RIFT VALLEY UNIVERSITY

SCHOOL POSTGRADUATE STUDIES

MASTESR OF BUSINESS ADMINSTRATION (MBA)

COURSE TITLE: MANAGEMENT INFORMATION SYSTEM

Information system used in Oromia Cooperative bank in Ethiopia

Prepared By:

ID No: ID NO: RVUBBGBAMR/ /15

Submitted To: Gosa lema (Ass.Prof)

March, 2024

Bale Robe, Ethiopia

1
1. Background of Oromia Cooperative Bank

The history of co-operative banks has been traced back to the financial exclusion faced by many
communities in the 19th century. With the industrial revolution, the emerging financial services
sector was primarily focused on wealthy individuals and large enterprises in urban areas. The
rural population, particularly farmers, small businesses and the communities they supported,
were excluded from financial services. Thus, co-operative banks were originally set up to correct
this market failure and to overcome the associated problems of asymmetric information in favor
of borrowers. Beginning in Germany, the co-operative banking concept gradually spread to the
rest of the continent and to the Nordic countries.

In respect of Ethiopia, the country has very low financial service coverage as mainstream
financial institutions are heavily tilted towards the urban centers with good physical
infrastructure, leaving the rural areas underserved. Traditionally, ‘Equbs’ and ‘Idirs’ are informal
institutions that are deeply ingrained in the life communities and have also been serving financial
needs of the society. Reluctance and low capacity of the financial institutions in the country to
serve rural community, a demand-supply gap prevailed in financial market especially in rural
areas, coupled with farmers awareness to be organized in to cooperatives and the increasing need
to finance cooperatives’ called for establishment of a cooperative bank. Furthermore, finance
appeared to be the critical bottleneck to sustain the cooperative institutions and ultimately the
farmers. It was all these glitches that initiated the inception and establishment of Cooperative
Bank of Oromia.

Obbo Haile Gebre Lube, regarded as the founding father (proponent) of Ethiopia's cooperatives,
brought the idea of founding the bank for he believed that the best way to fight poverty is
through cooperation. Formally establishing a project once in 2002, the bank's formation was
realized with the majority of shareholders being the cooperative societies. The bank then is
commercially licensed in October 2004 and commenced operations in March 2005. As there are
no legal provisions that allow the establishment of a cooperative bank in the country, the bank
was registered in accordance with article 304 of the commercial code of Ethiopia.

2
1.1 Definitions and Evolution of MIS
The MIS is method for collecting information from the internal and external source and
processing this information for the purpose of facilitating the process of decision-making
function of the business. Management Information System is not a new concept, before
using computers MIS techniques existed to supply to the managers with the information
that would permit them to plan and control business operations. The computer has
basically added on more dimensions such as speed, accuracy and increased volume of
data that permit the consideration of more alternatives in decision-making process.

Management Information System is generally defined as an integrated user-machine

system for providing information to support operations, management and decision-
making functions in an organization. The system utilizes computer hardware and
software, manual procedure, models for analysis. An organization with a well-defined
information system will generally have a competitive advantage over organization with
haven’t Management Information System. There are lots of researches on the approaches,
techniques and technologies for the design and development of MIS in an organization.
However, we analyze few articles for understanding this concept in very well. Then we
can see, there are no universally accepted definitions of MIS and that exist in literatures
are just prejudices of the researchers.

Management Information System (MIS) is a management system that is used by many

banks in development countries nowadays to improve the banking service and support
decision- making process. The internet banking is considered as one of the fast-growing
industries in the financial and banking sector. The study will explore the impact of
Management Information System on improving the banking service and identify the main
obstacles those hinders the implementation of MIS in banking sector in Ethiopia. The
finding of this paper shows that Ethiopia financial institutes need proper research to
implement MIS and shown the importance of usage of MIS in Ethiopia context.

Management Information System is a system used by most of modern banks nowadays to

provide information at high quality and precision needed to manage the bank effectively.

3
Management Information System provides the necessary reports and summarizes the
bank’s 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 bank’s clients.

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.

1.1.1 Evolution of MIS

Kenneth C. Laudon and Jane Laudon (2012- 12th edition) identify five eras of
Management Information System evolution corresponding to the five phases in the
development of computing technology: such as
 Mainframe computing era

 Personal computers era

 Client/server network era

 Enterprise computing era

 Cloud computing era.

They defined the first era (Mainframe) was ruled by IBM and their mainframe
computers. These computers would often take up whole rooms and require teams to run
them. As technology advanced increasing, these computers were able to handle greater
capacities and therefore reduce their cost.

The second era (Personal computers) began in 1965 as microprocessors started to

compete with mainframes and minicomputers and accelerated the process of
decentralizing computing power from large data centres to smaller offices. In the late
1970s minicomputer technology gave way to personal computers and relatively low-cost

4
computers were becoming mass market commodities, allowing businesses to provide their
employees access to computing power.

As technological complexity increased and costs decreased, the need to share information
within an enterprise also grew, giving rise to the third era (Client/server network), in
which computers on a common network access shared information on a server. This lets
thousands and even millions of people access data simultaneously.

The fourth era (Enterprise computing) enabled by high speed networks, tied all aspects
of the business enterprise together offering rich information access encompassing the
complete management structure.

The fifth era (Cloud computing) is the latest and employs networking technology to
deliver applications as well as data storage independent of the location or nature of the
hardware. This, along with high speed cell phone and Wi-Fi networks, led to new levels
of mobility in which managers access the MIS remotely with laptop and smart devices.

1.2 Management Information System in Oromia cooperative bank in Ethiopia

MIS plays a major role in any organization. It is important to understand the level of
management of an organization and the types of information system it entails. Further it
supports the decision-making process of an organization. Main goal of these systems is to
organize all data collected from every level of company. All organization identifies
several types of information systems for each of the three management levels.

• Strategic Management Level – Decision Support System (DSS)

• Tactical Management Level – Management Information System (MIS)

• Operation Management Level – Transaction Processing System (TPS)

Banking sector use IS to collect, filter, and process, create and distribute data. We analyse
the People’s Bank use of IS systems and their significance can be described follow.
Transaction Processing System (TPS)
These are based on operational level management in branch and apply to make decisions
for daily routine works in the bank. It is helping a business to perform service transaction
efficiently and record day today transaction in branches. Bank use TPS system is to

5
answer routine questions such as: End of the day how about the new savings accounts
opened? How much cash or inventory do we have at hand? What is the outstanding due
for branch? So on. These decisions were highly structured and very detailed.

For example, Bank give out loans require that some company that a person works for
should have a memorandum of understanding (MoU) with the Bank. If a person whose
employer has a MoU with the bank applies for a loan, all that the operational staff has to
do is verify the submitted documents. If branch manager meets the requirements, then the
loan application documents are processed. If branch manager does not meet the
requirements, then the client is advised to see tactical management staff (Area Manager of
PB) to see the possibility of signing a MoU.

Examples of TPS included in PB; ATM system, accounting packages (sage. MYOB,
Quick Book), finger print system for record employee attendance, provide income
statement, balance sheet or any other report daily, monthly or annually for account
holders and payroll system so on.
Management Information System (MIS)

MIS are used by tactical managers in People’s Bank to monitor the branch current
performance status. The output form TPS is used as input to a MIS. The MIS system
analyzes the input with routine algorithms information. Example of aggregate, compare
and summarizes the results to produced reports that tactical managers use to monitor,
control and predict future performance of the bank.

For example: MIS input from an TPS, End of the day how about the new accounts
opened? Management Information System can be used to analyse trends of new saving
account type that are performing well and those that are not performing well. This
information can be used to make future introduced accounts types in People’s Bank.

Examples for the Peoples Bank: Periodic Report (year-end financial statements),
Exceptional Report (Expenses analysis except weekends), On demand report (Daily
balance sheet)

Tactical managers in People’s Bank are responsible for get the semi-structured decision.

6
MIS systems provide the information needed to make the structured decision and based
on the experience of the tactical managers; they make judgement in historical data in
output of TPS. Examples of People’s Bank tactical managers predict goal in how much of
make new account opening in each branch second quarter based on the new account
opening of the first quarter.
Decision Support System (DSS)

Decision support systems are used by senior management in People’s Bank (Bank
director board) to make non-routine decisions. Decision support systems use input from
internal systems (output of TPS & MIS) and external systems. The main objective of
decision support systems is to provide solutions to problems that are unique and change
frequently. DSS use sophisticated mathematical models, and statistical techniques
(probability, predictive modelling, etc.) to provide solutions, and they are very interactive.

DSS answer questions in PB such as; What would be the impact of employees'
performance if we enhance the opening transaction hours at the bank? What would
happen to bank comprehensive income if a new competitor entered the market? what
would happen to bank customer base if introduced in new user-friendly technology in
another competitor.

1.3 How to Effect MIS Functions to the bank

Information systems are vital for the growth survival of business organizations in today’s
world. This section we discussed about the Accounting, Human Resources and marketing
functions in the Peoples Bank how to use management information system (MIS)
successfully.
Accounting Management Function
Organization in all industries use Accounting Management Information System (AMIS)
to collect and manage financial data and share it with interested parties such as
accountants, auditors and Central bank There are different types of AMIS designed for
the People’s Bank, each with its own unique features, such as general ledger system,
mortgage banking application and accounting supportive software programs (Sage 50).
Human Resources Management Function
Under the MIS functions of we can identify Human Resources Management Information System

7
(HRMIS) and People’s Bank also utilized this information system to maintain their personal
administration, salary administration, leave/ absence, recording, training and development,
human resource planning, recruitment, career planning and negotiation.
According to that, People’s Bank also used, Staff holiday planners to easily manage their
workforces annual leave requirement, Sick leave and lateness to monitor issues with employees
timing, Shifts and rotates in employees, create own work schedule with easy to use some
software in adapt MRMIS functions in bank.
Furthermore, PB uses in MIS relation to HRMIS; they used fingerprint system when employees,
recruitment of careers in online methods, using “Microsoft Teams” online meeting flatform for
their employee for a calling intranet meeting and they maintain employees’ details through the
database management system.
Marketing Management Function
Customer Relationship Management (CRM) relation to marketing side in People’s bank
can use to provide customer service, drive marketing efforts and analyse performance of
marketing efforts, builds better relationships with Customers, automates common tasks,
increases sales and makes newly attracting marketing methods target population.People’s
Bank also used CRM among their business activities as a marketing strategy in use
“People’s Wave App” and other mobility banking services. Through this app all
customers can connect to the various types of transaction, payment and get information at
the same time. People’s Bank introduced ATM machine and in addition they improved
their system up to the Cash Deposit machines, Online money transferring and SMS
banking services so on.
All of these facilities provided through the information system connect with the MIS by
the People’s Bank. Considering all this information which we collected; we can identify
How to Effect MIS Functions to the bank.

1.4 SWOT analysis of usage of information system in bank

Following are some of the unique effects of use MIS in only People’s Bank. Some on of

its benefited in customers of the People’s Bank. So, both of People’s Bank and its

customers are use the MIS techniques in usually.

Strengths or benefits of using MIS in People’s Bank

Convenience – E-banking is perceived to be convenient in every way, and one of the

8
main critical factors affecting the usage of Internet banking. They are open 24 hours a
day, and all 7 days of the week. So, the customer’s banking requirements will never have
to wait till the next business day
Speed and Reliability – ‘Speed’ as one of the main driving forces behind the success of
internet banking. Transactions, transaction processing, data transfer, information requests
etc. happen almost instantly in online banking
Security – Security of online banking to be a major factor affecting the usage. A common
misconception relating to online banking is that it is prone to security threats.
Low Cost – Customers, internet banking can be of a low-cost alternative to traditional
banking. The term ‘cost’ refers to all types of costs from financial costs, time costs,
energy costs etc. In all things considered, E-banking can provide a banking activity at the
lowest cost possible
Competitive advantage – Internet banking can be seen as a trend in to the future and
banks adopting e-banking will have a leading advantage over traditional banks.
Lack of human touch – Banking is a service and services rely on human interactions for
long term success. However, with internet banking the banks would not be able to form
close customer relationships
High level customer satisfaction Customer satisfaction is enhanced by information system
facilitating transaction at home. And also, transaction speed is very high. Customer satisfaction is
also a major factor that makes it possible to return a deal to any monetary transaction any place of
the world instantly. – Use bank mobile application

Weakness of using MIS in People’s Bank

Lack of knowledge and training labour- Even though the information system was
introduced, the lack of knowledgeable and trained staff in the present staff is major
weakness. It costs a lot to trained current staff as well as to hire new staff.
Instalment and maintain cost - It costs a great deal to install and maintain information
system. These costs will reduce profits and make it a huge weakness when it comes to
competitiveness
Limitations on transactions - Daily or monthly system transactions may make it difficult
for individuals. Therefore, transactions with customers without knowledge of the system
are minimal.

9
Opportunities of using MIS in People’s Bank
Opening up of new markets. - People’s Bank can access to markets where other
financial institutions are out of reach. On the other hand, foreign currency inflows
increase access of foreign markets such as western union, NRFC and RFC accounts.
New customers from online channel. - Due to a very busy and ill health, customers who
are unable to visit the bank can be contacted through the system. This will increase the
number of accounts and increase the amount of cash deposits. Due to that bank can
increase their assets.
Build a great network- People’s bank can build an efficient network through information
system that connects with other branches of the bank as well as other financial and non-
financial institutions. That is a great opportunity to satisfy current and potential
customers.
Threats of using MIS in People’s Bank
System failures – Internet, computer hardware, software and other systems could fail at
times making it impossible to access the bank accounts.
Security threats – Despite the numerous steps are taken to prevent security attacks, there
still could be attempts at hacking and theft. Also, there could be security flaws due to
negligence of the user.
Internet and E-banking knowhow - A certain level of technological and theoretical
knowledge is required to engage in e-banking activities. This might prevent some people
from being able to conduct online transactions.

10