This document discusses implementing a Management Information System (MIS) in Libyan Islamic financial institutions. It begins with an abstract that outlines the purpose and methodology of the study. The introduction provides background on Islamic banking and how MIS is used in modern banks to improve services and support decision making.
The document then discusses the background of the study, including exploring the impact of MIS on improving services and information quality at North Africa Bank in Libya. It identifies obstacles that hinder MIS implementation in Islamic banking. It also provides definitions and discusses the importance of MIS in banks for providing accurate customer and operational information to support efficient decision making.
Original Description:
Implementing Management Information System in Libyan Islamic Financial Institutions
This document discusses implementing a Management Information System (MIS) in Libyan Islamic financial institutions. It begins with an abstract that outlines the purpose and methodology of the study. The introduction provides background on Islamic banking and how MIS is used in modern banks to improve services and support decision making.
The document then discusses the background of the study, including exploring the impact of MIS on improving services and information quality at North Africa Bank in Libya. It identifies obstacles that hinder MIS implementation in Islamic banking. It also provides definitions and discusses the importance of MIS in banks for providing accurate customer and operational information to support efficient decision making.
This document discusses implementing a Management Information System (MIS) in Libyan Islamic financial institutions. It begins with an abstract that outlines the purpose and methodology of the study. The introduction provides background on Islamic banking and how MIS is used in modern banks to improve services and support decision making.
The document then discusses the background of the study, including exploring the impact of MIS on improving services and information quality at North Africa Bank in Libya. It identifies obstacles that hinder MIS implementation in Islamic banking. It also provides definitions and discusses the importance of MIS in banks for providing accurate customer and operational information to support efficient decision making.
Mohammed Abulqasem Eldlimi 1 Muhammad Ridhwan Ab. Aziz 2 Mohd Faisol Ibrahim 3
ABSTRACT
Management Information System (MIS) is a management system that is used by many banks in developed countries nowadays to improve the banking service and support decision-making process. The Islamic banking is considered as one of the fast growing industry in the financial and banking sector. In Libya the Islamic banks are still new and many traditional banks have opened Islamic banking departments or separate branches to provide banking services according to Islamic law and Sharia. The study will explore the impact of Management Information System on improving the banking service and information quality North Africa Bank, and identify the main obstacles those hinders the implementation of MIS in Islamic banking. The methodology of MIS is qualitative research that aims to gather an in- depth understanding to the role of Management Information System in Libya banks and evaluate the impact of MIS on Islamic banking. The finding of this paper shows that Libyan financial institutes need proper research to implement MIS. Keywords: Management Information systems (MIS), Islamic Banking, Investment, Banking Activities, Information Quality, Decision-Making Process
1. INTRODUCTION
Islam is a comprehensive way of life, which strikes the balance between the spiritual and the material need of human being. One of the important aspects in human life is the need for a comprehensive system in order to govern their life and to ensure all the needs are catered adequately including the material needs such as the financial management. This aspect of life is closely related to the fast growing industry in the world nowadays, which is the Islamic financial services industry. Islamic banks are banks that practicing banking activities according to the principles of Sharia law in all financial transactions and utilizes the banking functions to develop the economy using the Islamic way. Sharia prohibits imposing fixed payment of specific interest or fees due to profit from specific loan, this type of financial loan is known as usury (Riba). Islamic banking has the same purpose and functions as conventional banking with the exception of lending money at interest and avoiding any kind of suspect in financial transactions that may include usury (Riba). Management Information System (MIS) is a system used by most of modern banks nowadays to provide information at high quality and precision needed to manage the bank effectively. Management Information System (MIS) provides the necessary reports and summarizes the banks basic operations to the senior managers in the bank and support decision-making process. Other advantages of MIS are transparency and efficiency of information provided for banks clients. Investors need for efficient
1 Phd student at Faculty of Economic and Muamalat (USIM) . Corresponding author : m.eldlimi@yahoo.com 2,3 Lecturers at University Sains Islam Malaysia.
information before they decide to invest in Islamic banks and they need quality in information, which can only be provided using Management Information Systems. Banks in Libya were trying to follow the latest development around the world in all ways in order to achieve the desired goal but all these attempts still not yet accompanied with complete awareness on the importance of Management Information Systems (MIS), and by considering MIS a vital and strategic source for success in Islamic banking. The Islamic financial services are considered as one of the fast growing industry in banking sector. In Libya the Islamic banks are still new and many Islamic banks that will be established in the coming few year. However, applying Management Information Systems in Islamic Banks is quite important to develop the economy of Libya through effective banking system that attract investors from inside and outside Libya who wish in invest using the Islamic way and invest their money in efficient Islamic banking systems with full satisfaction.
2. BACKGROUND OF THE STUDY The banking system plays a vital role in improving the national economy and represents the backbone of any national economy, therefore this research attempt to find the best approach to implement the management information systems in Islamic banks and the remove the obstacles that prevent the implementation of Management of Information Systems (MIS) in Libyan banks that include Islamic banking. The study selected North Africa Bank in Libya as the focus of this study. North Africa Bank provide different types of Islamic banking such as (Islamic funding for small projects, finance commercial projects inside and outside Libya, granting loans for hire purchase contracts, financing real-estates projects) and other financial banking that comply with Islamic regulations and Sharia law. The current information services in North Africa Bank are not satisfactory to the management of the bank and to the clients as well. The senior management in this bank received many complaints from Libyan investors and beneficiaries in which they describe their inability to deal with bank and benefit effectively from the Islamic banking services offered by North Africa Bank, and they showed weak interest to invest due to poor quality of financial information and poor banking service. a. MIS in Banks The measurement of success of any bank is by providing banking services with high quality based on the capacity of the bank to meet the requirements of the client to financial information and satisfy these requirements better than other competitors. The huge developments in information systems are strategic weapons in dealing with current conditions that are characterized by rapid changes and strong competition among financial institutions. Competition in the financial sector matters for a number of reasons. The degree of competition in the financial sector emphasizes on the efficiency of production of financial services, the quality of financial products and the degree of innovation (Manolis, & Winsor, 2000). Management Information Systems (MIS) are not new to the banking sector. Since the early 80s, banks have been using this terminology to refer to the process of generating various reports and analyses at the Corporate/Head offices for their decision making for own use as well as for conveyance to authorities in charge of regulation.
MIS in the present context of high availability of voluminous data on electronic media at diverse locations and on diverse platforms, has become more pertinent to banks decision-making process, thanks to the availability of new tools of technology such as data warehousing, data mining. There are several definitions of the concept of MIS and may vary in expressions, but correlate in the connection and implications, actually there is no explicit agreement among most researchers and experts in the field of management science on one comprehensive definition for MIS.
A management information system (MIS) provides information that organizations need to manage themselves efficiently and effectively (Brien, 1999). Management information systems are typically computer systems used for managing five primary components: hardware, software, data (information for decision making), procedures (design, development and documentation), and people (individuals, groups, or organizations). Management information systems are distinct from other information systems, in that they are used to analyze and facilitate strategic and operational activities (Lucey, 2005) Academically, the term is commonly used to refer to the study of how individuals, groups, and organizations evaluate, design, implement, manage, and utilize systems to generate information to improve efficiency and effectiveness of decision making, including systems termed decision support systems, expert systems, and executive information systems. Management information systems (MIS), produce fixed, regularly scheduled reports based on data extracted and summarized from the firms underlying transaction processing systems to middle and operational level managers to identify and inform structured and semi- structured decision problems (Laudon , 2010). Most management information systems specialize in particular commercial and industrial sectors, aspects of the enterprise, or management substructure.
2.2 The importance of MIS in banks Management Information Systems MIS is very significant and fundamental for efficient banking service. In many modern banks, there is a great role of Management Information system in providing accurate information related to customer requirement and data gathering and processing. MIS helps in many ways the Bank for the better result and customer satisfaction. Most banks consider information technology (IT) as a route for service quality improvement, while others perceive it as a cost-effective expansion strategy (Kim and Davidson, 2004). There is a general consensus regarding the importance of understanding the patterns of IT adopted by bank customers (Pikkarainen et al, 2004), and several studies (Applegate, McFarlan and McKenney, 1999; Kim and Davidson, 2004) emphasize that financial institutions such as banks are distinguished from other businesses in their reliance on IT. As early as the 1980s, Porter and Millar (1985) found that banking was one of the most information intensive sectors. Banks tend to use IT to improve the quality of their services, increase efficiency and customer satisfaction, and offer wider choices with lower costs to the customer. In other words, banks are using IT for competitive advantage. The following are some of the benefits to financial institute that can be attained for different types of management information systems (Pant, 2007): Financial institutes are able to highlight their strengths and weaknesses due to the presence of revenue reports, employees' performance record etc. The identification of these aspects can help financial institutes to improve their business processes and operations. Giving an overall picture of the financial institute and acting as a communication and planning tool between the departments of the bank. The availability of the customer data and feedback can help the financial institute to align their business processes according to the needs of the clients. The effective management of customer data can also help the financial institute to perform direct marketing and promotion activities.
2.3 MIS in Libyan banks Libya's centrally planned economy depends primarily upon revenues from the petroleum sector, which contributes practically all export earnings and over half of GDP. These oil revenues and a small population give Libya one of the highest per capita GDPs in Africa. Since 2000, Libya has recorded favorable growth rates with an estimated 8.1% growth of GDP in 2006. The Government is in the process of preparing a financial sector reform program. Recent legislation setting corporate governance standards for financial institutions makes progress towards better management and greater operational independence of public banks. Over the past two decades, the banking industry in Libya has experienced very significant development, which was the direct result of various factors, one of the most important being the implementation of new accounting information systems (AIS) and associated technologies. However, Libyan public banks still lack management structures supported by skills in critical areas like credit, investment, risk management and information services quality and control systems. Moreover, the majority of banks and financial institute in Libya did not apply the modern management information systems and are still depending on old management systems and long routine using paper works to organize the workflow the bank. The result was negative on clients perception and satisfaction about Libyan banks.
3. THE RESEARCH PROBLEM The importance of Management Information Systems that provide reliable information for banks clients has much increased in recent years. Investors nowadays are much interested to use the new technologies to support their investment decisions. Since Islamic banking is very much similar in its banking activities to other non-Islamic banking service, however, these banks needs to develop their internal functions to follow the latest development in technologies specially applied for banks in order to provide effective banking service and high transparency for investors and clients. Providing high quality of information is important to rationalize the decisions of investors. MIS can help the management in Libyan banks to make good and strategic decisions, but this target cant be achieved without implementing an efficient Management Information System. The information technology is vital to the success of any banking institution including Islamic banks. The main problem that will be discussed in this research is the obstacles that hinder the implementation of Management Information Systems by North Africa Bank in Libya. Some of these obstacles are managerial, while the lake of technological capacity and qualified personnel needed to operate Management Information Systems is another obstacle that prevent swift development to new information system. Most of the banks in Libya including these banks that include branches of Islamic banking are using traditional and old way in doing daily banking activities and also most of their systems and computers are old and without advanced software and new computer applications, therefore this situation produce real difficulties and obstacles to implement modern information systems which is part of the Management Information System. Another problem that will be discussed in this study is the low level of knowledge about the management information system by employees of the Islamic banks and how to raise the level of awareness and understanding to use Management Information Systems in doing the daily banking activities by specialist employees in North Africa Bank, who are qualified and capable to run and operate these systems.
4. THE RESEARCH OBJECTIVE
1) To identify the main role of management information system MIS in banks and financial institutions. 2) To explore the factors those affect the quality of information produced by the Management Information System MIS. 3) To identify the major obstacles those hinder the implementation of Management Information System (MIS) in Islamic banks in general and North Africa Bank in particular.
5. THE RESEARCH QUESTIONS
1) How management information system MIS operates in banks and financial institutions? 2) What are the factors those affect the quality of information produced by the Management Information System MIS. 3) What are the major obstacles those hinder the implementation of Management Information System (MIS) in Islamic banks in general and North Africa Bank in particular.
6. RESEARCH METHODOLOGY
We applied a quantitative research that aims to gather an in-depth understanding to Management Information System in Libya with accordance to the current information services provided by Libyan banks in general and North Africa Bank in particular. The qualitative methodology used in this research will investigates why these Libyan banks cant adopt Management Information Systems swiftly, and how Libyan banks can improve quality of information and Islamic banking through adoption of Management Information Systems.
7. THE SIGNIFICANCE OF THE RESEARCH This study is the first study to cover this subject in Islamic banks in Libya, the importance of this study due to the immediate requirement to replace the traditional and old way in doing banking activities by proving the right plan to implement management information system in Islamic Banks help the supervisors and managers in these banks to remove the obstacles that prevent the implementation of MIS. This study attempt to improve the service quality of banking sector in Libya starting from the Islamic banks, and because most of Libyan clients prefer to put their money in Islamic banks due to religious factors, the banking sector is very important to the national economy in Libya, this study will contribute to the development efforts to the economy of Libya in the coming few years. Without efficient banking systems, the banks in Libya in general and Islamic banks in particular will remain weak and attract few investors to invest in these banks. A reliable and efficient Management Information System will help the Islamic banks to achieve its goals The main contribution in this study is evaluating the relationship between the reality of management information system in Libyan banks and its role in activation the financial market of Libya by evaluating the current information sources provided by Libyan banks. The result of this study will enable the officials in Libyan banks in general and other financial institutes like Libyan stock market to identify the eeffectiveness of deploying information system and test its ability to follow up the new development in banking industry, moreover this study will make high effect on the scientific research in this field. In addition to that the study will attempt to help North Africa Bank to develop the information service through improving the information quality using Management Information Systems; therefore the bank will be able to face the increasing challenges and competition with international banks.
8. THE SCOPE OF THE RESEARCH This study will conduct analysis in North Africa Bank in Libya and will focus on a group of employees and managers who are responsible to provide and manage Islamic banking activities in North Africa Bank. The researcher believes that the only way to get precise answers to all the questions arise from this study from the managers and specialist employees working in the IT departments in the bank. In addition to that the study will investigate the current level of information quality provided by North Africa Bank in Libya because it is the first bank in Libya, who provided Islamic banking service, and conclude the best implementation plan that suite the financial environment in Libya according to market demands and the rapid development in the global economy and the high competitions imposed by foreign non-Islamic banks.
9. CONCLUSION
Management information system ensure high level of service quality and effective information sharing between all the departments in the bank and provide accurate information to the senior management inside the banks that help to make precise strategic decisions. This study concluded that the past experience and awareness of managers and employees was weak about the function of MIS as well as the benefits of MIS on the overall performance of the bank and the service quality provided to the clients. It is clear that training on using the functions of MIS will improve their experience and ability to deal with these functions and good practicing on using these functions. In addition to that the perception and willingness of managers in the bank is very important to ensure swift implementation of MIS. Moreover the perception and willingness of managers to use and adopt MIS in North Africa bank was not encouraging and weak, according to this study perception of managers is one of the main obstacles that hinder swift implementation to MIS in North Africa Bank.
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