ICT usage has a positive
impact on efficiency and sustainability as they move in the same direction. The strength of the impact was
found to be low due low investments in ICT among Microfinance firms. Conclusions: Microfinance
Institutions in Tanzania should increase their ICT investments; expand their customer base and increase
ICT usage level to realize the benefit of ICT in their organizations. The Government of Tanzania should
review the current ICT policy in order to create better and supportive ICT policy than the current policy.
Keywords: Microfinance Institutions, Efficiency, Financial Sustainability, ICT usage
Interdisciplinary Studies on Information Technology and Business (ISITB)
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1. INTRODUCTION
Microfinance institutions are the main financing sources for the poor and low income households
around the world. These institutions provide financial services to the poor who are excluded by formal
financial systems, to enable them sustain living and engage in economic activity through entrepreneurial
activity and small business which together have impacts on country economic developments. The
performance of Microfinance institutions has recently been a point of focus among different stakeholders
of the sector as a result of failure and poor performance of most of microfinance projects, which were
mainly financed by donors and governments (Morduch, 2000). Microfinance institutions have faced
increasing competitions for scarce donor funds and increased market competition due to entrances of
commercial banks in the microfinance business (Hermes et al, 2011). They have also faced declining
donor support and advancements in the financial sector technologies which together have affected their
operations. This has resulted into the need for efficiency and sustainable operations with reduced
operating costs and greater productivity to ensure future survival. As a way of improving efficiency and
sustainability, Microfinance Institutions around the world have adopted different advanced operational
methodologies together with information and communication technology (ICT) in order to facilitate their
operations, reduction of cost, increasing staff productivity and improved communication and coordination
(Bada, 2012).
Microfinance sector in Tanzania is dominated by SACCOS which are small in size and rural oriented,
Nongovernmental organizations (NGOs), microfinance companies, nonbank financial institutions
(NBFIs) and few commercial banks offering microfinance services. Most of these institutions are
characterized by poor performance with high inefficiency and low financial sustainability which together
has hindered their outreach to the poor and low income households (Marry & Tubaro, 2011; Triodos
Facet, 2011). According to FinScope survey (2009) on financial sector utilization in Tanzania, only
12.4% of the country population is served by formal financial sectors. The 4.3% is saved by semi formal
sector, mainly being Microfinance institutions while 27.3% and 56% of the population was reported to be
informally included and totally excluded from financial services respectively. Microfinance institutions
have not been able to reach most of poor population especially in rural areas, which account for about
70% of the total population of the country (Triodos Facet, 2011). Most of the Microfinance institutions
were reported to operate at high costs and low productivity, which in turn results into high losses as well
as low outreach to the poor which is the primary objective these institutions (Marry & Tubaro, 2011;
Nyamsogoro, 2010).
With changing business environment in microfinance sector in Tanzania and around the global, most
of the Microfinance institutions have adopted information and communication technology (ICT) in their
business operations. They adopt ICT in order to facilitate communication within an organization and with
customers (Yu, 2010), reduce cost of operations which results into improved efficiency (Majumdar et al,
2010) as well as to aid management in decision making process with all necessary information required
for decision making (Jimenez-Zarco et al, 2006). Most of Microfinance institutions in Tanzania have
established websites, which enables them interact easy with their clients; they have also increased internal
use of internet within organizations while others have adopted different accounting packages to help them
in management of business transaction (ESRF, 2008). Although there have been increases in the use of
ICT among small and large Microfinance institutions in Tanzania, most of them have not been able to
reduce their operating costs as well as improve their revenue generation which make them dependent on
donors hence unsustainable (Marry & Tubaro, 2011; Nyamsogoro, 2010; Kipesha, 2012).
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Although ICT adoption among Microfinance institutions has recently increased, still studies on its
impact on performance of Microfinance institutions in Tanzania have not been undertaken. The need for
evidences on the impact of ICT adoption and usage in Microfinance institutions Tanzania is still high.
The evidences on impact of ICT adoption and usage will act as a benchmark for Microfinance
institutions, which have not adopted ICT in their business operations. The evidences will also act as a
push factor for policy making regarding ICT in Microfinance Institutions to enable utilization of the
benefits associated by ICT uses. This paper aims at finding empirical evidences on whether adoption of
ICT in Microfinance operations has any impact on their performance especially on their efficiency use of
resources, better cost management and financial sustainability.
2. REVIEW OF LITERATURE
Efficiency and sustainability are the key aspects of Microfinance institutions performance especially
in situations with high competitions, low donor supports and fast changes in the operational technologies
(Hermes et al, 2011). Efficiency in Microfinance institutions refers to the better use of input resources in
the production of output. It measures how well Microfinance institutions use input resources such as
subsidies, human capital and assets in the production of outputs measured in terms of the loan portfolio
and outreach the poor clients (Bernd, 2007). Financial sustainability, on the other hand, refers to the
ability of Microfinance institutions to cover their operating costs using their operating revenue. It
indicates the ability of Microfinance institutions to continue with operations without depending on
donations and other types of subsidies from government, donors and other developing partners
(Rosenberg et al, 2009; Barres et al, 2005, Mayer, 2002). Both efficiency and financial sustainability in
Microfinance institutions depends on the ability of the institutions to manage its operating costs, by
keeping costs as low as possible as well increased employee’s productivity which in turn results into
overall organizational efficiency.
Among the main alternatives for cost reduction in an organization, is the adoption and usage of
information and communication technology. The adoption of ICT in any business firm has proved to be
beneficial to both firms and customers, as well. ICT plays a significant role in reduction of operational
inefficiency in an organization as well as improvement in decision making (Krishnaveni & Meenakumari,
2010). ICT is an essential tool for the efficiency administration of organization, and for better delivery of
services to clients (Apulu & Lathan, 2011). ICT also improves the supply of information, reduce the cost
of production due to better access of market information (Schwarez, 2003,Buhalis, 2003) and facilitating
organizational flexibility, which results into improved product quality (Majumdar et al, 2010). ICT
adoption and use have also proved to be beneficial to the management of organizations as it increases the
supply of information for decision making, facilitate easy dissemination of information within the
organization which in turn reduces the time constraints in accessing the required information and
monitoring activities (Spanos et al, 2002). ICT adoption results into increases in organization capability
and improved performance as a result of low operating costs, improved coordination, decreased
inefficiency and uncertainty as well as increases in revenues (Hengst & Sol, 2001; Jimenez-Zarco et al,
2006). To customers, ICT adoption is beneficial as it improves information accessibility and provides
effective means of customer service delivery (Hengst & Sol, 2001, Melville et al, 2004). With improved
ICT uses in organization, customers can easy acquire goods and services online, can easily access
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services and product information online, communicate with organizations easily which in turn brings
customer satisfaction on services offered by the organization (Melville et al, 2004).
ICT usage in Microfinance institution is vital in the reduction and management of transaction costs.
Transaction cost in Microfinance institutions is the bottleneck of its survival. Most of the Microfinance
institutions operate at very high transaction costs as a result of high administration costs, financing costs
and information costs. Unlike in commercial banks with larger loan and long maturity, most of the poor
people served by Microfinance require small loans with shorter maturity. Such types of loan are
expensive to administer and involve high follow up costs as well as high defaults, which results into high
operating costs (Brandt et al, 2003). The adoption of ICT in Microfinance institutions around the world
has resulted into improved efficiency, sustainability and profitability. ICT adoption and usage have
enabled Microfinance institutions to reduce their transaction costs due to reduced staff working time,
better financial management due to generation of timely and quality information for financial decision
making, decreased chances of fraud as well as customer satisfaction and loyalty (Hishigsuren, 2006).
Regardless these advantages of the use of ICT most of Microfinance institutions in developing countries
have not yet adopted ICT in most of their internal operations. Most of them still rely on their traditional
manual processing systems which are inefficient and results into poor performance (Parikh, 2005). The
adoption and usage of ICT in Microfinance institutions in developing economies faces several challenges
associated with high direct and indirect costs. These costs are associated with implementation of ICT,
such as installations costs, training costs and service costs. Evidences have shown that, the benefit of
implementing ICT in developing countries is outweighed with the associated costs, due to institutions
size, volume of operations and rural orientations. ICT implementation in Microfinance institution has also
shown to be costly and not beneficial especially in areas with low population density (Heshigsuren,
2006). Microfinance institutions ICT adoption, have also been challenged by low education level of their
clients, especially in rural areas, which are characterized, by poor communication infrastructure. Most
clients are ICT ignorant and cannot utilize most of ICT developments such as online services hence
requiring physical interaction with loan officers of Microfinance institutions (Heshigsuren, 2006). In
Tanzania, for example, only 1% of the population have a university education, 19% have secondary and
post secondary education, 65% have primary education while 16% has no education at all (FinScope
survey, 2009). With such education distribution, the use of ICT among the clients especially in rural
Tanzania is unlikely even when there is high adoption of ICT uses among the Microfinance institutions.
ICT adoption and usage in Microfinance institutions have also been constrained by policy and regulatory
framework. Most of the developing countries lack enabling environment, with well developed
infrastructure and full support from central banks. They also lack good communication infrastructure,
regulation and supervision which could bring about positive policy impact on the adoption and use of ICT
in Microfinance institutions (Cracknell, 2004; Ssewanyama, 2009). Most of The Microfinance institutions
are not regulated and are restricted from mobilizing deposits from clients which causes low volume of
transactions undertaken by the institutions as compared to banks and other financial institutions hence
high unit operating costs (Heshigsuren, 2006, Hermes et al, 2011, Kipesha, 2012). With such low volume
of activities the benefits of ICT adoption and usage is likely to be outweighed by the associated costs.
Empirical studies on adoption of ICT and its impact on performance in Microfinance institutions,
present good news especially in firms which have invested more on it. The evidences form Uganda on the
extent to which Microfinance institutions use ICT to deliver business services, report a fair use of ICT in
business process automation which has resulted into increased staff productivity, reduced transaction
costs and growth (Bada, 2012). On the other hand, the study reported low usage of ICT in most
Interdisciplinary Studies on Information Technology and Business (ISITB)
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microfinance institutions in Uganda, which was in contrary with Ssewanyama (2009) evidences in the
Country. The latter study reported increased uses of ICT in Microfinance institutions by adoption of
different technologies, which has enabled them to control cost, create efficiency, improve operations
efficiency, effectiveness and productivity and increased outreach to the poor. The study by Fu & Polzin
(2008) present evidences from India on impact of ICT adoption at various levels among rural
microfinance cooperative banks. The findings show that, ICT have enhanced efficiency and productivity
of rural credit institutions. The study indicates that, still a lot need to be done to improve ICT skills
among the employees as well as clients of Microfinance institutions to enable full enjoying of the benefit
of ICT adoption. The evidence on traditional microfinance institutions in India has provided different
results on ICT adoption and its impact on performance. The study by Gupta et al (2007) has supported the
ability of ICT use on improving outreach to the poor in rural areas, but report very low ICT penetration
among most traditional microfinance institutions. The study reported that most of the institutions
reviewed were found only using internet and have not automated their internal business processes. The
empirical evidences on ICT adoption and performance of Microfinance institutions in Europe also support
most of the findings. Jawadi et al, (2010), assessed the impact of ICT adoption and its uses on
Microfinance institutions, when examining the evolution, commercialization and performance of
Microfinance institutions in Europe. The study found that, ICT adoption has contributed to the expansion
of most microfinance services among the citizens, have improved access to microfinance services and has
enhanced performance of microfinance institutions through cost reduction and better services to clients.
Evidences from America are much similar to those from Europe; the findings by Washington (2006)
survey on the impact of ICT adoption on microfinance institutions operations reported a positive impact
of ICT uses. Apart from that, the study reported that ICT adoption and use was more beneficial to
Microfinance institutions with larger clients base and larger loan portfolio such institutions were found to
have a high ratio of IT related spending to total operating costs. The study also found out that, the use of
ATM had higher value to microfinance institutions while commercial banks offering microfinance
services have highly adopted ICT as compared to NGOs and NBFIs. In Tanzania, although studies on
impact of ICT adoption in Microfinance institutions has not been undertaken, evidence shows there have
been increases in the number of clients using ICT related financial services such mobile payment services
and mobile banking from 4mil in 2009 to 10million in 2010 (BOT, 2010). The evidences form
microfinance client’s show that most of them have the feeling that ICT could enhance their livelihood
through reduction of information costs, transport costs as well as easy accessibility of microfinance
services (ESRF, 2008).
3. METHODOLOGY AND DATA
The study was conducted in Tanzania using a sample of 29 Microfinance institutions operating in the
country. The sample selection was based on three main criteria, first Microfinance institutions should be
reporting to Mix market organization which is an international database for microfinance institutions, or
should be reporting to Bank scope or regulated by Bank of Tanzania. This was to ensure that, the data
used for estimating efficiency and sustainability was correct and reliable. Second, data availability both
primary and secondary data and lastly accessibility of information on ICT utilization was also key criteria
for selection of Microfinance institutions to included in the sample. This study is part of ongoing PhD
study on Microfinance institutions performance; it uses both primary data and secondary data. Secondary
data was collected form annual financial statements available at market mix database
(www.mixmarket.org), bank scope and bank of Tanzania while primary data was collected among the
Interdisciplinary Studies on Information Technology and Business (ISITB)
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employees of organizations, supervisor and managers of microfinance institutions during the data
collection phase of the major study. The study methodology involves four parts, the estimation of
efficiency of microfinance institutions, estimation of financial sustainability, estimation of ICT adoption
index of microfinance institutions and lastly the testing of the impact of ICT on efficiency and financial
sustainability of Microfinance institutions.
3.1 EFFICIENCY ESTIMATION MODEL
Different models exist for estimation of efficiency of firms; this study uses data envelopment analysis
(DEA) for estimation of technical efficiency scores. DEA model was adopted because it allows the use of
multiple inputs and multiple outputs in the estimation of efficiency scores (Ruggiero, 2005). The study
used production efficiency approach by considering Microfinance institutions as producers of financial
services to the poor clients. To specify efficiency model, assume we have n Microfinance institutions
(MFIs) using m input resources to produce s output, technical efficiency of such microfinance institutions
under CCR model (Charnes et al, 1978) input oriented can be presented as;
𝑇𝐸 =
𝑠
𝑗 = 1
(
𝑢
𝑟
𝑦
𝑟𝑜
)
÷
𝑚
𝑖 = 1
(
𝑣
𝑖
𝑥
𝑖𝑜
)
‒‒‒‒‒‒‒‒‒‒‒‒ (1)
𝑆𝑢𝑏𝑗𝑒𝑐𝑡 𝑡𝑜
𝑠
𝑟 = 1
µ
𝑟
𝑦
𝑟𝑗
𝑠
𝑟 = 1
𝑣
𝑖
𝑥
𝑖𝑗
1 ‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒
𝑢
𝑟,
𝑥
𝑖
≥ 0,𝑖 = 1,….,𝑚,𝑗 = 1,….,𝑛,𝑟 = 1,….,𝑠
Where: TE is the technical efficiency ratio of the
𝑀𝐹𝐼
0
,
𝑣
𝑖
,
µ
𝑟
are the weights for the
𝑖
𝑡ℎ
inputs and
𝑟
𝑡ℎ
outputs, m is the number of inputs variables, s is the number of output variables, n is the of MFIs,
𝑥
𝑖𝑜
and
𝑦
𝑟𝑜
are values of input i and output r for
𝑀𝐹𝐼
0
. The above equation is the fractional linear
programming equation with infinite numbers of solutions. The equation can be converted into DEA
model problem by adding the following additional constraint
𝑚
𝑖 = 1
𝑣
𝑖
𝑥
𝑖0
= 1
,
The equations for minimization problem becomes,
𝑀𝑖𝑛 𝑇𝐸 = δ
0
‒ ƿ
(
𝑚
𝑖 = 1
𝑆
𝑖
+
𝑠
𝑟 = 1
𝑆
𝑟
+
)
‒‒‒‒‒‒‒‒‒‒ (2)
𝑆𝑢𝑏𝑗𝑒𝑐𝑡 𝑡𝑜
𝑛
𝑗 = 1
𝑣
𝑖𝑗
λ
𝑗
+ 𝑆
𝑖
= δχ
𝑖0
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And
𝑛
𝑗 = 1
𝑦
𝑟𝑗
λ
𝑗
‒ 𝑆
𝑟
+
= 𝑦
𝑟0
λ
𝑗
,𝑆
𝑟
+
,𝑆
𝑖
≥ 0, ƿ > 0,𝑖 = 1,….,𝑚,𝑗 = 1,….,𝑛,𝑟 = 1,….,𝑠
Where
ƿ
is a non Archimedean quantity which is smaller than any positive real number,
δ
0
is the
proportion of
𝑀𝐹𝐼
0
input which is needed to produce a quantity of output equivalent to the best performer
MFIs
λ
𝑗
𝑆
𝑖
and
𝑆
𝑟
+
are input and output slack variables respectively,
λ
𝑗
is a (nx1) column vector of
constants indicating benchmarked MFIs for
𝑀𝐹𝐼
0
. The study uses total assets, personnel and operating
costs as the input variables and gross loan portfolio and financial revenue as the output variables. The
selection of inputs and outputs variables was based on their frequency of use in the studies of
microfinance institutions efficiency (Haq, et al, 2010, Ahmand; 2011, Masood et al, 2010).
3.2 FINANCIAL SUSTAINABILITY ESTIMATION MODEL
The measurement of financial sustainability in MFIs employ a range of method with a common goal
of assessing the ability of MFI to cover the operating costs with internal inflow income without
considering all forms of subsidies (Zeller & Johannsen, 2006). Among the most common methods
includes operating self sufficiency (OSS), financial self sufficiency (FSS), subsidy dependency index
(SDI) and capital formation rate (Barres et al, 2005; Rosenberg, 2009, Alufohai, 2006). The study uses
operating self sufficiency as the measure of sustainability in Microfinance institutions. Operating self
sufficiency measures the ability of Microfinance Institutions to cover its operating costs using its
operating revenue regardless of its capital base composition (Mayer, 2002; CGAP, 2004, Barres et al,
2004). Using standard definition for operating self sufficiency (Barres et al, 2005) we define operating
self sufficiency as,
𝑂𝑆𝑆 =
𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
𝐹𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 + 𝐼𝑚𝑝𝑎𝑖𝑟𝑚𝑒𝑛𝑡 𝐿𝑜𝑠𝑠𝑒𝑠 + 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠
Financial revenue (
𝑋
𝐹𝑅
) is the total value of all revenue earned from the provision of financial
services; it includes the financial revenue from loan portfolio (
𝑋
𝐹𝑅𝐿𝑃
) such as interest on loan portfolio (
𝑋
𝐼𝐿𝑃
)
and fee and commission earned from loan portfolio
𝑋
𝐹𝐶𝐿𝑃
, financial revenue from investments (
𝑋
𝐹𝑅𝐼
)
such as interest and dividend derived from financial assets rather than the loan portfolio and other
revenues from the provisions of financial services (
𝑋
𝑂𝑃𝑅
). Financial expenses (
𝑋
𝑃𝐸
) is the total value of
financial expenses incurred in the operations, it includes interest and fee from deposits taken by MFI (
𝑋
𝐼𝐹𝐸𝐷
), interest and fee from borrowing that funds loan portfolio (
𝑋
𝐼𝐹𝐸𝐵
) and other financial expenses
related to financial services (
𝑋
𝑂𝐹𝐸
). Impairment losses on loan (
𝑋
𝐼𝐿
) is the net loan loss provision expense.
It is the difference between the provision made for loan impairments for the current accounting period (
𝑋
𝑃𝐿𝐼
) and the total value of principal recovered on all loans previously written off (
𝑋
𝑉𝐿𝑅
). Operating
expenses (
𝑋
𝑂𝐸
) is a total value of operating expenses which includes staff expenses (
𝑋
𝑃𝐸
), depreciation
and amortization expenses (
𝑋
𝐷𝐴𝐸
) and other administration expense (
𝑋
𝑂𝐴𝐸
), (Barres, 2005, Rosenberg,
2009). Operating self sufficiency (
𝑂𝑆𝑆
𝑚𝑡
) for
𝑚
𝑡ℎ
MFI at time t can be presented as,
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𝑂𝑆𝑆
𝑚𝑡
=
𝑋
𝐼𝐿𝑃
+ 𝑋
𝐹𝐶𝐿𝑃
+ 𝑋
𝐹𝑅𝐼
+ 𝑋
𝑂𝑃𝑅
𝑋
𝐼𝐹𝐸𝐷
+ 𝑋
𝐼𝐹𝐸𝐵
+ 𝑋
𝑂𝐹𝐸
+ 𝑋
𝑃𝐸
+ 𝑋
𝐷𝐴𝐸
+ 𝑋
𝑂𝐴𝐸
+
(
𝑋
𝑃𝐿𝐼
‒ 𝑋
𝑉𝐿𝑅
)
‒‒‒‒‒‒‒‒ (3)
Operating self sufficiency indicates whether the revenue from operations is sufficient to cover the
costs of operations. When the ratio is 100% such microfinance institution is said to attain a breakeven
point, the ratio below 100% implies that MFI still does not cover its operating cost with the revenues from
operations while the ratio above 100% indicates that MFI generates profits, (Barres et al, 2005).
3.3 ICT USAGE MEASUREMENT MODEL
The data on ICT usage ware collected using questionnaires which were administered to 10
respondents of each Microfinance institutions reviewed. The respondents included 3 managers, 3
supervisors and 4 employees selected randomly. Data was collected in three main categories, the presence
and the level of ICT infrastructure in Microfinance institutions offices, knowledge and skill levels on ICT
related issues among employees and managers, and the level of ICT usage in organization. In assessing
ICT infrastructure, respondents were asked to indicate whether Microfinance institutions have installed
accounting packages or other ICT packages, presence of workable website, number of computers in
relation to staff, ratio of ICT cost to the total cost and whether there is working internet infrastructure. In
the measurement of knowledge and skills possessed, respondents were asked to about the level of
employee knowledge on ICT, level of ICT trainings, and whether the organization has IT department or
IT manager or subcontracts IT services. In order to measure the uses of ICT in Microfinance institutions,
four criteria were used, the level of E business measured by the number of online transaction per total
transaction, level of online reporting, level of customer and staff online interaction and the level of ICT
adoption in internal business process such as procedures and processes automation. The criterion used in
measurement of ICT adoption and its uses in this study, have also been used in several empirical studies
such as studies by Washington, (2006), Hishigsuren, (2006), Ssewanyama, (2009), Melville et al, (2004).
A Likert scale with six points (0-5) was used in the measurement of the level of ICT usage in
Microfinance Institutions. The respondents were asked to give their views in each of the measurement
criteria in the questionnaire. Basing on their answers the researcher ranked the questionnaire using the
Likert scale. The Likert scale value of 0 represented absence/unavailability of particular variable, 1
represented low level/performance in particular variable and 5 represented high level/performance of
criteria. All criteria were measured using Likert scale except level of E- business; number computers in
relation to staffs and ICT cost to the total cost which were computed using secondary data obtained from
the respective microfinance institutions. The performance level of each of the three dimensions was
computed as,
𝑃
𝑦
=
𝑛
𝑛 = 1
𝑤
𝑦𝑖
∗ 𝑥
𝑦𝑖
‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒ (4)
Where
𝑃
𝑦
is the ICT performance of dimension y,
𝑤
𝑦𝑖
is the weight of the variable i in dimension (All
variables of the dimension had equal weight) y,
𝑥
𝑦𝑖
is the value of independent variables i in performance
dimension y. y represents the three ICT dimension used (Infrastructure, knowledge and skills and uses), i
represent variables evaluated on each dimension. The ICT usage index was measured as the weighted sum
of all three ICT performance dimension as follows
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𝐼𝐶𝑇
𝑈𝐼𝑗
=
𝑛
𝑛 = 1
α
𝑦𝑗
𝑃
𝑦𝑖
‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒ (5)
Where
𝐼𝐶𝑇
𝑈𝐼𝑗
𝑃
𝑦
is the ICT usage index for Microfinance institution j,
α
𝑦𝑗
is the weight of performance
dimension y in Microfinance institution j (All dimensions have equal weight),
𝑃
𝑦𝑖
is the performance
value of dimension y in Microfinance institution, n is the number of performance dimensions of ICT
usage.
3.4 EMPIRICAL ESTIMATION MODEL
The empirical model was used to establish, whether ICT adoption and usage have an impact on
efficiency and financial sustainability in Microfinance Institutions in Tanzania. Both regression and
correlation analysis were used for association testing. Correlation analysis was conducted to examine the
presence of association between ICT adoption and its use with efficiency and financial sustainability.
Regression analysis, on the other hand, was conducted to ascertain if changes in ICT levels in
Microfinance efficiency results into changes in efficiency and sustainability levels. The ANOVA test was
also conducted to examine the variations in the dependent variables can be explained by the variations of
independent variables. From empirical studies reviewed in the literature, ICT adoption and its use results
into cost reduction, improved efficiency and improved organization profitability which enhances financial
sustainability and overall performance of Microfinance institutions (Fu&Polzin,2008; Ssewanyama, 2009;
Jawadi et al,2010; Gupta et al, 2007). The following two hypotheses were formulated and test in this
study,
Ho1: The level of ICT uses has a positive association with efficiency in Microfinance Institutions
Ho2: The level of ICT uses has a positive association with financial sustainability of Microfinance
Institutions
The two hypotheses were tested using liner regression model. Both Microfinance institutions
efficiency and financial sustainability were used as dependent variables while ICT usage index was used
as independent variable. The basic liner regression model can be presented as;
𝑦
𝑖
= λ + βχ
𝑖
+ µ
𝑖
‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒ (6)
Where:
𝑦
𝑖
is the
𝑖
𝑡ℎ
observation of dependent variable Y,
χ
𝑖
is the
𝑖
𝑡ℎ
observation of the independent
variable X, �,β are intercept and slope between Y and X and ,
µ
𝑖
is the error term which represents
other variables affecting Y but which have been omitted from the equation. Using the two dependent
variables, their respective regression model can be presented as,
𝐸𝐹𝐹
𝑖
= λ
1𝑖
+ β
1
𝐼𝐶𝑇
𝑈𝑆𝐼𝑖
+ µ
1𝑖
‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒ (7)
𝑂𝑆𝑆
𝑖
= λ
2𝑖
+ β
2
𝐼𝐶𝑇
𝑈𝑆𝐼𝑖
+ µ
2𝑖
‒‒‒‒‒‒‒‒‒‒‒‒‒‒‒ (8)
Where:
𝐸𝐹𝐹
𝑖
is the efficiency score of observation
𝑖
𝑡ℎ
,
𝑂𝑆𝑆
𝑖
is sustainability score of observation
𝑖
𝑡ℎ
,
λ
1𝑖
,β
1
,λ
2𝑖
,β
2
are the intercepts and slope of equation 7 and 8 respectively,
𝐼𝐶𝑇
𝑈𝑆𝐼𝑖
is the ICT usage index of
observation
𝑖
𝑡ℎ
,
µ
1𝑖
, 𝑎𝑛𝑑 µ
2𝑖
are error terms.
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From the literature reviewed ICT adoption and usage results into reduced transaction costs as the
results of reduced working time required to process transactions. ICT facilitates the cut down of operating
costs due to reduction in coordination costs, communication costs and information processing costs in an
organization (Ssewanyama, 2009; Parikh, 2006; Hishigsuren, 2006). Since financial self sufficiency is
about the ability of Microfinance institutions to cover its operating costs, it was expected that ICT usage
to have a positive impact on operating self sufficiency (OSS). ICT adoption and use also enhance
efficiency and profitability through increased staff productivity in an organization. ICT usage removes
distance and time constraints on accessing information; reduce the cost of production due to the reduced
number of supervisors as well as facilitating in quick decision making (Hengst & Noor, 2009; Spanos et
al, 2002). Since efficiency is about the better allocation of input resource in the production of outputs,
ICT is expected to have a positive correlation and causality to the efficiency of Microfinance institutions
reviewed.
4. RESULTS
The results on efficiency show high scores with an average of 0.8586 indicating better utilization of
inputs and low wastes in the production of outputs in Microfinance reviewed. Financial sustainability
results were moderate with average of 0.9228, indicating that on average Microfinance institutions
reviewed have not reached breakeven point and still operate in loss but they are not far from the
breakeven point. Among the 29 firms reviewed, only 10 were found to be relatively efficient in one hand
and 13 firms were found to be operationally self sufficiency, on the other hand. The standard deviations
results were 0.3553 and 0.1568 for efficiency and sustainability respectively indicating low variations of
the performance scores among Microfinance Institutions reviewed (Table 1).
Table 1: Descriptive Statistics
Knowledge
Uses
ICT usage
index
Efficiency
Score
OSS
Minimum
1.8667
1.0675
1.5062
0.4757
0.1939
Maximum
4.4333
3.6875
3.6644
1
1.6727
Mean
3.1898
2.2737
2.5789
0.8586
0.9228
Std. Dev
0.673
0.6253
0.5568
0.1568
0.3553
The results on the correlation between efficiency and financial sustainability with ICT usage were all
positive with coefficients of correlation (r) of 0.058 and 0.216 for efficiency and sustainability respective.
With positive coefficients, it shows that ICT usage move in the same direction with the two variables
although the strength of relationship was found to be very low. The correlation results were also
supported with results from the coefficient of determination. The coefficient of determination measured
the proportional of variation of dependent variables about their mean explained by variation in
independent variable. The coefficient of determination results were 0.0038 for efficiency and 0.4668 for
financial sustainability, indicating that most of variations on efficiency and financial sustainability were
not explained by variations in ICT usage hence were the results of other factors (Table 2).
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Table 2: Correlation Results
Model Summary
Model
R
R Square
Adjusted R
Square
Std. Error of the
Estimate
1
.216a
0.0468
0.0115
0.3533
2
.058a
0.0034
-0.0335
0.1594
a. Predictors: (Constant), ICT
index
The results from hypotheses tested using F-test did not support the two null hypotheses that the level
of ICT usage has a positive association with efficiency and financial sustainability, the Sig values
obtained were 0.765 and 0.259 for efficiency and sustainability respectively. The Sig values were all
higher that 0.05 which results into rejecting the null hypotheses at 5% level of significance (Table 3).
Table 3: ANOVA Results
ANOVA
a
Model
Sum of Squares
df
Mean Square
F
Sig.
Regression
0.1656
1
0.1656
1.3267
.259
b
Residual
3.3699
27
0.1248
1
Total
3.5355
28
a. Dependent Variable: OSS, b. Predictors: (Constant), ICT index
Model
Sum of Squares
df
Mean Square
F
Sig.
Regression
0.0023
1
0.0023
0.0911
.765
b
Residual
0.6861
27
0.0254
2
Total
0.6884
28
a. Dependent Variable: Efficiency, b. Predictors: (Constant), ICT index
The results on regression analysis did not show presences of significant cause and effect between ICT
with efficiency and financial sustainability. Regressions coefficients were both positive 0.0163 and
0.1381 for ICT usage in relation to efficiency and financial sustainability respectively. The positive
coefficients indicate that both efficiency and sustainability move in the same direction with ICT usage.
The probability values were all higher than 5% level of significance indicating that the coefficients were
not significant. The results do not support the previous assumption on the presence of cause and effect
between ICT usage with efficiency and sustainability. We do not find statistical evidence on whether
increases in ICT usage results into increases in efficiency and financial performance, due to insignificant
regression coefficients. However the presence of positive coefficients signs the positive movement of ICT
with sustainability and profitability which supports the correlation results (Table 4).
Table 4: Regression Results
Coefficients
a
Un standardized Coefficients
Standardized
Coefficients
t
Sig.
Model 1
B
Std. Error
Beta
(Constant)
0.5666
0.3161
1.7923
0.0843
a. Dependent
Variable: OSS
ICT index
0.1381
0.1199
0.2164
1.1518
0.2595
Model2
Un standardized
Standardized
t
Sig.
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Coefficients
Coefficients
(Constant)
0.8165
0.1426
5.7238
0.0000
a. Dependent
Variable:
Efficiency
ICT index
0.0163
0.0541
0.0580
0.3018
0.7651
The findings of this study are generally in line with most of the previous empirical studies. Most of
the previous findings have reported the presence of positive impact of ICT adoption and usage on
performance of microfinance institutions (Ssewanyama, 2009; Rai, 2012; Bada, 2012; Jawadi et al,2010
etc). We find ICT to have a significant positive correlation and insignificant positive cause and effect with
both efficiency and financial sustainability. The presence of positive correlation implies that efficiency
and sustainability increases with ICT usage level. We support the findings of Hishigsuren, (2006) and
Washington, (2006) that in order for Microfinance institutions to enjoy the benefits of ICT usage, they
need to have a large number of clients and increase their level of ICT investment. We find high ICT usage
in commercial banks and regional bank as compared to NGOs and NBFIs. This indicates that most of the
traditional microfinance institutions in Tanzania have not invested much on ICT to enable them realize
the benefit of it (Table 5).
Table 5: Result Summary by Microfinance Institution Status
Infrastructure
Knowledge/skills
Uses
ICT index
Efficiency
Score
OSS
Commercial
banks
2.7299
3.9630
2.9583
3.2171
0.8096
0.9482
Regional banks
2.1391
3.1006
1.9513
2.3970
0.8075
0.6935
MFC
1.7787
2.4000
2.0583
2.0790
0.9012
1.0068
NGOs
2.2003
2.8500
1.9756
2.3420
0.9650
1.1192
NBFI
1.8597
2.7444
1.8750
2.1597
0.7813
0.6977
5. CONCLUSION
The aim of the study was to examine the impact of ICT adoption and usage on efficiency and
financial sustainability of microfinance institutions in Tanzania. The study used DEA model to estimate
efficiency scores, and operating self sufficiency ratio as the proxy for financial sustainability. The level of
ICT usage was estimated basing on the data collected using a questionnaire. A total of 29 microfinance
firms were included in the sample which included 9 commercial banks, 6 regional banks, 3 Microfinance
companies, 3 NBFIs and 8 NGOs.
The findings of the study show positive but weak association between ICT usage with efficiency and
financial sustainability. The coefficient of determination results suggests that, most of variations of
efficiency and financial sustainability about their mean are explained by other factors other than ICT
usage as the coefficients obtained were low. Regression results show positive but insignificant cause and
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effect relationship between ICT usage with efficiency and financial sustainability in Microfinance
Institutions reviewed. The study concludes that ICT usage has a positive impact on efficiency and
sustainability, but depends on the level of ICT investment in the institutions. Institutions which invest
more on ICT, experiences improved efficiency and sustainability compared to those with low ICT
investments.
The study recommends that, in order to realize the benefit of ICT usage, Microfinance institutions in
Tanzania should increase ICT investment levels, increase client base and their overall uses. The higher
level usage of ICT will results into improved efficiency, sustainability as well as their overall
performance. To the government of Tanzania, the study recommends the review the country’s ICT policy
in order to create a better and supportive ICT policy than the current one. The better ICT policy will guide
and direct Microfinance institutions on implementations of ICT in their firm for the better saving of the
poor client and country economic growth.
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BIOGRAPHY
Interdisciplinary Studies on Information Technology and Business (ISITB)
Volume 1, Issue 1: January -March 2013 (67 - 82)
82
ISSN 1923-970X (Print) - ISSN 1923-9718 (On-line) - ISSN 1923-9726 (CD-ROM), Copyright NAISIT 2013
Mr. Erasmus Fabian Kipesha is a PhD candidate in Financial Management (Final year) at Dongbei
University of Finance and Economics in China. He holds a Masters degree in Business Administration
from University of Dar-es-salaam in 2009, Bachelor degree in Accounting and Finance from Mzumbe
University in 2005 and, He is a certified public accountant CPA (T) by the National Board of Accountants
and Auditors in Tanzania. He is also a Lecturer at Mzumbe University, School of Business, department of
Accounting and Finance. Mr. Kipesha is interest in different areas of accounting and finance he conducts
research and consultancies in these areas as well as in government accounting and financial management,
strategic financial management and management control systems. Currently he is finalizing his PhD thesis
on Performance of Microfinance institutions in Tanzania. So far, Mr. Kipesha has published two research
reports and eight articles in a peer reviewed journals.
... These institutions provide financial services to the poor who are excluded by formal financial systems, to enable them sustain living and engage in economic activity through entrepreneurial activity and small business which together have impacts on country economic developments (Kipesha, 2013). ...
... The results are agreed by Kipesha (2013) who studied the impact of ICT adoption on efficiency and financial sustainability of MFI's in Tanzania. He found the correlation results imply ICT usage has a positive impact on efficiency and sustainability as they move in the same direction. ...
Article
The study analyzed the impact of ICT utilization on the financial performance of microfinance institutions inRwanda with case study of Réseau Interdiocesain de microfinance (RIM) Ltd undertaken within 5 years (2011-2015). The study adopted the use of descriptive survey using both qualitative and quantitative methods for a totalsample size of 132. Purporsive and simple random simpling was used for this purpose. Primary and Secondary datawere collected and thene analyzed using SPSS version 16.00. The study found that ICT has been introduced and usedabout 5 years and above. The study found that ICT impact firstly on financial sustainability and profitability (65.8%),secondly on financial efficiency and productivity (23.7) and finally on portfolio quality (5.3%). ICT utilization havea high influence to the RIM Ltd.’s financial performance compared to the previous situation.The correlation results imply that ICT usage has a positive impact on financial sustainability and profitability as theymove in the same direction (R=0.502). The strength of the impact was found to be low due to the low investments inICT among microfinance institutions.
... For instance, Jawadi et al. (2010) found the positive impact of ICT adoption on expansion and performance of microfinance services in Europe. Kipesha (2013) studied the effect of ICT in Microfinance operations, cost management in Tanzania. Some other studies also identified ICT adoption can improve information accessibility and provides effective ways to deliver customer services (Hengst & Sol, 2001;Melville et al., 2004). ...
... For instance, Jawadi et al. (2010) found the positive impact of ICT adoption on expansion and performance of microfinance services in Europe. Kipesha (2013) studied the effect of ICT in Microfinance operations, cost management in Tanzania. Some other studies also identified ICT adoption can improve information accessibility and provides effective ways to deliver customer services (Hengst & Sol, 2001;Melville et al., 2004). ...
... In giving their perspective on the use and management of ICTs in microfinance in Bangladesh, Mia and Ramage (2014) suggest that if properly adapted and used, ICTs have the potential to increase operational performance, grow organizations, alleviate poverty, and decrease interest rates for MFIs. However, the study of Kipesha (2013) of ICTs utilization by MFIs inTanzania shows that while there may be a positive impact on efficiency and financial sustainability when MFIs adopt ICTs, this is short lived without increasing ICT investments, expanding customer base, and increasing ICT usage level. Further, without a proper and supportive ICT policy by the government, the perceived benefits of ICTs to MFIs and their clients cannot be realized. ...
Article
We investigate whether information and communication technologies (ICTs) can be used to achieve social good as they are implemented in microfinance institutions (MFIs) in Zambia. We find through information gathered from interviews with MFI officials that their organizations are focused primarily on survival in a competitive financial climate. Additionally, our findings reveal that most MFI business within the context of ICTs only promotes social good by default and not by design. This means that social good is not a primary mover or something that MFIs plan to achieve when they integrate ICTs into their business models but that it happens because of the assumed mission of primarily serving the informal sector small business and microbusiness and the low‐income clients.
... On the other hand, some researchers such as Saatcioglu et al. (2001), Malhotra and Singh (2009), Wondimu (2013) and Okibo and Wario (2014) contend that despite e banking has a benefit; it also has major pitfalls that can harm BP and lessen service quality. Thus even though e banking provides new opportunities to banks, but it also raises numerous challenges as the innovation of IT applications; the blearing of market boundaries; the breaking of industrial barriers; the potential of fraud on customers' account; the entry of new competitors; the development of new business models; the staff challenges; and the great direct and indirect costs such as training costs, installations costs, and service costs (Saatcioglu et al., 2001;Kipesha, 2013;Ibrahim and Muhammad, 2013;Okibo and Wario, 2014;Thalassinos et al., 2013a;Vovchenko et al., 2017). These circumstances will slash the profitability of banks. ...
Article
Previous research on the relationship between investment in information and communication technology (ICT) and bank performance (BP) have been obviously disagreeing. This is because some posit a positive relationship and some argue to the contrary. Thus, this research contribute to the ongoing debate regarding the contribution of ICT to BP by looking at the impact of ICT investments on the performance of a sample of 50 Lebanese banks for the period 2009-2016. Secondary data were collected from the annual report for each bank. CAMELS model is chosen as the dependent variable, while ICT investments (adoption of automated teller machines (ATM), mobile banking (MB), internet banking (IB), telephone banking (TB), debit and credit cards (BC) and point of sale (POS) terminals) is the independent variable. Using multivariate OLS model, the results demonstrate that the application ATM, IB, TB and POS terminals does not significantly affect banks performance. However, the application of MB and offering BC to customers significantly and directly affects performance of banks in Lebanon. Thus, banks in Lebanon are recommended to find a way to increase interest of Lebanese consumers in MB applications and attract more customers by offering them a range of BC tailored to fit their preferences. © 2018 International Strategic Management Association. All Rights Reserved.
Article
Full-text available
There is a growing requirement in recent times for stronger cost control and a demand for higher returns in businesses (Milis and Mercken, 2003). The use of Information and communication technology (ICT) to gain competitive advantage has become a key strategic issue amongst organizations in the fast globalizing environment (Kakabadse et al., 2005), as ICT plays a strategic role in the management of organizations. Rastrict and Corner (2010); Lin and Lin (2006) amongst others reveal that there is a growing support for the positive relationship between ICT and its benefits. Thus, it implies that ICT brings about organizational advantage. This paper is drawn from on-going PhD research and it intends to deepen our understanding on the impact of implementing ICT in organizations using two companies in Nigeria as case study examples. It further identifies the reasons behind the companies' decisions to adopt ICT and the benefits associated with the use of ICT.
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A good higher education system is required for overall prosperity of a nation. A tremendous growth in the higher education sector had made the administration of higher education institutions complex. Many researches reveal that the integration of ICT helps to reduce the complexity and enhance the overall administration of higher education. This study has been undertaken to identify the various functional areas to which ICT is deployed for information administration in higher education institutions and to find the current extent of usage of ICT in all these functional areas pertaining to Information administration. The various factors that contribute to these functional areas were identified. A theoretical model was derived and validated. Index Terms—General administration, Information administration, Information and Communication Technology (ICT), Student administration, Staff administration, Path Model.
Article
The significant changes detected in both the social and the economic environments have evidenced the key importance of innovation processes in firms' survival. However, the innovation must be considered as one of the main aspects that defines the business culture instead of a mere activity oriented to the development of new products or the adaptation of the existing ones to new market demands (Castells, 2001). Also, those firms that use information and communication technologies (ICTs) in an intensive way are the most innovative and adapted ones to the competitive environment. This fact constitutes a relevant proof of the importance of innovation as a key aspect of competitiveness, and the ICTs as one of the key factors to achieve it (Vilaseca and Torrent, 2005). Innovation is currently considered one of the hottest research topics for both academics and practitioners. However, the research in the innovation field has become a challenging task since it has been very difficult to offer an accurate definition of innovation that fits precisely into the business environment. In addition, there is not only one research stream within this vast field. The investigation on innovation has basically evolved along two main research lines: the type of innovation to be developed, and the risk associated to the innovation processes (Storey and Easingwood, 1996; Oldenboom and Abratt, 2000; Langerak et al., 2004). Both aspects are intrinsically related since sometimes the risk intensity is highly influenced by the type of innovation developed and the perceived risk often impacts the type of innovation. Bearing in mind the importance of this topic, the present study attempts to make interesting contributions to this field by analyzing the importance of innovation on firm's success. With this objective in mind, we first review the concept of innovation from different points of view. Secondly, we analyze the determinant factors of new economic and social environments, placing special emphasis on the role of ICT on the new business situation. Finally, we focus on the study of the effects that ICT adoption has fostered in the business scene. The review of the relevant literature evidences how the intensive use of ICT by firms encourages innovation as well as cultural, organizational, strategic and tactical changes. The conclusions of this work provide interesting managerial implications for both product and brand managers in developing innovation processes. © Ana Isabel Jiménez-Zarco, Maria Pilar Martinez-Ruiz, Maria Rosa Llamas-Alonso, 2006.
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A nonlinear (nonconvex) programming model provides a new definition of efficiency for use in evaluating activities of not-for-profit entities participating in public programs. A scalar measure of the efficiency of each participating unit is thereby provided, along with methods for objectively determining weights by reference to the observational data for the multiple outputs and multiple inputs that characterize such programs. Equivalences are established to ordinary linear programming models for effecting computations. The duals to these linear programming models provide a new way for estimating extremal relations from observational data. Connections between engineering and economic approaches to efficiency are delineated along with new interpretations and ways of using them in evaluating and controlling managerial behavior in public programs.
Chapter
Fifteen Years ago it would have been hard to find, within academia, any courses or departments using the title 'information systems' yet today business schools and management departments have professors, lecturers and courses in IS. The question of a separate existence for IS is not merely an academia one, but also a practical one at this time. Like many academics we believe that the engine which drives good teaching is research and one difficulty for IS teaching is funding their research programme. This chapter sets the scene for the text comprising chapters from leading academics in the field which dealing with the problems and opportunities of an emerging discipline. the chapters highlight the different schools of thought that makes up this emerging discipline
Article
In this research we investigated the extent to which Microfinance Institutions (MFIs) use ICT to deliver business services and train staff. We performed literature review on ICT for business service delivery and staff skills development in MFIs. We next investigated the actual ICT usage by MFIs in Uganda with focus on ICT literacy, business applications, and planning. We used questionnaires to gather data from Microfinance institutions covering three districts of Uganda. The data collected from the survey was analyzed quantitatively and qualitatively. The analysis results indicate that the usage of ICT in microfinance business is still low. The usage is fair in business process automation but none in professional skills enhancement through e-learning. Based on our findings from this research we conclude that there is need to experiment e-learning for professional skills development in Ugandan microfinance institutions. Furthermore, research is needed to test the level of computer technology acceptance in microfinance business.