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IMPLEMENTING MANAGEMENT INFORMATION


SYSTEM IN LIBYAN ISLAMIC FINANCIAL
INSTITUTIONS
Conference Paper September 2013

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Muhammad Ridhwan Ab Aziz
USIM | Universiti Sains Islam Malaysia
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IMPLEMENTING MANAGEMENT INFORMATION SYSTEM


IN LIBYAN ISLAMIC FINANCIAL INSTITUTIONS
Mohammed Abulqasem Eldlimi1
Muhammad Ridhwan Ab. Aziz2
Mohd Faisol Ibrahim3

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 indepth 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

Phd student at Faculty of Economic and Muamalat (USIM) . Corresponding author : m.eldlimi@yahoo.com
Lecturers at University Sains Islam Malaysia.

2,3

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 semistructured 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.

2.3

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.
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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