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.