THE EFFECTS OF INFORMATION COMMUNICATION TECHNOLOGY (ICT) ON THE PERFORMANCE OF COMMERCIAL BANKS IN BUEA. CASE STUDY: ECOBANK BUEA
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The use of Information Communication Technology devices has become a customary practice in the banking industry. Information technology has led to improve performance, speed and accuracy and generally boosted customer base and revenues of commercial banks. It was in line with these that the study aims at examining the effect of ICT on the performance of commercial banks in Cameroon. The study takes F.BC
S.A Buea as a ease study. Using five variables in a six-section questionnaire of 20 of l.ikcrt-lype and open ended questions, bankers per the responses returned, assert 100% that ICT has a positive impact on bank performance. This has been confirmed by a proper analysis of the data collected, a further affirmation that ICT has positively impacted.accounting systems in financial institutions. To this end. it is recommended that banks and financial institutions at large should invest in ICT tools to boost and foster operations, legislation established and enforced and customisation strictly controlled to
1.1 Background to the Study
Commercial banks are crucial financial institutions within any economy, playing a vital role in its growth. The concept of banking dates back to ancient civilizations like Assyria, Sumeria, and Greece, where wealthy merchants provided loans to farmers and traders. Later, during the Roman Empire, temple lenders accepted deposits and engaged in money exchange. Archaeological findings in China and India also indicate early money lending activities.
In the 14th century, Renaissance Italy dominated global banking, with renowned institutions like the Medici Bank (established in 1397) and Banca Monte dei Paschi di Siena (the world’s oldest operational bank since 1472). These banks expanded throughout Europe. Banking innovations in Amsterdam during the 17th century and in London since the 18th century further fueled the industry’s growth.
Throughout history, banking significantly contributed to the economic prosperity of regions where it was practiced, such as the Holy Roman Empire and 14th-century Renaissance Italy.
Cameroon, a sub-Saharan country in Central Africa, has a diverse landscape and a population of approximately 20 million people. It relies on primary agricultural products for exports, including crude oil, coffee, cocoa, rubber, banana, and timber. While the country’s economic growth initially thrived at around 7% during the first 20 years of independence, it currently stands at 2.8%. Cameroon uses the Central African CFA franc (FCFA) as its currency and has faced economic challenges, including currency devaluation in 1994.
Formal banking in Cameroon is relatively recent, with its roots traced back to the late colonial era. The first bank was established before independence, but small societies practiced primitive banking before modern banks emerged. Thrift and loan societies played a role in this early financial system.
Furthermore, technological innovations, such as credit and debit cards, have significantly impacted the banking sector. Credit cards, which were first introduced in the 1940s, have gained widespread use, particularly among younger consumers. This has influenced the demand for physical currency, especially in developed nations.
In Africa, the banking activities date way back to the pre-colonial period before the mid-19th century where the indigenes gathered into ROSCAs (Rotating Savings and Credit Associations) to save and lend to each other. The African countries referred to this type of banking in different ways; it was called Susu in Ghana, tontines in Francophone Africa, gamias in llgypt. njangis in Cameroon among others. This practice was common in many parts of Africa by the early ]9,h century and most of the countries had between 50% and 90% of their adult population actively participating in this practice.
As a result of colonialism, the banking industry in Africa took a new turn as the major colonial masters of the African continent established the colonial banks in their colonies to introduce the more modern systems of banking that existed in the western world. There existed the Bank of British West Africa which was created in 1893 in I.agos, Nigeria to provide banking services to the British West African colonies. It had branches across these colonies including in Ghana, Sierra Leone. Gambia and Cameroon. There existed also the Banque d’Afrique Occidental which took care of the banking needs of the French African colonies which was established in Dakar, Senegal, in 1901.
The introduction of the colonial banks in the African banking industry marked the beginning of ICT incorporated banking in the African continent as these banks used telecommunication and computing in their banking operations and provided more efficient banking services than the traditional systems existent before colonial banking in Africa.
Recently. Africa’s banking sectors are rapidly entering into ICT with most of the large banks found across Africa like Lcobank. Zenith Bank, Standard Chartered Bank and UBA providing digitalised systems for customers and issuing Debit and Credit cards that enable customers to enjoy banking services at the comfort of their homes. In South Africa, a study by Moody’s analytics for Visa concluded that the use of Visa Cards had increased the country’s GDP by $7.8 billion. A wider study by them also showed that Africa lias the highest potential to expand its GDP with increased use of Visa cards. It revealed that a 1% increase in usage of electronic payments could produce on average $104 billion in consumption.
In Cameroon, before the late 19″ century, like most other African countries, there existed only the traditional styles of.banking like the ‘njangi houses’ which were the major sources of credit and areas for saving funds. Institutional banking came in the late 19lh century where the colonial masters established banks in Cameroon. There was the BBWA (British Bank for West Africa) for the English part and the BAO (Banque dc I’Afrique Occidentale) for the Trench part of Cameroon. After Cameroon gained its independence, the banking sector gradually evolved with the entrance of banks like BICEC set up on March 14th, 1997 which was first existent as BIC1C before and during the economic crises of the 80s and 90s, HCOBANK established in Cameroon in 2001. AFRILAND First Bank established in Cameroon in 1987 under the name CCF.I (Joint Savings and Investment Fund) with headquarters in Douala, and others like SBC, UBA, Atlantic Bank, BGFI Bank, SCB. Citibank. UBC. SGBC and CBC. The banking sector lias grown significantly overtime with the present existence of 15 stable banks in Cameroon with most of them having branches across the country.
I he use of 1C’T significantly began with the colonial banks present in Cameroon back in the 19′ century. This intensified in the 1980s after Cameroon’s independence and this was when some of the world’s largest banks had evolved in ICT significantly, showing the possibility for young Cameroon banks to introduce new technology in their operations and benefit from greater efficiency in the midst of competition. Hence, the use of personal computers (PCs) and telecommunication became common, Cameroonian banks began to use them in back- office operations and later tellers used them to serve clients. Today, virtually all banks in Cameroon including Ixobank, BICEC, SGBC, Afriland and many more, have actively integrated ICT in their banking operations.
1.2 Problem Statement
‘I‘here has been a rapid growth in the customer base of the commercial banks in Cameroon including Fcobnnk Cameroon over the years. This simply implies massive growth in deposits, loans, w ithdrawals and other transactions. Commercial banks under the regulation of COBAC must keep proper records of all their transactions for tax and regulatory purposes. Due to this rapid growth in the scale of the banks’ transactions, it became difficult for the manual systems to handle these large transaction volumes.
Firstly, recording transactions manually take a relatively long period of time. This makes the time taken to complete transactions much longer and the execution rate of bank operations slow. It is also very tedious when the volume of the operations starts increasing.
> In addition, there is arithmetic inaccuracy resulting from human weaknesses and fatigue -in manual transaction processing. During the mathematical computation of analytical information, manual computation poses the inherent risk of making errors as efficiency per time diminishes with longer ho