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The effects of the computerized accounting system (CAS) on the growth of microfinance institutions (MFI's) in Bamenda Municipality

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Computerized Accounting Systems will always remain a great factor in the determination of the growth of microfinance institutions. Given the importance of micro finance institutions in our society especially in poverty alleviation, it is worthwhile that this sector of the economy is given keen attention. This study, “The Effects of Computerized Accounting Systems on the Growth of Microfinance Institutions in the Bamenda Municipality” has as main objective “To find out the effects of Computerized Accounting Systems on the growth of Microfinance Institutions”. In this study, the descriptive survey design is used with the main instrument for data collection being the questionnaires. Data collected using these closed ended questionnaires was coded and logged in the computer using Statistical Package for Social Science (SPSS V 20.0), with graphs drawn with the use of Statistical Package for Social Science (SPSS V 20.0) and Micro Soft Excel 2016. The sample of the study consisted of 56 managerial staff of credit unions within the Bamenda municipality taken through convenience sampling. The variable factored in the multivariable regression model, analysis of variance and percentages. Data collected was analyzed using descriptive statistics and regression analysis in particular using the Statistical Package for Social Sciences software. Computerized Accounting Systems had a positive relationship with growth in micro finances. From the model, the beta coefficient for the Computerized Accounting Systems is 1.277. With the help of the t statistic, there is a significant relationship as shown by a P-Value of 0.001 which is less than the alpha of 0.05 at the 95% confidence interval. Thus, there is a positive and significant relationship between Computerized Accounting Systems and growth in micro finances (β1 = 1.277, t = 3.614, p> 0.001). As a result of the findings, the regression Y= 0.475+ 1.277X1+ 0. 132 X2 was established with Y being the dependent variable (Growth of micro finances), X1 is Computerized Accounting Systems, and X2 is Manual Accounting Systems. The data findings analyzed show that growth is greatly influenced by the computerized accounting systems. The study recommends that MFIs of all forms should try to implement a Computerized accounting System given its effects to their growth and in turn the importance of MFIs to the society.



  • Background


The advancements in information technology have eventually led to the introduction of computerized accounting systems in displacement of manual accounting system in corporate reporting to help produce relevant and faithful representative financial reports for both management and external users for decision making (Greuning, 2006) The advent of Technologies across the globe has altered the norms of the game and expectations of the new mode of economics activities. The norms of inter and transnational trading changed dramatically to admit the increasing number of financial transactions and trade-related activities that take place via the Internet and technologically assisted tools (Sam, Hoshino and Tashir, 2012).


(Yinus & Oladejo, 2014) Observed that the basic indicator of modern day development in any society is the level of technological advancement and how it has contributed to Economy growth of a country. Hence, from the aforementioned statement, one is able to identify how significant computerized accounting system is to the growth of Microfinance institutions. The many advantages from the use of these systems have led many to conclude that Computerized Accounting Systems in corporate reporting is the engine of growth in Microfinance Institutions. This was evidence with numerous advantages of computerized accounting over manual accounting system. (Porter & Millar, 1985) mentioned in this competitive advantage, over the years, information technology had played a major role, changing the nature of business who knows its effects.


With the introduction of new technology and more user-friendly software, computerized accounting system (CAS) appears to reduce the problems in book record keeping practice. Furthermore, with the new and rapid financial information, new updates and changes will be available for others in making decisions; these reliable decisions will in effect increase the performance of Microfinance Institutions and thus leading to their growth.


(Smith and Wiggins, 1991) argued that the use of Accounting Information could be linked to the success or failure of Microfinance Institutions. To survive, Microfinance Institutions need updated, accurate and timely accounting information (Lohman, 2000; Amidu and Abor,


2005). 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). In modern theories of growth and operational performance, technology innovation has taken the Centre stage through the introduction of PC-based Accounting Systems, both the computer hardware and the accounting software creating an opportunity for Microfinance Institutions to adopt computerized accounting system. These Computerized Accounting System include “Quick Books” and “le Sage” for big organizations and “Alpha” for MFIs mostly Credit Unions which is the focus of this study.


(Omolehinws, 2009) defines accounting as the collection and recording of financial data about an organization whether in the private or in the public sector and analyzing the data so collected to suit the decision that needs to be taken and reporting the relevant information in a summary form to the user in a form that is meaningful to him or her.


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 creation of the Grameen bank in Bangladesh by Muhamadou Yunus because of high capacity of the innovation of the informal sector contributed to the growth of microfinance in the world.


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.


(Robinson, 2001) in his work titled; “The Microfinance Revolution” defines microfinance as small-scale financial services offered to people into small business in both rural and urban societies. He went further to point that the goal of microfinance institutions is to improve living standards or get rid of poverty through the provision of small business financing and consumer credit or bring financial services to poor and vulnerable people in the society.


In Cameroon, the first micro finance institution was created in 1963 at Njinikom in the North- West Region of Cameroon by a Roman Catholic priest; Anthony Jansen, a priest from Holland. The relative success of noticed in this industry lead to the creation of CamCCUL in 1968 by 34 credit unions that were already in existence (Zengue , 2006).


From the main purpose of Microfinance Institutions which is to provide financial and non- financial services to the poor and those excluded from the traditional banking system, we see that there is a need for computerized accounting system to help the Microfinance institutions ameliorate the provision of these services to the targeted group. Despite the main aim of MFI to provide the aforementioned services, they also need to engage in activities that will generate income to ensure sustainability.


1.2  Statement of the Problem


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.


In advanced countries, the management of Financial Management Information System (FMIS) requires considerable management skills which of course they possess. This is not the case with developing countries Cameroon not being and exception. Most often than not, top managers in most MFIs are not computer literate and the staff as well. Many MFIs do not have qualified accountants and have problems preparing accurate and timely financial reports, which is one of their major requirements.


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 CAIS. 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, this 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 FMIS. As a result, this study is aimed at studying how the implementation of these CAIS has increase the quality of financial statements and performance thus leading to the growth of MFIs, as a result seek to answer the following questions.


1.3Research Questions

  • Main Research Question


What are the effects of Computerized Accounting Systems (CAS) on the growth of Microfinance Institutions (MFIs)?


1.3.2    Specific Research Questions

  1. What are the benefits of Computerized Accounting Systems (CAS) over the Manual Accounting System (MAS)?
  2. How has Computerized Accounting Systems influence the Quality of Financial Reporting in Microfinance Institutions?
  3. How has    Computerized   Accounting   Systems    influence    the   Performance    of Microfinance Institutions?


1.4   Objectives of the Study

  • Main Objective of the Study


To find out the effects of Computerized Accounting Systems on the growth of Microfinance Institutions.


1.4.2  Specific Objectives of the Study

  1. To determine the benefits of Computerized Accounting Systems over the Manual Accounting
  2. To examine whether Computerized Accounting Systems have influence the Quality of Financial Reporting in Microfinance
  3. To examine    whether   Computerized   Accounting   Systems    have   influence    the Performance of Microfinance


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