EFFECT OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) ON FINANCIAL PERFORMANCE OF SME'S (SMALL AND MEDIUM ENTERPRISE)
EFFECT OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) ON FINANCIAL PERFORMANCE OF SME'S (SMALL AND MEDIUM ENTERPRISE)
ABSTRACT
This research investigates the impact of information and communication technology (ICT) on the financial performance of small and medium enterprises (SMEs). The research is carried out using small and medium enterprises (SMEs) in Minna Metropolis. A survey design was employed, with a sample size of 210 SMEs selected through judgmental sampling across six locations. The research instrument, a questionnaire with a Likert scale, was used to collect data on general information, ICT adoption, and challenges faced by SMEs. The analysis of the data reveals significant insights into the relationship between ICT utilisation and efficiency in SMEs' business activities. Findings indicate that a majority of respondents strongly agree that ICT enhances product and service quality, improves customer satisfaction and relationships, and makes business processes more efficient. Moreover, the study explores the extent to which SMEs adopt ICT for various purposes, such as online and offline record-keeping, online ordering systems, and communication through email. Challenges hindering the adoption of ICT by SMEs are also identified. Lack of ICT infrastructure, including internet access and power supply, inadequate knowledge and skills to operate ICT devices, and the perceived high cost of ICT are significant barriers faced by SMEs. The study tests hypotheses using chi-square analysis. Results show a significant relationship between ICT utilisation and efficiency in SMEs' business activities, as well as a significant relationship between the level of ICT application and the effectiveness of SMEs.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
A great number of organisations around the globe are currently utilising information and communication technology (ICT), not only for cutting costs and improving efficiency but also for providing better customer service (Irefin, Abdul-Azeez, & Tijani, 2012). Also, governments all over the world are adopting ICT to provide better services to their citizens. The adoption of ICT by organisations requires a business environment that encourages open competition, trust and security, interoperability, standardisation, and the availability of finance for ICT (UNCTAD, 2004). The effective use of ICT remains at a central stage in facilitating the change and growth of enterprises. Many small and medium enterprises (SMEs) consider the creative use of ICT as a key enabler to their development (Dixon, Cambridge, Carl, & Andrew 2002). However, as the global economy has become increasingly reliant on ICT to receive, process, and send out information, the small businesses within the developing countries (which form a significant portion of their developing economies) have yet to reap these benefits equally. This is because obtaining such opportunities rests largely upon the ability of SMEs to engage in regional and global economic business networks, which, in turn, demand the provision of a prerequisite level of access to and use of ICT (Dixon et al., 2002). Unless these prerequisites are in place, these SMEs are set to miss out on opportunities to integrate into the global supply chain, bid for outsourcing businesses, and increase their internal productivity and efficiency.
Irefin et al. (2012) made it known that the definition of small-scale enterprises (SSEs) in Nigeria has changed over the years, not only in consonance with the changing fortune of the country but also by the diversity of the small and medium enterprises (SMEs) supporting institutions in the country. Before 1992, different institutions in Nigeria adopted varying definitions of small enterprises. However, in 1992, the issue of conflicting definitions was resolved with the establishment of the National Council on Industry, which is now the policy-making organ on all matters relating to industry in Nigeria. Among the conceptual issues that were resolved is whether the small-scale industry definition should include all economic activities such as trading, buying, and selling or whether it should be restricted to productive industrial activities, especially manufacturing. Accordingly, a clear distinction was made between small-scale enterprises consisting of trading, buying, and selling activities and small-scale industries engaged in the manufacturing industry.
The usage of IT in SMEs improves economic performance and reduces the unemployment rate. IT has a significant impact in the sector of small and medium-sized enterprises (SMEs), especially where industries are in decline or when unemployment levels are high (Namani, 2009). Onu et al. (2014) indicate that the economic literature shows that IT is an important driver of productivity and growth. IT has shown a pickup in labour productivity from 1.5 percent to 2.4 percent, which has increased economic performance and national income (Oliner and Sichel, 2002). Polland (2006) claims that SMEs need high-quality IT and must always provide superior-value products better than competitors when it comes to quality, price, and service. The use of IT by SMEs enhances expansion and enables small and medium enterprises to compete with multinational enterprises. In a technological environment, enterprises (multinationals and SMEs) efficiently and effectively utilise economic resources by producing standard technology goods and services, transforming human effort and economic resources to meet market needs.
1.2 Statement of the Problem
While ICT can benefit SMEs in multiple ways, SMEs within developing countries such as Nigeria have been slow to adopt ICT as they face major constraints such as poor telecommunication infrastructure, limited ICT literacy, the inability to integrate ICT into business processes, high costs of ICT equipment, incomplete government regulations for e-commerce, and a poor understanding of the dynamics of the knowledge economy (Lucey, 2005). However, Okwuonu (2013) asserts that many SME operators are unfamiliar with operating a computer, become sceptical of the benefits and value it gives to the business, and have the notion that ICT is only for larger companies, even when they have the will and financial resources to integrate ICT into their core businesses. SME operators are often at a loss when the need arises to choose the most appropriate and cost-efficient product. Most Nigerians could not participate in the international markets from the comfort of their offices and rooms due to the erratic supply of electricity, the dearth of adequate ICT facilities, and the enabling environment that supports e-business. Low participation in the internal market means low transactions and contribution to the global economy, but with the use of ICT, weak players in the economy can be empowered by being provided with information, communication, and knowledge they could not access before. This enhances the competitiveness of small and medium-sized enterprises (SMEs) and can enable them to establish their presence on the internet and use it to communicate with suppliers and customers, search for business information, and advertise their products (Okwuonu, 2013).
1.3 Objectives of the Study
The general objective of this research is to examine the effect of information and communication technology (ICT) on the financial performance of SMEs (small and medium enterprises). Other specific objectives are to:
- To find out the relationship between the utilisation of ICT by SMEs and efficiency in their business activities.
- To determine whether SMEs adopt ICT in their day-to-day business activities.
iii. To identify the challenges of the adoption and use of ICT by SMEs.
1.4 Research Questions
The following research questions are put forward to guide the research:
- What is the relationship between the utilisation of ICT by SMEs and efficiency in their business activities?
- What is the level of application of ICT by SMEs?
iii. What are the challenges to the adoption and use of ICT by SMEs?
1.5 Research Hypotheses
The following research hypotheses are formulated to guide this research:
HO1: There is no significant relationship between the utilisation of ICT by SMEs and efficiency in their business activities.
HO2: There is no significant relationship between the level of application of ICT among SMEs and the effectiveness of SMEs.
HO3: There are no significant challenges SMEs face in the adoption and utilisation of ICT in their business.
1.6 Significance of the Study
Quite a bit of research has been carried out related to this study, such as Adewole and Akanbi (2004), in which they examined the role of information and communication technology investment on the profitability of small- to medium-scale industries—a case of sachet water companies in Oyo State, Nigeria. Similarly, Rufai (2014) studied the impact of communication technologies on the performance of SMEs in a developing economy, a case study of Nigerian SMEs. However, this research is distinct from various similar research in that it examines the impact of ICT on the growth of small and medium enterprises. This research tends to be very beneficial to small and medium enterprises, stakeholders in the country, and Nigeria's economy as a whole, and it also adds to the existing literature concerning this topic.
Also, the findings of this research will enable SMEs to see the need to adopt or utilise ICT in their day-to-day business activities.
Furthermore, the findings will help the government of Niger State implement policies that will enable SMEs to strive and move the state forward by generating more employment opportunities in the state.
Finally, it is also hoped that the research will serve as a reference point for researchers as well as students wishing to carry out similar research. The research will add existing knowledge and form part of reference material in this field of study.
1.7 Scope and Limitation of the Study
Due to financial constraints, time constraints, and mostly academic workloads, this research will not be able to cover the entirety of SMEs in Nigeria. Hence, this study deals with SMEs operating in Minna, Niger State. The research will be limited to analysis based on the questionnaire to be administered as well as diverse literature that has a direct bearing on the subject of the study.
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EFFECT OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) ON FINANCIAL PERFORMANCE OF SME'S (SMALL AND MEDIUM ENTERPRISE)
EFFECT OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) ON FINANCIAL PERFORMANCE OF SME'S (SMALL AND MEDIUM ENTERPRISE)
ABSTRACT
This research investigates the impact of information and communication technology (ICT) on the financial performance of small and medium enterprises (SMEs). The research is carried out using small and medium enterprises (SMEs) in Minna Metropolis. A survey design was employed, with a sample size of 210 SMEs selected through judgmental sampling across six locations. The research instrument, a questionnaire with a Likert scale, was used to collect data on general information, ICT adoption, and challenges faced by SMEs. The analysis of the data reveals significant insights into the relationship between ICT utilisation and efficiency in SMEs' business activities. Findings indicate that a majority of respondents strongly agree that ICT enhances product and service quality, improves customer satisfaction and relationships, and makes business processes more efficient. Moreover, the study explores the extent to which SMEs adopt ICT for various purposes, such as online and offline record-keeping, online ordering systems, and communication through email. Challenges hindering the adoption of ICT by SMEs are also identified. Lack of ICT infrastructure, including internet access and power supply, inadequate knowledge and skills to operate ICT devices, and the perceived high cost of ICT are significant barriers faced by SMEs. The study tests hypotheses using chi-square analysis. Results show a significant relationship between ICT utilisation and efficiency in SMEs' business activities, as well as a significant relationship between the level of ICT application and the effectiveness of SMEs.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
A great number of organisations around the globe are currently utilising information and communication technology (ICT), not only for cutting costs and improving efficiency but also for providing better customer service (Irefin, Abdul-Azeez, & Tijani, 2012). Also, governments all over the world are adopting ICT to provide better services to their citizens. The adoption of ICT by organisations requires a business environment that encourages open competition, trust and security, interoperability, standardisation, and the availability of finance for ICT (UNCTAD, 2004). The effective use of ICT remains at a central stage in facilitating the change and growth of enterprises. Many small and medium enterprises (SMEs) consider the creative use of ICT as a key enabler to their development (Dixon, Cambridge, Carl, & Andrew 2002). However, as the global economy has become increasingly reliant on ICT to receive, process, and send out information, the small businesses within the developing countries (which form a significant portion of their developing economies) have yet to reap these benefits equally. This is because obtaining such opportunities rests largely upon the ability of SMEs to engage in regional and global economic business networks, which, in turn, demand the provision of a prerequisite level of access to and use of ICT (Dixon et al., 2002). Unless these prerequisites are in place, these SMEs are set to miss out on opportunities to integrate into the global supply chain, bid for outsourcing businesses, and increase their internal productivity and efficiency.
Irefin et al. (2012) made it known that the definition of small-scale enterprises (SSEs) in Nigeria has changed over the years, not only in consonance with the changing fortune of the country but also by the diversity of the small and medium enterprises (SMEs) supporting institutions in the country. Before 1992, different institutions in Nigeria adopted varying definitions of small enterprises. However, in 1992, the issue of conflicting definitions was resolved with the establishment of the National Council on Industry, which is now the policy-making organ on all matters relating to industry in Nigeria. Among the conceptual issues that were resolved is whether the small-scale industry definition should include all economic activities such as trading, buying, and selling or whether it should be restricted to productive industrial activities, especially manufacturing. Accordingly, a clear distinction was made between small-scale enterprises consisting of trading, buying, and selling activities and small-scale industries engaged in the manufacturing industry.
The usage of IT in SMEs improves economic performance and reduces the unemployment rate. IT has a significant impact in the sector of small and medium-sized enterprises (SMEs), especially where industries are in decline or when unemployment levels are high (Namani, 2009). Onu et al. (2014) indicate that the economic literature shows that IT is an important driver of productivity and growth. IT has shown a pickup in labour productivity from 1.5 percent to 2.4 percent, which has increased economic performance and national income (Oliner and Sichel, 2002). Polland (2006) claims that SMEs need high-quality IT and must always provide superior-value products better than competitors when it comes to quality, price, and service. The use of IT by SMEs enhances expansion and enables small and medium enterprises to compete with multinational enterprises. In a technological environment, enterprises (multinationals and SMEs) efficiently and effectively utilise economic resources by producing standard technology goods and services, transforming human effort and economic resources to meet market needs.
1.2 Statement of the Problem
While ICT can benefit SMEs in multiple ways, SMEs within developing countries such as Nigeria have been slow to adopt ICT as they face major constraints such as poor telecommunication infrastructure, limited ICT literacy, the inability to integrate ICT into business processes, high costs of ICT equipment, incomplete government regulations for e-commerce, and a poor understanding of the dynamics of the knowledge economy (Lucey, 2005). However, Okwuonu (2013) asserts that many SME operators are unfamiliar with operating a computer, become sceptical of the benefits and value it gives to the business, and have the notion that ICT is only for larger companies, even when they have the will and financial resources to integrate ICT into their core businesses. SME operators are often at a loss when the need arises to choose the most appropriate and cost-efficient product. Most Nigerians could not participate in the international markets from the comfort of their offices and rooms due to the erratic supply of electricity, the dearth of adequate ICT facilities, and the enabling environment that supports e-business. Low participation in the internal market means low transactions and contribution to the global economy, but with the use of ICT, weak players in the economy can be empowered by being provided with information, communication, and knowledge they could not access before. This enhances the competitiveness of small and medium-sized enterprises (SMEs) and can enable them to establish their presence on the internet and use it to communicate with suppliers and customers, search for business information, and advertise their products (Okwuonu, 2013).
1.3 Objectives of the Study
The general objective of this research is to examine the effect of information and communication technology (ICT) on the financial performance of SMEs (small and medium enterprises). Other specific objectives are to:
iii. To identify the challenges of the adoption and use of ICT by SMEs.
1.4 Research Questions
The following research questions are put forward to guide the research:
iii. What are the challenges to the adoption and use of ICT by SMEs?
1.5 Research Hypotheses
The following research hypotheses are formulated to guide this research:
HO1: There is no significant relationship between the utilisation of ICT by SMEs and efficiency in their business activities.
HO2: There is no significant relationship between the level of application of ICT among SMEs and the effectiveness of SMEs.
HO3: There are no significant challenges SMEs face in the adoption and utilisation of ICT in their business.
1.6 Significance of the Study
Quite a bit of research has been carried out related to this study, such as Adewole and Akanbi (2004), in which they examined the role of information and communication technology investment on the profitability of small- to medium-scale industries—a case of sachet water companies in Oyo State, Nigeria. Similarly, Rufai (2014) studied the impact of communication technologies on the performance of SMEs in a developing economy, a case study of Nigerian SMEs. However, this research is distinct from various similar research in that it examines the impact of ICT on the growth of small and medium enterprises. This research tends to be very beneficial to small and medium enterprises, stakeholders in the country, and Nigeria's economy as a whole, and it also adds to the existing literature concerning this topic.
Also, the findings of this research will enable SMEs to see the need to adopt or utilise ICT in their day-to-day business activities.
Furthermore, the findings will help the government of Niger State implement policies that will enable SMEs to strive and move the state forward by generating more employment opportunities in the state.
Finally, it is also hoped that the research will serve as a reference point for researchers as well as students wishing to carry out similar research. The research will add existing knowledge and form part of reference material in this field of study.
1.7 Scope and Limitation of the Study
Due to financial constraints, time constraints, and mostly academic workloads, this research will not be able to cover the entirety of SMEs in Nigeria. Hence, this study deals with SMEs operating in Minna, Niger State. The research will be limited to analysis based on the questionnaire to be administered as well as diverse literature that has a direct bearing on the subject of the study.
EFFECT OF INFORMATION AND COMMUNICATION TECHNOLOGY (ICT) ON FINANCIAL PERFORMANCE OF SMES (SMALL AND MEDIUM ENTERPRISE), GET MORE PROJECT TOPICS AND MATERIALS
Attached Files