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Enterprise Development and Microfinance Vol. 27 No. 2 June 2016

Challenges faced by MFIs in adopting management information systems during their growth phase: the case of Togo MAWULI K. COUCHORO

Mawuli K. Couchoro ([email protected]) is Senior Lecturer at the Centre de Recherche et de Formation en Economie et Gestion (CERFEG), Université de Lomé, Togo.

The growing urgency to achieve financial sustainability has led some microfinance institutions (MFIs) in Africa to invest in management information system (MIS). These systems offer the potential to reduce transactions costs and increase efficiency. However, we know little about the opportunities and the difficulties faced by MFIs during their growth phase to adopt and manage MIS. The paper examines qualitative and quantitative data on the capacity of MFIs in Togo to effectively implement MIS. Results suggest that MFIs face various difficulties resulting from insufficient support from MIS designers; limited network data consolidation; irregular system updates that disturb the proper functioning of the system;; and difficulties to manage data in accordance with the legal framework and instability of the system. We find also that if the MIS responds appropriately to the need for MFIs information processing, the result is a better outcome in terms of operating cost reduction, portfolio risk reduction, and operating profit. Findings suggest that full involvement of the Professional Association of MFIs in Togo is recommended to centralize and share the information system problems faced in the entire sector microfinance in Togo. This can be done through the organization of training workshops.

Keywords: microfinance, management information systems, growth phase

Microfinance is the provision of financial services, such as credit, savings, insurance, remittances, and guarantees, to the poor and the financially excluded. it is seen as a solution to social problems (social and financial exclusion, poverty) and a tool to improve the quality of life for lower income families (Karlan and Goldberg, 2011; ashta et al., 2014). today, the microfinance sector is characterized not only by strong competition, because of commercialization, but also by high demand for financial services. as a result, microfinance institutions (Mfis) manage a large amount of data‚ essential for their operations, from basic information on customers to detailed analysis of transactions and portfolio performance. Moreover, a growing number of countries are adopting microfinance legislation and regulations (Lux-Development, 2010; couchoro, 2015). consequently, the adoption of a sophisticated management information system (Mis) in order to better manage portfolios (loan, saving, and risk) in accordance with the legal framework becomes a requirement and a way to improve financial services to the poor communities in the world (ashta, 2011; Khan, 2011; ashta et al., 2015).

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according to the World Bank (2003) report on information systems, and the Millennium Development Goals, information systems reduce transaction costs per customer and enable financial institutions to provide small loans and services to a large number of rural customers. in addition, Mfis face considerable internal information challenges in terms of processing, storing, and sharing, and they have been reluctant to introduce comprehensive Mis (estapé-Debreuil, 2015). this suggests that in the case of Bangladesh, the main reason for introducing Mis in Mfis in Bangladesh has been operational efficiency rather than to improve their capability to reach and serve a broader customer segment (Mia, 2005; estapé- Debreuil, 2015). sophisticated Miss are supposed to collect and disseminate timely information to managers and thus improve their ability to process and analyse information (couchoro, 2015; Davenport, 1998). thus Miss should also be viewed as a strategic necessity that prevents competitive disadvantage in rapidly changing business environments (Goh and Kauffman, 2013). in order to achieve these strategic objectives, organizations are adopting more sophisticated and comprehensive Mis (naranjo-Gil, 2009; choe, 1996). Unfortunately, many Mfis, even those which have reached maturity, consider that a basis information system, such as manual accounting systems or spreadsheets, is sufficient (couchoro, 2015). they judge that it is useless to invest enormous effort and financial resources to improve their information system (ashta, 2011; Khan, 2011). in fact, these tools are easy to develop and update. however their utility is limited to institutions with a large volume of loans and saving portfolios. on the other hand a system which handles a low volume of activity correctly may collapse under the pressure of growing information needs when an Mfi grows (couchoro, 2015; csfi, 2008). an institution that is not well prepared for rapid growth jeopardizes its financial health and quality.

Moreover, the development partners and donors, who provide grants to Mfis, sometimes also require Miss to be in place as they promote better quality reporting and strengthen the institutional capacity of the Mfi. Besides, Mfis find that they have the potential to reach more customers than they have the capacity (Khan, 2011), mostly due to a shortage of capital required and technology to reach these people. to illustrate this, we can take the example of accessing funding from private formal financial institutions that comes with multiple preconditions; one of which is the need for information transparency. one of the most efficient ways of having any level of information transparency is through the use of strong information technology systems. thus, transparency mixed with the intrinsic need from Mfis to be efficient in their operations, require Mfis to adopt robust Mis tools to automate and streamline their operations.

for many institutions today, methodological issues, staff training, and even resource mobilization are fundamental for their growth. an institution that implements a system capable of producing timely, accurate, and comprehensive information about its operations, will be in a better position to manage its financial performance, as well as adapt to the needs of its customers. an information system with automated management then becomes the best solution.

conversely, even when they have financial means, many Mfis have great difficulty implementing Mis during their growth phase. the problem was so acute in the West african economic Monetary Zone (WaeMZ) that it has been decided to support Mfis

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to acquire automated Miss that are technically reliable, suitable, and in accordance with the legal framework instead of imposing a one-size-fits-all approach to the entire sector. in this regard, the Lux-Development (2010) studies explain the necessary and sufficient requirements that an Mis must meet in order to be consistent with the legal framework. But this approach can only succeed if the difficulties faced by Mfis in terms of Mis are well known. thus, this approach does not take into account the fundamental problem that poses the following question: what are the difficulties that Mfis face in terms of Mis during their growth phase?

the objective of this paper is to highlight those difficulties through the experiences related to the use of an Mis during the growth phase of Mfis. to do this, we will initially present, through a literature review, the challenges in implementing an Mis for Mfis in the growth phase. then the case of Mfis in togo will be presented as well as some proposed solutions before concluding.

Literature review and methodology

in general, all enterprises, whether the sector is finance, engineering services, information, or technology‚ have one thing in common: they need to be managed, planned, staffed, organized, monitored, controlled, and evaluated (couchoro, 2015; caniël and Bakens, 2012). to this end, managers need to make fast decisions, allocate scarce resources efficiently, and have a clear focus. the problems faced by enterprises can be termed resource conflicts in the long run (caniël and Bakens, 2012; Maylor et al., 2006). inadequate balancing of scarce resources often results in additional pressure on the organization, which leads to poor quality of information and longer lead times of projects (elonen and artto, 2003). Managers may become overwhelmed by the amount of information that is available for decision making, losing sight of relevant information or being unaware of inaccuracies. in general, poor information quality leads to poor decision making (engwall and Jerbrant, 2003). the use of management information systems is considered advantageous to managers because it leads to more timely decision making. thus, for the Mfis, an innovation which leads to the use of an information system becomes a need but at the same time it is a considerable challenge. Mis challenges faced by Mfis can be divided into two types: first, challenges faced before the decision to adopt the Mis; and second, challenges faced after the decision to adopt the Mis (couchoro, 2015).

Growth phase and challenges before the decision to adopt an MIS

Before adopting an automated Mis, Mfis face some challenges. Microfinance practitioners from all over the world mentioned the high cost as a major barrier in acquiring and implementing a Mis (csfi, 2008; Khan, 2011). it is often said that the majority of the costs are concentrated in the maintenance of the system, rather than building or implementing it (Quadri et al., 2011). two major issues in the maintenance phase are considered to have the potential to increase costs for the organization (couchoro, 2015; csfi, 2008; Khan, 2011). first, an Mis may face fatal errors and fail due to hardware or software crashes or malfunctions (couchoro, 2015; csfi, 2008). second, there can be changes in the requirements of the organization

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during the implementation or post-implementation of the Mis. these changes basically arise because of the change in the process model, the growth of the organi- zation, or a change in the strategic focus (couchoro, 2015). thus, based on the objective of cost minimization, Mfis are ready to operate without information technology tools that are often seen as non-productive and highly expensive. in most cases, even if an Mfi can afford the cost of automation, it doesn’t consider this as a necessary expenditure and thus looks for external assistance, such as donor funding or grants, to meet this expense (Khan, 2011). another challenge is, on the one hand, the lack of skilled labour within the Mfi to implement the automation project and on the other hand, the lack of explicit support coming from senior managers who have difficulties in understanding the Mis.

if the chief executive is either skeptical about adopting technology or feels that it is being imposed upon the Mfi by an external factor (perhaps as pre-requisite for a loan), then the implementation process becomes complex, tedious and often heads for failure (Khan, 2011).

the decision to adopt an Mis is also an issue which depends on the willingness of the leaders of the Mfis who must be aware of the challenges. Based on the assessment of the available means, managers must be able to appreciate the scope of the Mis in terms of the Mfis’ performance and impact. if leaders are not able to adequately diagnose the future perspectives of the institution and the needs for information technology, they will surely be reluctant to adopt a change (rivard and Lapointe, 2012). an effective Mis can only work and sustain within an Mfi if the staff at all levels accept it and are aware of its potential.

Growth phase and challenges after the decision to adopt an MIS

after the decision to adopt an automated Mis, the rest of the procedure is not without difficulties (couchoro, 2015). the software selection process is not part of the routine operations of an Mfi. few institutions have the needed expertise to monitor such a project; this makes the choice of Mis relatively difficult (neXUs, 2000). employees might have the skills, but not enough time to develop an information system. in such a case, advice from an external consultant can help avoid major pitfalls.

in terms of automation process implementation, Mfis face the following diffi- culties (Waterfield and ramsing, 1998): first, executives, field staff, and members of the board of directors, as well as managers of information systems, are rarely aware of all the needs of their organization to accurately identify the information needs. even when they are aware of the necessity to monitor key indicators, these are not always defined well enough to allow them to do the job. they can also ignore some of the key monitoring indicators while systems are often constructed in an arbitrary and piecemeal manner without fully assessing the needs. a second category of diffi- culties relates to communication between senior managers and specialized Mis staff. in general, senior managers and the staff of information systems within a financial institution do not speak the same language (couchoro, 2015). the existing workload of employees and the tendency to compartmentalize operations exacerbate this

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problem. even if they show the best intentions, employees may misinterpret the wishes of the leaders. finally, problems arise from a lack of realistic evaluation of what information technology can offer. in a world dominated by computers, users are often surprised not to have the desired information when they want it.

investigation of needs is a fundamental step towards a successful Mis (couchoro, 2015; csfi, 2008; Khan, 2011; ashta, 2011). it is therefore paramount that Mfis that are adopting Mis understand their own needs deeply. it is only after this that the institution can make an initial assessment of the various options, including the improvement and linking of existing systems and the purchase of ‘turnkey’ systems. for this reason, it is recommended that the following steps be taken (couchoro, 2015; Waterfield and ramsing, 1998): 1) establish a working group; 2) draw up a list of needs; 3) determine what is feasible; 4) evaluate the possibilities; and 5) present the conclusions of the working group. the question would then be whether the Mfi has difficulties in identifying its needs. concerning the estab- lishment of a working group, leaders must ensure that all actors are represented and that the project objectives are communicated to the staff. the members of the team should include operations staff, head office staff, and representatives from the board of directors (Khan, 2011). Leaders must therefore go beyond the decision to adopt the Mis by taking an active role in the achievement of the project.

in addition, it is one thing to have an automated information system; another thing is to make a good choice at the time of adoption. choosing an automated information system to meet Mfi business growth challenges is not an easy task. this choice is sometimes subject to great difficulties, and a wrong solution can lead to worse situations than a manual system. Difficulty arises from the dilemma between developing a customized system and purchasing existing software (Laydeker, 2002; neXUs, 2000).

Moreover, Mis implementation during the growth phase can face enormous resistance (rivard and Lapointe, 2012). indeed, since the second half of the 20th century, information technology implementation has often faced user resistance to innovations, including electronic data-processing equipment (Mann and Williams, 1960), Mis, decision support systems (alter, 1980), and enterprise systems (Kitto and higgins, 2010). Manifestations of resistance represent the core element in terms of resistance to information technology, which is generally defined as a set of behaviours enacted by users to manifest some discontent with the imple- mentation of a new information system (rivard and Lapointe, 2012). there is a broad range of manifestations, from apathy (Keen 1981; Lee and clark 1997) to sabotage (Day, 2000; Moreno 1999) and destructive behaviour (ferneley and sobreperez, 2006), including denial (Kim and Kankanhalli 2009), persistence of former behaviour (Kim and Kankanhalli 2009), and the formation of coalitions (Lapointe and rivard, 2005). is user resistance to information technology imple- mentation good or bad? the answer is neither affirmative nor negative (rivard and Lapointe, 2012; hirschheim and newman, 1988; Marakas and hornik, 1996; Markus, 1983). some manifestations are mild or weak forms of resistance, others are strong but not destructive behaviours, while still others seek to create disruptions and may even be destructive. at times, it is a means for users to convey the existence of problems with the information technology (it) or with its effects;

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in such instances, resistance is functional (rivard and Lapointe, 2012). at other times, however, resistance ‘can be destructive, because it generates conflict and ill-will’ (Markus, 1983). furthermore, when resistance prevents the adoption of an it that could benefit the organization, it is dysfunctional.

Lastly, the Mis cannot solve all business or operational problems of an Mfi. some of these problems may be related to a lack of staff training and internal controls. Users’ satisfaction is undoubtedly a significant factor in the success of an Mis (rigaud, 1984). the Mfi management which knows why it wants to change its Mis must set specific and measurable objectives for the new system and thus estimate the degree of satisfaction that comes from the Mis.

Togo case study methodology and data sources

Based on the structure of the literature review, our methodology aims to highlight, in terms of Mis, the profile of the microfinance sector in togo. thus, it is structured around an empirical investigation focused on both qualitative and quantitative studies. the six key points which held our attention, as far as difficulties faced by Mifs are concerned, are divided into two parts: 1) diffi- culties faced before the adoption of Mis (cost as a barrier to adopt an Mis, decision to adopt an Mis); and 2) those faced after the decision to adopt an Mis (identification of the needs of the Mfi, the involvement of all actors, the choice of an Mis: a dilemma between an internal system and software purchase, and degree of satisfaction with the Mis). in addition, this methodology aims to point out the impact of those difficulties on the performance of the Mis and on the financial performance of Mfis in togo. thus, we use correlations and covariance statistics in order to highlight not only the link between the variables representing the difficulties of adopting the Mis and the response of the latter to rapid information processing needs of Mfis, but also the link between the variable representing the quick response to the needs of information processing and those that represent performance indicators of Mfis such as: operations profit, portfolio risk reduction, and operation cost reduction.

the first step of the empirical investigation is done through interviews with leaders or the managers of the biggest Mfi in togo, faîtière des Unités coopératives d’Épargne et de crédit du togo (fUcec), which itself accounts for over 50 per cent of the market share of the microfinance sector in togo and hold over 43 years of experience. this step helps to highlight the advantages and difficulties faced by this large institution as far as Mis is concerned. the interviews also enabled us to prepare the second part of the empirical study as the answers helped us to determine our sample for the survey and to design the study questionnaire. the second step of the empirical study consists of a survey based on a research questionnaire administered to a sample of 30 Mfis which account for over 90 per cent of the market share of legally registered Mfis in togo (in november and December 2013). We have selected Mfis that have at least 5 years of experience and continuous growth in terms of number of customers. We used epidata and stata software for data processing and analyses.

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Experiences of MFIs in Togo in terms of MIS

The microfinance environment in Togo

from a monetary perspective, the incidence of poverty is high in togo, a country of 6.5 million inhabitants. the country poverty rate was 58.7 per cent in 2011, with a significant discrepancy between rural and urban areas where it is, respectively, 73.4 per cent and 44.7 per cent at the same period. as a result, access to the formal banking system is low (less than 15 per cent of the active population hold a bank account), reflecting the very important role Mfis need to play in enhancing access to financial services. according to data reported by cellule d’appui et de soutien aux institutions et Mutuelles d’epargne et de crédit (cas-iMec), the microfinance sector in togo had more than 1.2 million customers (20 per cent of the population), with customer deposits close to €177 m by 2012. this represents 15 per cent of the total deposits in the country. the total microcredit portfolio was nearly €155 m in 2012. By 2006, microfinance represented 16 per cent of total credit in the country. figure 1 shows the growth of microfinance, particularly since 2005.

the largest Mfis in the country are fUcec and WaGes which account for about 50 per cent and 16 per cent market share, respectively.

fUcec, WaGes, and other Mfis have been successful and have taken a portion of the market that was held by traditional banks (couchoro, 2015). With this success, the implementation of an Mis could help them meet their growth needs.

as indicated in table 1, fUcec and WaGes are larger than some banks in togo in terms of loans disbursed and savings collected. fUcec is almost as large as some of the biggest banks in the country.

200

100

19 95

200

100

19 95

20 00

20 05

20 10

20 12

Gross loan portfolio (€ m)

20 00

20 05

20 10

20 12

Deposits (€ m)

Figure 1 Growth of microfinance in Togo Source: CASI-MEC-Togo

Table 1 Data of FUCEC and WAGES

Number of customers Volume of saving (€) Volume of loan (€)

FUCEC 2011 40,000 916,000 717,500

WAGES 2012 16,000 76,000 229,000

Source: CASI-MEC-Togo

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the need to secure the savings of poor people, especially in the West african economic and Monetary Union (WaeMU), led to actions by the legislator of the WaeMU (ashta et al., 2010). it is the central Bank of the eight countries in the WaeMU, Bceao (Banque centrale des États de l’afrique de l’ouest), that regulates the microfinance sector for all eight countries. in 1994, the Bceao proposed a bill on microfinance, which became law on 14 July 1995, better known as the parMec law, requiring accreditation of Mfis. the law was ratified by these countries over a series of years (by togo in 1996). the objective was to support microfinance to take off.

While regulation is passed by the WaeMU, the promotion and the ratification of the industry was done within each country. as a result, each country passes its own decree of ratification of the law (the decrees are almost identical, except for the date and the name of the institutions). in togo, the department which controls and supervises the microfinance sector, within the Ministry of economy and finance, is called casiMec. the 1995 (parMec) law was modified in 2007 and the bill has been ratified by many of the members including togo (in 2011). an example of the difference between the two pieces of legislation is that the decision to certify an association will now be made at the level of the commission bancaire (at the level of the Bceao) and not at the level of the cas-iMec in togo. another feature is that the previous law provided tacit authorization to start a Mfi if written approval was not provided in six months. as opposed to this, the new law provides for tacit refusal if the written approval is not provided in six months. thus, togo moved from a period of enabling legislation to a new era of supervisory legislation.

FUCEC’s experience of MIS: interview findings

regarding the choice between internal development of an automated system and the purchase of software, fUcec said they faced a big difficulty. at first, the institution made the choice to develop an internal system as a response to its growth and not prior to a growth strategy. nevertheless, the experience failed, although the conventional procedures, including involvement at the board level, had been followed. as far as needs identification is concerned, fUcec ranged its level of difficulties at four on a scale of ten. this first failure led fUcec to acquire a new Mis named sYsDesaf.

sYsDesaf is the choice of the six major Mfi networks in West africa. it is considered as the most efficient solution compared with the existing systems on the market at the time of its implementation in fUcec-toGo network in november 2003. according to fUcec’s managers, sYsDesaf offers lot of flexibility and security. it effectively supports all transactions. its reports allow proactive management of the entire loan portfolio in compliance with international standards. it has a database capable of managing a wide range of financial products. it takes into account the needs of Mfis, including best practices for adminis- tration of the loan portfolio, the financial accounting, management accounts, and customer information. it facilitates a balance between business demands and the active responsibility of social balance. fUcec is currently using the fourth version

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of the software and for its managers the sYsDesaf is suitable for both extensive branch networks and small sites with a single branch. the main benefits offered by the sYsDesaf include: 1) increased productivity by automating all daily activities, reducing manual processes and the risk of human error; 2) increased ability to control business through portfolio, productivity, late payments, and hundreds of other reports; and 3) cost reduction and better use of staff time, thanks to the use of a Windows interface integrating Ms office tools.

nevertheless, fUcec managers highlighted the real weaknesses of sYsDesaf. the Mis cannot edit financial statements in accordance with regulation. fUcec is therefore obliged to acquire another system called strateGo decision, which entails additional costs. Up to version 4.3, sYsDesaf did not permit overtime accounts, which requires accountants to spend the night of 31 December – 1 January at work, for the end of year closing. the system does not allocate operating/ income statement, once the year is closed. in addition, the sYsDesaf had bugs and corrections of these bugs led to several versions (the 2, 3, 4, 4.2, and 4.3). however, other bugs still remain. in addition, the system is heavy and costly for smaller Mfis because its starting cost is €857 per computer, with €286 annual support fees. apart from the cost of the software, one also has to purchase the Microsoft sQL server.

Moreover, the system is composed of several integrated modules: customer management, accounts, and credits, which sometimes lead to unexplained accounting discrepancies.

in addition, the designer of the system is in costa rica and only speaks spanish and english. the users are in francophone countries in africa. this raises linguistic and distance issues. the DiD (Développement international Desjardins), a technical partner from canada, serves as an intermediary between the french speaking users and the systems designers. Given that the circuit is long, with multiple instances of decisions, it takes time to make changes. Despite all this, fUcec expressed a 70 per cent satisfaction rate with their current Mis.

Empirical results of challenges before the decision to adopt an MIS

the survey results show that 21 out of 30 Mfis have their headquarters in the capital city, Lomé. the average number of beneficiaries per Mfi is 36,900 people with a minimum of 520 and a maximum of 550,000.

Most Mfis have adopted an Mis (21 Mfis) in response to the growth of their institution. conversely, nine Mfis have adopted an Mis prior to a growth strategy.

out of the 30 Mfis surveyed, 26 said they were supported by the management team in the adoption of an automated Mis against four Mfis for which the management team has been reluctant to support the project (table 2). the results reflect the importance that the majority of management teams give to the adoption of an automated Mis. thus, management teams are generally aware of the significance of Mis in the management of their institutions. More than half (16 Mfis) of Mfis surveyed find that the cost is a negative factor for the project, while for the 14 other Mfis, the cost is not at all a barrier to the Mis adoption. the average maintenance cost is approximately €3,000. as far as the human resources are concerned, 19 Mfis

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find that it is not a barrier to the Mis project success. however for the11 other Mfis, the lack of adequate human resources played a negative role in the outcome of the project. these results show that the majority of Mfis have human resources that understand the challenges related to the adoption of an Mis.

Empirical results of challenges after the decision to adopt an MIS

after the decision to adopt an automated Mis is made, Mfis face other difficulties. on a scale of 1 to 10, Mfis estimated these difficulties to be 4.4, with a maximum of 10. for 14 of those Mfis, on a scale of 1 to 10, the difficulties exceeded 5, while for 16 of them the difficulties are lower than or equal to 5 (table 3). With regard to needs identification, 23 Mfis said that they did identify needs whereas 7 of them said they did not. By not doing so, these Mfis take the risk of making the choice of an Mis that could not meet the real needs of the organization. over the 30 Mfis surveyed, 24 said that all actors (executives, field staff, members of the board of directors, and managers of information systems) are involved in the Mis instal- lation process, while six Mfis said that only some of the actors were involved in the process. one can understand through these figures that the adoption of an Mis and its success are a major challenge for most Mfis. for 19 out of 30 Mfis surveyed, the choice between the software purchase and the development of an internal system was made without difficulty. But for the 11 other Mfis, that choice was a real dilemma. Most Mfis (24) chose a software purchase, while six of them opted for development of an internal system. Within the 24 Mfis that opted for software purchase, 4 had changed their Mis at least once. among the six Mfis that opted for internal system development, only one had changed its Mis.

Mfis face tremendous difficulties in the use of an Mis. Mfis that opted for software purchase complain that they are not really supported by the designers. thus, they are on their own for the control of the software. some Mfis point out the problem of

Table 2 Situation before adopting the MIS

Yes No

The cost has been an obstacle to the success of the project

16 14

Competent human resources has been an obstacle to the success of the project

11 19

Supported the project

Was reluctant to support the project

Did not care about the project

In adopting the MIS, the management team:

26 4 0

A response to growth

Prior to a growth strategy

The adoption of the MIS was: 21 09

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data consolidation for their network. in other cases, it is the update that disturbs the proper functioning of the system. some Mfis complain about the lack of measures to secure the restoration of the databases. other Mfis point out the difficulties of managing the data in accordance with the legal framework.

the system sometimes does not allow the monitoring of credit through an age wise balance analysis. in addition, the accounting was only partly undertaken by the software. in some systems, the flaw was its instability: for the information requested, the database could give two different versions if it was drawn from two different computers or on the same computer at different times. Moreover, sometimes the supplier does not have a systematic procedure for the treatment of the difficulties faced.

Despite these difficulties, 21 out of the 30 surveyed Mfis estimated their degree of satisfaction at more than 70 per cent; 8 Mfis evaluated their satisfaction between 50 and 70 per cent; only one Mfi estimated its degree of satisfaction as less than 50 per cent.

regarding the capacity of the Mis to respond quickly to the need for information processing, 20 Mfis found that it is moderate, while for eight Mfis the capacity is significant (table 4). only one Mfi found that the capacity of the Mis to respond to the need is very weak. these observations confirm the important role the Mis plays in Mfi management.

With regard to donor support (for example, subsidies), more than half of Mfis (16 Mfis) surveyed said they had never received such support. this is due to the transparency provided by the installation of the Mis. four out of 14 Mfis thought that this support is weak, while seven and three, respectively, found it moderate and significant.

Table 3 Situation after adopting the MIS

Yes No

Identification of needs 23

All actors were involved 25 05

The institution experienced a dilemma over the internal system or software purchase

11 19

The MFIs changed MIS since the adoption

5 25

<5 ≥5

Estimation of difficulties faced on a scale of 1 to 10

16 14

<50% 50–70% 70–90% 90–100%

Satisfaction degree on a scale of 100 1 8 14 7

The purchase of software The development of an internal system

First information system choice 24 6

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in terms of Mis and operating cost reduction, 25 Mfis found that this contri- bution is positive, while five Mfis thought that the Mis does not contribute to operating cost reduction. on other hand, 29 of the 30 Mfis found that the Mis contributes to the improvement of their operating profits.

there is a positive link between the variable representing the quick response to the needs for information processing and the following variables (table 5): operations profit, portfolio risk reduction, and operation cost reduction. this implies that if the Mis responds appropriately to the need for Mfi information processing, the result is a better outcome in terms of operating cost reduction, portfolio risk reduction, and operating profit. since the number of Mfi customers is expected to grow, effective

Table 4 Impacts of MIS adoption

No effect Yes but weakly

Yes but moderately

Yes significantly

Does the MIS respond quickly to the need for information processing?

01 01 20 08

Support received from donor because of the transparency provided by MIS

16 04 07 03

MIS and operating cost reduction 05 05 13 07

MIS and portfolio risk reduction – 2 14 14

MIS and improvement of operating profit 01 01 16 12

Table 5 Correlation of performance variables

Does the MIS respond

quickly to the need for information processing?

Support received

from donors thanks to

MIS through transparency

MIS and operating

cost reduction

MIS and portfolio

risk reduction

MIS and improvement of operating

results

Does the MIS respond quickly to the need for information processing?

1.0000

Support received from donor thanks to MIS through transparency

0.1677 1.0000

MIS and operating cost reduction

0.3527* 0.3585* 1.0000

MIS and portfolio risk reduction

0.3694* 0.2275 0.2408 1.0000

MIS and improvement of operating profit

0.5327* 0.1736 0.2135 0.2673 1.0000

*z-statistics significance at 10%

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and prompt data processing is essential. therefore a sophisticated Mis is a very important factor for the sustainability of the microfinance programme.

the data show (at 10 per cent level of significance) that there is no correlation between the variables representing the difficulties before the decision to adopt the Mis and the response of the latter to rapid information processing needs of Mfis. however there is a link between the rapid response of an Mis and some variables concerning the difficulties encountered after the decision to adopt the Mis (table 6). indeed, there is a link between the degree of satisfaction with the Mis and the dilemma related to the choice between a software purchase and an internal system. We can say that if an Mfi does not have a problem in terms of initial choice, it knows what it really needs and its choice is made accordingly. When an Mfi has difficulties identifying its needs, it hesitates about the choice of an Mis, a sign of immaturity which can adversely affect the performance of the selected Mis. to better meet the needs of the Mfis in terms of information processing, the choice between a software purchase and an internal system is crucial.

Conclusion and recommendation

Miss are becoming increasingly important for the microfinance industry in togo, as a number of Mfis have reached maturity. indeed, as Mfis grow and begin to adopt a commercial approach, Mfi managers note that they lose their ability to maintain direct contact with field activities. they realize that it is difficult to manage their portfolio and financial transactions without better information. We have highlighted the advantages and especially the difficulties faced by some of the largest Mfis while implementing their Mis although they followed the traditional process recommended for the installation of an Mis.

two kinds of difficulties can be observed as far as Mis implementation is concerned: those encountered before the decision to adopt the Mis, and those faced after the decision to adopt Mis. We noticed that the adoption of an Mis and its success are the major challenges for most of the Mfis management teams. they are generally aware of the scope of the Mis in the management of their institutions. the cost is also one of the major barriers to the decision of adopting a Mis. empirical results show that most Mfis overcome the challenges without great difficulties before the decision to adopt an Mis, because of support by the management team. although Mfis overcome challenges (identification, human resources competence) after the decision to adopt an Mis, they face tremendous difficulties in the use of the Mis such as lack of support by the designers; problem of data consolidation for their network; updates that disturb the proper functioning of the system; lack of measures to secure the restoration of the databases; difficulties in managing the data in accordance with the legal framework; and instability of the system. the fact that more than two-thirds of the Mfis surveyed said that they are at least 70 per cent satisfied with the Mis they are currently using, indicates that several problems have been fixed; but further improvement is necessary and possible.

128 M.K. COUCHORO

June 2016 Enterprise Development and Microfinance Vol. 27 No. 2

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MFI ADOPTION OF MANAGMENT INFORMATION SYSTEMS IN TOGO 129

Enterprise Development and Microfinance Vol. 27 No. 2 June 2016

in order to more easily overcome the challenges of adopting an Mis, we recommend full involvement of the professional association of Mfis in togo (apiM-togo). the latter must support all of its members before and after the decision to adopt an Mis. Given that each Mfi has its own problems with the information system, there is a need to create a central resource to identify the information system problems faced by Mfis. this will pave the ways for the sharing of information concerning these problems not only with the designers, but also with Mfis that are starting an Mis adoption process. this would help Mfis in their future choices.

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