CHAPTER ONE

INTRODUCTION

1.1 Background of the study

In the present information and knowledge era, knowledge has become a key resource that enhances organizational performance. Faced with competition and increasing dynamic environments, organizations are beginning to realize that there is a vast and largely untapped asset diffused around the organization in the form of knowledge (Gupta et al, 2000). (Nonaka 1994) defines knowledge as a justified belief that increases an entities capacity for effective action, which can be further divides knowledge into tacit or explicit knowledge. Where Tacit knowledge focuses on the knowledge of a person, which comes from experience that is shaped by the beliefs and values of the person, explicit knowledge is a representation of tacit knowledge in the form of an artifact. An artifact can be a document, an image or a video. Knowledge management has gained much prominence in recent years and knowledge assets gives organizations a competitive edge in the market ensuring organizational effectiveness, efficiency and performance. (Davenport and Prusak 1998) defined knowledge management as the processes which support knowledge collection, sharing and dissemination.

Modern businesses world embraces the economy of knowledge to improve corporate performance. It is the responsibility of an organization to have knowledge management on how to improve both their internal and external competitiveness (Tseng and Lee, 2014). To stay competitive and to survive, there is a need to continuously modify strategies so as to achieve the needs of the business. (Pearlson, Saunders, and Galletta, 2016). Organizations need a different kind of knowledge strategy for different kind of situations. According to (Bishwas 2014), strategies regarding the management of crisis, knowledge and performance of organization are dependent on each other but are not independent. The best transformation from tacit knowledge to explicit knowledge enables organization to use the knowledge in finding the solution and to utilize any new chance and support organizational learning (Bishwas, 2014). 

Knowledge management has its roots deeply grained in the study of knowledge which has been deeply contested issue since ancient times (Turban et al., 2007). Over the last decade, interest in finding the best practices of knowledge management in the industry has surged dramatically due to rapid globalization. Although the importance of knowledge to organizations were often discussed in the past, the knowledge-based-view of the firm brought new meaning to the value of organizational knowledge by identifying it as an important resource comparable to the need of capital investment for an organization (Conner & Prahalad 1996; Grant 1996; Spender 1996).

Hackett (2000) noted that best practices simply indicates the process of turning tacit knowledge into explicit knowledge which is part of the continuous cycle of learning, sharing, refection, and use of that knowledge. However, most knowledge management efforts have focused mainly on improving efficiency by sharing of internal best practices. It is also important to understand that intense level formalization of the best way could hinder the progress of implementing creativity and innovative thinking among the employees.

In Malaysia, knowledge management had been identified as a key factor in ensuring organizational success (Gan, Ryan and Gururajan, 2006). However, there are few empirical studies available that explores the relationship between the structures of a firm’s knowledge management practices and its effect on the firm employee’s innovative performance.

The expectations for knowledge management were that it would be able to improve growth and innovation, productivity and efficiency reflected in cost savings, customer relationships, decision making, innovation, corporate agility, rapid development of new product lines, and management decision making (Pollard, 2005) as cited in (Cranfield 2011). This gives organizations a competitive advantage which results to organizational success. Ever since their inception, higher education institutions have been occupied with the fundamental elements of what we now call knowledge management, for instance the creation, collection, preservation and dissemination of knowledge. Organizations and Universities are no longer living in isolation. They have their place in society, and they have a responsibility to society, which expects something in return.

In Sub Sahara Africa, knowledge management is a key source of competitive advantage for the organization as it enables organizations to acquire skills and understanding through experimenting and process (Yiu and Law, 2014). The major concern is, for effective implementation of knowledge management in organizations it is crucial for organizations to identify and understand the essential practices that will influence the success of knowledge management initiatives as these may have profound effects on the organization performance (Yiu and Law, 2014). These techniques are the main thrust in completing learning administration, they do not simply broad information in the organization by invigorating the formation of information, yet they likewise persuade the members of group to impart their insight and encounters to each other, enabling authoritative information to develop simultaneously and efficiently (Muthee, 2014).

To stay competitive and to survive, there is a need to continuously modify so as to achieve the needs of the business and this regards to the knowledge management growth for last few years (Pearlson, and Galletta, 2016). Organizations need a different kind of knowledge strategy for different kind of situations. According to (Bishwas 2014), strategies regarding the management of crisis, knowledge and performance of organization. The best transformation from tacit knowledge to explicit knowledge enables that organization to use the knowledge in finding the solution and to utilize any new chance and support organizational learning (Bishwas, 2014). Organization that works as if their environment is still stable (old world of business), not only are the losing the competitive advantage, but also, they are facing massive financial losses. They also lose knowledge of best practice in a specific area of operations because of a critical employee’s departure and finally they lose in the relationship with a key client or supplier or a sponsor by the departure of key individuals (Muthee, 2014).

Knowledge management is a key source of competitive advantage for the organization as it enables organizations in acquiring skilled and understanding through experiencing and process (Yiu and Law 2014). The major concern however is, for effective implementation of knowledge management in organizations it is crucial for organizations to identify and understand the essential practices that will influence the success of knowledge management initiative as these may have profound effects on the organization performance (Yiu & Law, 2014). These techniques are the main thrust in completing learning administration, they do not simply broad information in the organization by invigorating the formation of information, yet they likewise persuade the members of group to impart their insight and encounters to each other, enabling authorities information to develop simultaneously and efficiently (Muthee, 2014).

In Cameroon, the performance of microfinance institutions has been decreasing since the 2017 fiscal year but, in 2019, the trend changed slightly. This is revealed in the background note published, on April 1, by the Ministry of Finance in the framework of its coming three bond issuances. At end-December 2019, the note informs, the total equity of the microfinance sector was XAF2, 122.9 billion (representing 32.8% of commercial banks equity). Deposits stood at XAF90.09 billion (18.5% of deposits recorded by banks) and credits reached XAF839.14 billion (22.90% of the credits granted by banks by that period). On December 31, 2019, 418 accredited microfinance institutions were operating in Cameroon. Of those institutions, 88.04 % were first-class (123 private and 245 organized as cooperative), 11.24 % were second-class (47 institutions) and 0.72 % third class.

1.2 Statement of Problem    

Knowledge has in the recent past been recognized as the organizations most important asset in human resource (Gituma, 2017). (Dlamini 2017) indicated that with knowledge being a very complicated asset, it had received special treatment from organizations management, unlike other resources. Despite the rising popularity of knowledge management across different organizations of the world, in Cameroon, knowledge management has not received much attention from the small and medium-sized enterprises. In this regard, this industry has not been able to address the problems of consumer knowledge and feedback adequately.

Knowledge management has been said to be a key resource for organizations to gain a competitive advantage. However, to what extent do knowledge management practices affect organizational performance specifically case of Micro Finance Institutions in Bamenda? Reviewed literature reveals a number of knowledge management practices in micro finance institutions.    Empirical literature reveals a number of knowledge management practices in microfinance institution (Wamundila 2008), identified knowledge management practices at University of Zambia which included knowledge transfer practices, knowledge acquisition practices and knowledge retention practices.  Studies by Yusuf and (Wanjau 2014), (Muthee 2014), and (Sawe 2017) are among the few studies that have sought to investigate the knowledge management and its effect on the wellbeing of the key institutions in Kenya.

Despite the knowledge management related challenges facing microfinance sector in Cameroon, there exist too few scholarly works in Cameroon relating to it. It is to this concern that; this study sought to fill the gap by investigating the effect of knowledge management practices on organizational performance with micro-finance institution in Bamenda as the case study.

1.3 Research Questions

1.3.1 Main Research Question

The main research question of the study is:

What are the effects of knowledge management practices on the organization performance at micro finance institutions Bamenda?

1.3.2 Specific research questions

1. i) To what extent does knowledge acquisition affect the performance of microfinance institutions in Bamenda?
2. ii) What is the effect of knowledge conversion on the performance of micro finance institutions in Bamenda?

iii) How does knowledge protection affect the performance of micro finance institutions in Bamenda?

1. iv) What is the effect of knowledge application on the performance of micro finance institutions in Bamenda?

1.4 Research Objectives

1.4.1 Main Research Objective

The main objective of this study is to assess the effect of knowledge management on the performance of micro finance institutions in Bamenda.

1.4.2 Specific Objectives

1. i) To establish the effect of knowledge acquisition on the performance of micro finance institutions in Bamenda.
2. ii) To determine the effect of knowledge conversion on the performance of micro finance institutions in Bamenda.

iii) To find out the effect of knowledge protection on the performance of micro finance institutions in Bamenda.

1. iv) To establish the effect of knowledge application on the performance of micro finance institutions in Bamenda.