CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Accounting information is a part and parcel of today’s life which is necessary to understand the accurate financial situation of the organization and used as the basis of making any decisions. Since strategic decisions have long-term effect on the business and therefore it is important to analyze accounting information for making strategic decisions. Accounting information helps managers understanding their tasks more clearly and reducing uncertainty before making their decisions Chong, (1996). Accounting is sometimes referred to as a means to an end, with the ending being the decision that is helped by the availability of accounting information Arneld and Hope, (2016). Accounting systems can aid in decision making providing information relevant to the decision and to the decision maker Gray, (1996). Effective and efficient accounting information plays a central role in management decision making Trimisiu Tunji, (2012).

Microfinance is increasingly becoming an important asset class for investors Beisland, Mersland, & Strom, (2015). Globally, the growth in the microfinance market continues, and soon the microfinance sector is expected to become the world’s largest banking market in terms of the number of customers Beisland et al., (2015). During the last three decades, microfinance has captured the interest of both academics and policy makers. The industry has been growing at a significant rate and in several countries it has become an important sub-sector of the formal financial markets Assefa, Hermes, & Meesters, (2010).

Microfinance institutions came as solution to help not only women but also other people with low income. Microfinance institutions help these clients to have access to some basic needs like medical insurance, to pay school fees to their children, improve housing status and then increase clients’ income and saving. To improve microfinance institutions’ operations, accounting system has become the key activity and provides information on their performance. According to Jain (2000), accounting system is considered as process of recording business transaction or data daily microfinance transactions from its clients. Accounting today is thus more of an information system showing performance rather than a mere recording system.

Accounting information system is a combination of people, equipment, policies, and procedures that work together to collect data and transform it into useful information Emeka Nwokeji, (2012). It is a formal mechanism for gathering, organizing and communicating accounting information about an organization’s activities. It is a system that provides people with either data or information relating to an organization’s operation to support the activities of employees, owners, customers, and other key people in the organization’s environment by effectively supplying information to authorized people in a timely manner Salehi, Rostami, & Mogadam, (2010).

Without accounting information, MFIs can’t know what is going on with the organization as far as decision making is concern. Accounting information also helps to take long term investment decisions by giving the proper view of present condition and would be condition of the organization. Though top management needs accounting information in every step to take any sorts of strategic decisions but no significant study were found to be conducted on the role of accounting information in decisions making in micro financial institutions (MFIs). Therefore, the study was initiated to evaluate the effect of accounting information on effective decision making in micro financial institutions (MFI) in Bamenda.

1.2 Statement of the Problem

MFIs Compels to carry out a great deal of book-keeping records based on accounting principles and information provided with the perpetual increase in the number of members involved in the activities of MFI, it has become necessary to devise a systematic mean in handling the resultant book-keeping and accounting activities. MFIs are face with the challenges of proper and adequate accounting information for management decision. According to this report, improper attention to the accounting system and handling of accounting information has given birth to the poor planning and decision making, poor organization and control of business activities and in administrative activities of the organization. This therefore has prompted the researcher to conduct further investigation on the effect of accounting information on decision making on MFIs in Bamenda.

1.3 Research Questions

1.3.1 Main Research Question

What is the effect of accounting information on effective decision making in micro finance institutions in Bamenda?

1.3.2 Specific Research Questions

• What is the effect of comparability of accounting information on effective decision making in micro finance institutions Bamenda?
• What is the effect of reliability of accounting information on effective decision making in micro finance institutions Bamenda?
• What is the effect of relevance of accounting information on effective decision making in micro finance institutions Bamenda?

1.4 Research Objective

1.4.1 Main Research Objective

To examine the effect of accounting information on effective decision making in micro finance institutions Bamenda.

1.4.2 Specific Research Objectives

• To evaluate the effect of comparability of accounting information on effective decision making in micro finance institutions Bamenda.
• To examine the effect of reliability of accounting information on effective decision making in micro finance institutions
• To examine the effect of relevance of accounting information on effective decision making in micro finance institutions Bamenda.