CHAPTER ONE

1.0 INTRODUCTION

          ICT can be a strategic tool in making Microfinance Institutions (MFIs) more efficient and effective. MFIs can reach more people in a more economic way by implementing the right Management Information System (MIS). While a few MFIs are making good use of technology, the majority are facing difficulties in getting the right solution.

Microfinance is considered to be an effective tool in alleviating poverty by increasing income of poor households and reducing their vulnerabilities. Today, when the majority of the world’s population is living below subsistence level, more than 3,000 organizations are providing microfinance services to millions of the world’s poor. Yet most of the poor still have little or no access to financial services. Microfinance institutions (MFIs) have reached a mere 70 million out of 2 billion poor people. The task of reaching such a big number is a major challenge.

With a population of around 150 million people, Nigeria has big potential for microfinance. 70% of the population lives in rural areas. Despite achieving a growth rate of 6-7% in recent years, poverty has increased by 2%, showing low penetration of economic benefit to the lower income sector. Unemployment rate stands over 8% and per capita income is US$652. The financial sector of the country comprises some 35 scheduled banks. These banks have an outstanding portfolio of US$20.7 billion against 3.2 million accounts and they hold deposits worth US$33.3 billion in 28.5 million deposit accounts. More than 50% of the deposits and portfolio are concentrated in three main banks with large branch networks.

          Banks are financial institutions set up to provide customers with some specific functions such as receiving deposits from customers for savings and onward money transfer as well as credit services. Banks as defined by Business dictionary.com is

An establishment authorized by a government to accept deposits, pay interest, clear checks, make loans, act as an intermediary in financial transactions, and provide other financial services to its customers.

More so, banks are into safekeeping transaction and group management purposes with the intention of making profits and delivering best but affordable services to their customers.

These customers may either be individuals or institutional and serving them in the more convenient, efficient and fastest possible way is the aim of all banks so as to derive utmost benefit from them. In the 1990's through to early 2000’s, the number of accounts holders in the various banks in Nigeria both rural and commercial banks were very few. The use of manual banking system made it uneasy to serve customers in a more diverse ways as urgent demand for information coupled with reconciliation of financial statements of the various institutional customers were very hard to come by. But with the introduction of Computerized Accounting System, the more tedious banking functions through the use of manual banking system has considerably been softened.

In Nigeria, the use of computerized Accounting System in the various banks is drastically changing the way banking activities are being organised. Electronic commerce is now regarded as the panacea for the new commercial revolution that is taken place in the advance world which in one way or the other lacking in Nigeria, and by offering reasonable banking products and services to customers, Nigerian banks had to adopt computerized Accounting System. Moreover, considering the recent improvement in the country’s infrastructure then one can say that the banks had nothing to say but toforcibly adopt this technology in order for them to improve their services for their customers.

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