EFFECT OF ICT ON FINANCIAL PERFORMANCE

Abstract

This study assessed the Impact of Information and Communication Technology on the performance of Jaiz bank plc. The study used bank annual data over the period 2010 to 2014. This study applied simple percentage Models in its analysis. The results from the Taro yamen test revealed that Random Effects Model was appropriate. The findings of the study indicated that the use of ICT in the banking industry in Nigeria increases return on equity. It has also been found an inverse relationship between additional sustained investment in ICT and efficiency which the study recommends among other thing shifting more emphasis on policies that will boost efficient/proper utilization of ICT equipment rather than additional investments.

CHAPTER ONE

IMPACT OF ICT ON FINANCIAL PERFORMANCE ON JAIZ BANK PLC
INTRODUCTION

1.0 Background of the study

Through Information and Communication Technology (ICT) services available to Jaiz bank, it can now give its customers a unified access to manage their personal financial information. The adoption of Information and Communication Technology (ICT) by this bank has increased its operational efficiencies, reduced cost through high utilization rates in the ICT environment to ensure compliance with changing time and to gain competitive advantage (Haggani A.B, 2003).Methods of handling financial services has to change from old manual transactions and data processing to a faster, more effective and highly efficient electronic data processing and Electronic Fund Transfer (EFT) i.e. deposits, withdrawals, bills-pay-in, purchases of draft, value for cheques, third party transactions, fund transfer and inquiries are all done electronically within seconds. The adoption of Information and Communication Technology (ICT) has also helped Jaiz bank to keep the pace with the changing customers’

needs and market dynamics and create a competitive differentiation in products and services (Haggani A.B, 2003).The complex nature of the banking system, its products and services have made it necessary for banks to embrace this change as quick as possible since this medium of banking has proven to be very efficient in most countries of the world( for example America)and Nigeria is no exception. Indeed, the impact of ICT has reshaped the banking industry in terms of providing and delivering effective and efficient services to enhance its operations and general performance and does not need to be overemphasized. This research work is therefore an attempt to determine the impact of Information and Communication Technology (ICT) on Nigerian Banks performance.

1.2 Statement of the Problem

Information and Communication Technology has become a potential tool in the hands of banks for sustainable growth it has revolutionized the banking industry and its advent has enormously increased the capabilities of banks as they are now able to offer wider range of services to their customers including internet banking, mobile banking and ATMs and also expand at a great rate. Despite all these innovations in the banking industry, it is highly disheartening to observe that banks are still finding it difficult to meet the expectations of their customers as regards service delivery. It is not uncommon to find long queues in banks, delay in attending to customers, inability to properly sort out Transaction and customer’s general loss of trust in banks. Also, banks have found it increasingly difficult to meet up with its overall objectives and responsibilities and Jaiz bank is not an exception. These has therefore led to the interest of the researcher to examine the impact of Information and Communication Technology (ICT) on Nigerian Banks’ performance and also to realize the significant impact ICT has had on their operations so as to guarantee their profitability and growth.

1.3 Objectives of the Study

The broad objective of this study is to identify the impact of Information and Communication Technology on the performance of Nigerian banks. The specific objectives of the study are;

1. To determine if ICT has enhanced the profitability of Nigerian banks.
2. To know if ICT has grown/ increased the assets base of Nigerian banks.
3. To determine if ICT has enhanced the liquidity of Nigerian banks.
4. To determine if ICT has improved the service delivery of Nigerian banks.

1.4 RESEARCH QUESTION

For the effective completion of this studies, the following research question was put forward:

1. Has ICT enhanced the profitability of Jaiz Bank plc?
2. Has ICT grown or increased the assets base of Nigerian banks?
3. Has ICT enhanced the liquidity of Nigerian banks?
4. Has ICT improved the services rendered by Nigerian banks?

1.5 SIGNIFICANCE OF THE STUDY

Every organization is concerned with the best possible way of improving performance to guarantee sustainable growth that will lead to the achievement of organizational goals. Therefore, the knowledge that would be obtained from this research will assist management of banks to appreciate the importance and use of ICT products to achieve overall efficiency and effectiveness in their operations. This study will also benefit financial institutions in general, as it will provide the framework with which proper system upgrades can be carried out together with the adoption of computer to guarantee efficient service delivery, maximization of profit and minimization of cost. Students of management sciences and other researchers who intend to carry out further studies will find this study as a useful reference material especially in their literature review and findings thereby helping to arrive at objective conclusions.

1.6 SCOPE AND LIMITATION OF THE STUDY

The scope of this research is on “the impact of Information and Communication Technology (ICT) on Jaiz Bank performance”, the research is limited by time to go that far and treat this exhaustively. The research is also limited by secrecy of information in the bank, which requires permission of the bank’s higher authority hence most information was regarded as classified information. The study is also limited by time; that is the time allocated for the study does not allow the scope of the work to cover other banks

1.7 DEFINATION OF TERMS

INFORMATION COMMUNICATION TECHNOLOGY

Information and communications technology (ICT) is an extended term for information technology (IT) which stresses the role of unified communications and the integration of telecommunications (telephone lines and wireless signals), computers as well as necessary enterprise software, middleware, storage, and audio-visual systems, which enable users to access, store, transmit, and manipulate information. The term ICT is also used to refer to the convergence of audio-visual and telephone networks with computer networks through a single cabling or link system. There are large economic incentives (huge cost savings due to elimination of the telephone network) to merge the telephone network with the computer network system using a single unified system of cabling, signal distribution and management.

However, ICT has no universal definition, as “the concepts, methods and applications involved in ICT are constantly evolving on an almost daily basis.” The broadness of ICT covers any product that will store, retrieve, manipulate, transmit or receive information electronically in a digital form, e.g. personal computers, digital television, email, robots. For clarity, Zuppo provided an ICT hierarchy where all levels of the hierarchy “contain some degree of commonality in that they are related to technologies that facilitate the transfer of information and various types of electronically mediated communications” Skills Framework for the Information Age is one of many models for describing and managing competencies for ICT professionals for the 21st century

BANKS

A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities can be performed either directly or indirectly through capital markets. Due to their importance in the financial stability of a country, banks are highly regulated in most countries. Most nations have institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, known as the Basel Accords.

Banking in its modern sense evolved in the 14th century in the rich cities of Renaissance Italy but in many ways was a continuation of ideas and concepts of credit and lending that had their roots in the ancient world. In the history of banking, a number of banking dynasties — notably, the Medicis, the Fuggers, the Welsers, the Berenbergs and the Rothschilds — have played a central role over many centuries.

FINANCIAL INSTITUTION

Financial institutions provide services as intermediaries of financial markets. Broadly speaking, there are three major types of financial institutions:^[1][2]

1. Depository institutions – deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loancompanies;
2. Contractual institutions – insurance companiesand pension funds
3. Investment institutions – investment banks, underwriters, brokerage firms.

Some experts see a trend toward homogenization of financial institutions, meaning a tendency to invest in similar areas and have similar business strategies. A consequence of this might be fewer banks serving specific target groups, for example small-scale producers could be under served.

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study its based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

1.9 HISTORICAL BACKGROUND OF THE INDUSTRY

Jaiz Bank Plc. was created out of the former Jaiz International Plc which was set up in 2003/2004 as a Special Purpose Vehicle (SPV) to establish Nigeria’s first full-Fledged Non-Interest Bank.
It is an unquoted Public Company owned by over 20,000 shareholders including the Islamic Development Bank (IDB).

Jaiz Bank Plc. obtained a Regional Operating License to operate as a Non-Interest Bank from the Central Bank of Nigeria on the 11th of November, 2011 and began full operations as the first Non-Interest Bank in Nigeria on the 6th of January, 2012 with 3 branches located in Abuja FCT, Kaduna and Kano. The Regional License allows the Bank to operate geographically in a third of the country. Based on recommendations of (IDB), Jaiz Bank Plc. entered into a strategic partnership with Islami Bank Bangladesh (IBBL) for the later to provide Technical Management to run the Bank.

Currently, Jaiz Bank is the only full-fledged Non-Interest (Islamic) Bank in Nigeria. It recently obtained an approval from the Central Bank of Nigeria (CBN) for a National Operating License. This will enable it to operate in all parts of the Federation. The Bank’s ultimate objective is to expand beyond the shores of Nigeria in line with its vision.

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