Assessing the impact of information and communication technologies on the performance of microfinance institutions in Niger

Abstract

This paper assesses the impact of information and communication technologies (ICTs) on the performance of microfinance institutions (MFIs) in Niger, West Africa. MFIs play a pivotal role in improving financial inclusion in Niger because the majority of the country’s poor live in rural areas, with only limited and costly access to formal financial services. Using an unbalanced panel of 23 MFIs spanning 2005–2013, single-step generalized moments method (GMM) estimations are run to appraise whether ICT investments improve the financial and the social performance of MFIs. The results show a positive relationship between investments in ICTs and MFIs’ financial performance. Investing more in technologies enables managers to reduce the frequency of operational errors, increase the speed of task execution, decrease operating costs, and increase the likelihood of higher financial profits. The findings also reveal a positive effect of institutional affiliation on the financial performance of MFIs. Namely, MFIs affiliated with a network and investing in ICTs tend to perform better. The impact of ICT investments on the social performance of MFIs is rather weak. From a policy perspective, developing ICT infrastructure can yield substantial performance dividends and should remain a top developmental priority in Niger.

Résumé

Cet article évalue l’impact des technologies de l’information et de la communication (TIC) sur la performance des institutions de microfinance (IMF) au Niger, Afrique de l’Ouest. Les IMF jouent un rôle central dans l’amélioration de l’inclusion financière au Niger parce que la majorité des pauvres du pays vivent dans des zones rurales et n’ont qu’un accès limité et coûteux aux services financiers formels. À partir d’un panel non équilibré de 23 IMF couvrant la période 2005–2013, des estimations sont réalisées selon la méthode des moments généralisés (MMG) en une seule étape pour vérifier si les investissements dans les TIC améliorent la performance financière et sociale des IMF. Les résultats montrent un rapport positif entre les investissements dans les TIC et les performances financières des IMF. Investir davantage dans les technologies permet aux managers de réduire la fréquence des erreurs opérationnelles, d’accélérer l’exécution des tâches, de diminuer les coûts d’exploitation et d’augmenter la probabilité de profits financiers plus élevés. Les résultats révèlent aussi un effet positif de l’affiliation institutionnelle sur les performances financières des IMF. En effet, les IMF affiliées à un réseau et investissant dans les TIC ont tendance à être plus performantes. L’impact des investissements dans les TIC sur la performance sociale des IMF est plutôt faible. D’un point de vue politique, le développement de l’infrastructure des TIC peut produire des dividendes substantiels en termes de performance et devrait demeurer une priorité absolue du développement au Niger.

Keywords:

• Microfinance
• financial performance
• social performance
• information and communication technologies
• network
• Niger

MOTS-CLÉS:

• Microfinance
• performance financière
• performance sociale
• technologies de l’information et de la communication
• Niger

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Table 6 reports test results showing that regression errors are heteroscedastic.

2 Data are expressed in BCEAO FCFA francs (XOF).

3 The coverage, expressed in terms of number of clients, is computed as 100*(exp (7.6902)-1) = 218,581.

4 We thank a referee for suggesting this test.

Additional information

Notes on contributors

Hadizatou Ali

Hadizatou Ali is a researcher in Economics and Finance. Her main research interests are macroeconomic and development economics, in particular the impact of international aid in developing countries, education, and migration. She also investigates issues on financial inclusion, microfinance, digital technologies, regulation and gender. Her research on the role of microfinance institutions in the fight against food insecurity contributed to the United Nations for Development Programme report for Africa. She also teaches management courses. She benefited from research grants from the African Economics Research Consortium (AERC) and the Council for the Development of Social Science Research in Africa (CODESRIA).

Jean-Pierre Gueyié

Jean-Pierre Gueyié is a full professor in the School of Management, University of Quebec in Montreal. His research interests are on financial institutions management (including banks, financial cooperatives and microfinance institutions), financial risk management, corporate governance, development economics and alternative investments. He has published several articles and has edited books in several areas in finance.

Cédric Okou

Cédric Okou is a financial economist. His research interests include macro-finance, asset and derivatives pricing, risk management, development economics and econometrics.