Effectiveness Of E Payments

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02 Nov 2017

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Presented by

James Ojera

MBA. 29

No.34571.

SUPERVISOR: Prof. Vincent Feltkamp

A thesis proposal submitted to Maastricht School of Management in partial fulfilment for the requirement of the award of a Masters in Business Administration (MBA, A&F) of Maastricht school of Management-The Netherlands.

Content

List of tables

List of figures

List of acronyms

NWSC-National Water & Sewerage Corporation

MTN-Mobile Telecommunication Network

UTL-Uganda Telecom Limited

UEDCL-Uganda electricity distribution Company limited

EFTs-Electronic funds Transfer

RTGS-Real time gross transfers

DDs-Direct Debits/banking

IV-Intervening Variable

IDV-Independent Variable

DV-Dependent Variable

Chapter One

1. Introduction

This chapter will describe and provide the framework for assessing the effectiveness of e-payments as an option for receivables control in utility organizations in Uganda, a case of National Water and Sewerage Corporation (NWSC) (e-water). The background to the study will be presented with the problem statement, purpose of the study, research objectives and research questions, research hypothesis, scope of the study, subject scope and the time scope, justification of the study, the conceptual framework, significance of the study, organisation of the study and the research timeline.

Background to the Study

(Kwame, 2007), The existence of efficient receivables management practices can make a noticeable difference between the successful and failure organisation and this is particular important to the managers of utility organisations, because they are the ones who strive for finances and the cost of not having enough money, to them, high arrears are undesirable

As established by established by Padachi (2006), Efficient and effective receivables control is very important for the success and survival of the utility organisations that requires to be upheld to enhance performance of the organisation and contribution to economic growth.

Salek, (2005), describes revenue generation as the reason and core for business existence. A company which create new products but does not generate enough revenue from it usually burn their cash and cease operations. Companies expend a substantial part of their resources for generation of increasing levels of revenue.

However, the revenue generated must be converted into liquid cash. Cash is known to be the lifeblood of a company. Every dollar of a company’s revenue becomes a receivable that must be managed and collected.

Receivables control or Debtors management is one of the essential functions of management in any service organisation to ensure its survival. Management therefore must design policies and strategies on how to keep credit as low as possible and for a short period by using all feasible tools. For instance, credit policy as one of the essential tools for effective management of debtors in an organization and other means of debt recovery can be instituted.

According to (Ross & Westerfield, 1988), granting of credit could cause bad debt expenses, which reduce the profitability of the firm. Credit associated costs are broadly categorized into carrying and opportunity costs. Carrying costs are associated with investment in debtors like losses from bad debts, cost of managing, cost of supervising, production and selling costs because of increased business and costs of field visits.

In March 2011, NWSC management decided to close all the cash collection centres and directed customers to pay up the bills in the selected banks and other payment service providers such as Mobile Money Vendors (MTN, UTL, and Airtel) and branded the system as e-Water.

One important reason for the introduction of e-water was the fact that customers did not pay their bills in time on the basis that the distance to the payment point for the customer’s premises may be more expensive than the bill itself so the customers decide to stay back till the bill reach a reasonable amount leading to accumulation of arrears, in order to come out from this there was need to decentralise the payment systems, to make it easily accessible to the clients and convenient ie customers can pay any time through the mobile telephone hence the introduction of e-water.

Table . Flow chart for e-water payment process Sms feedback to the customer on receipt of money from Bank & NWSC

Amount relayed to the Scala server thru’ the billing server

Client with Mobile phone and Bank account pays direct

Msg from Bank to NWSC for payment receipt

Client without Mobile phone pays thru a Vendor Agent

NWSC

Client

Vendor

Agent

Vendor

Eg Banks,Mobile money Vendors

NWSC

Billing Server

NWSC

Scala server (Accounting)

Source: NWSC e-water platform

E-payment is still at an infant stage in Uganda and also in many other developing countries. In many of these countries such studies have not been carried out in this case specifically to National Water and Sewerage Corporation. E-water is still a new system of payment by the client’s, it is a system built in-house and still needs a lot of modification and enhancement in order to effectively meet the client’s needs of on-time update of their payments on to their accounts in the billing system as well as the Corporations needs of having these payments posted in time in the general ledger in order to establish at a snapshot the Arrears position. There is a gap of knowledge and information on the value of the system, yet large investments are required in setting up such infrastructure. A systematic analysis of e-water will be done to provide information on the system’s performance, identification of existing weaknesses and control measures on receivables.

NWSC was formed in 1972 by decree, to serve the urban areas of Kampala, Entebbe and Jinja. In 1995, NWSC was re-organized under the NWSC Statute. The company was given more authority and autonomy and the mandate to operate and provide water and sewerage services in areas entrusted to it, on a sound, commercial, and viable basis.

In 1988, NWSC took over water and sanitation services in Mbale, Tororo, Masaka, and Mbarara. In 1997, Kasese and Fort Portal were handed over to NWSC, followed by Kabale in 1999. As of June 2009, the following Ugandan cities and towns receive services from NWSC, Bushenyi, Lira, Gulu, Mubende, Masindi, Lugazi, Hoima, Soroti, Iganga, Mukono and Njeru. (Ministry of Water and Environment, 2006).

Statement of the Problem

Many organizations accept credit sales as a means of increasing on their financial performance. Good financial performance is an acknowledgement that the business is running smoothly (Block & Hirt, 1987), but sometimes it is not easy to achieve good financial health. There are quite a number of problems associated with the financial performance of organizations, and numerous studies to investigate these different aspects have been done. For example; in some cases, a decline in the financial performance may result from increased operational costs, decreased revenue, or both according to a profit analysis by Gawlicky (2001) on Blockbuster Video Company.

The growth in arrears in utility organisations is a result of selling services on credit due to the nature of the business. National Water and Sewerage Corporation customers have failed to respond to great efforts of prompt payment of bills which has led to the growth in arrears of up to 40 Billion Shillings as at December 2007, (Annual report 2006-2007, 2007) and a provision for bad debt write off of UShs. 7,392,868,000 Billion as at December 2007 and UShs: 10,173,258,000 billion as at December 2008, (NWSC Annual Report 2007/2008).

The arrears are growing and seem to be increasing every year. If this problem continues, the corporation is likely to suffer from liquidity trap, failure to achieve operational efficiency, among others. High levels of arrears in a utility organisation is undesirable because it leads to late payments to suppliers and thus cause organisation to juggle between various forms of short-term finance to fund their working capital requirements (Cowton & Ho, 1985)

The corporation may be facing challenges in establishing effective collection methods, resulting into accumulation and growth of arrears. Other options adopted by management have not been effective enough hence the introduction of e-payment system tagged (e-water).

Objectives of the Study

General objectives of the study

The purpose of the study is to assess the effectiveness of e-water as an option for receivables control in utility organisations in Uganda a case of National Water and Sewerage Corporation.

Specific objectives of the Study

To assess the effectiveness of e-water as an option for receivables control

To examine the impact of e-water on the receivables control level of NWSC.

To establish challenges faced by the system and how it can be improved to make the system effective.

Research Questions

Is e-water an effective way of debt collection for utility organisations?

What impact has e-water on Debtors control in utility organisations in Uganda?

Are there any challenges faced by the system, and how do you think they can be improved to make the system effective?

Research Hypothesis

i) e-water is an effective way of receivable control.

ii) e-water reduces average receivables/total receivables.

Assumptions

The researcher assumes that the variables under study can be measurable with fair accuracy, the instruments and methods of data collection, measurement and analysis are valid and reliable for the purpose of the study, the methodology is appropriate to the problem being addressed, the results can be generalised for all utility organisations and that the results of the study will be relevant for the stakeholders use.

Significance of the Study

Provide information on the effectiveness of e-water as a system for receivable control, identify challenges and provide solutions for improvement for receivables control.

Contribute to the body of knowledge and literature already in existence and also contribute to closing the gap on the literature on e-water as an option for receivables control in utility organisations in Uganda.

Inform management on effective receivables control methods and how best the system could be properly managed to get the maximum on the investment.

Sister utility organisations like Uganda electricity distribution Company limited (UEDCL), UMEME etc will benefit from the study by using the study results as a benchmark for improvement of their system or adoption of e-water platform.

Subject Scope

The study will cover the debt collection techniques the have been used by NWSC in its debt collection efforts and analyse whether these methods have been effective or not and why the need for e-water as an option for receivables control in Uganda, it will also study effectiveness of e-water as an independent variables and receivable control as a dependent variable.

Geographical Scope

The assessment of the effectiveness of e-water as an option for receivables control for this study will be carried out at in Uganda with NWSC as a case study, the study will concentrate specifically in Kampala district and the other 22 district under NWSC including the Head Office in Kampala where the accounting information is finally consolidated.

Figure 2 Showing map of Uganda

Map of Uganda

Time Scope

The study will cover the period from 2005 to 2009, before the introduction of e-water to study the arrears pattern and the period from 2010 during and after the introduction of e-water to date to enable the researcher assess the trend for comparison and therefore arrive at informed decision on the effectiveness of e-water.

The conceptual frame work

The conceptual framework will describe the theories or concepts to be studied or addressed in the research, it will further show the Independent Variable as e-water and all the dimensions such as Electronic Funds Transfers (EFTs), Real Time Gross Transfers (RTGs), Direct Debit/Banking and Mobile Money Payments and the Dependent Variable-Receivable control and the dimensions such as Credit Terms, Credit Standards, Collection procedure including the intervening variable which are factors that may affect the effectiveness of e-water system which includes factors such as Stability and reliability of the system and Customer Confidence

Independent Variable

e-Water

Dependent Variable

Recievables control

Intervening Variables.

-Stability and reliability of the system.

-Customer Confidence

Dimensions for e-water study

- Electronic Funds Transfers (EFTs)

-Real Time Gross Transfers (RTGs)

-Direct Debit/Banking

-Mobile Money Payments

Dimensions for receivables.

-Credit Terms.

-Credit Standards

-Collection procedure

Source: (Adopted form the Literature reviewed).

Chapter 2

LITERATURE REVIEW

Introduction

This chapter will provide a critical review on the current information and knowledge on e-payments (e-water), it will provide empirical and theoretical literature explored by various writers on the system, it will especially examine the benefits arising out of the system, shortcomings, what other studies have shown of the subject, their findings and what they have not been able to discover about the system which will show any existing knowledge gap. In the context of the study, only the main dimensions of e-water will be studied and their effectiveness compared as against the receivables status of the Corporation.

Apparently utility organisations in Uganda are greatly hit by financial problems; they are unable to finance most activities by themselves let alone relying on loans and grants from Donors and Government yet at the same time they are not attractive enough for investments, this is because they are involved in provision of services that are essential for the community such as water supply, electricity supply etc, this trend has seen many of them being privatised.

Government parastatal have often deployed different methods of debt collection such as use of debt collectors, door-to-door follow up by their staff, disconnection of supply and including distressing of clients, however this seems not to yield the expected results. Many more debt collection methods exist in the world, however the research will concentrate on e-payments since it is still a new phenomenon in many parts of Africa especially Uganda as a tool for receivables control.

Evolution of e-payments (e-Water)

(Armesh, Rad, Azadavar, & Saeid, 2011), E-payment or Electronic payment is any digital financial payment transaction involving currency transfer between two or more parties. In a simple context, an e-payment transaction may be defined as one in which monetary value is transferred electronically or digitally between two entities as compensation for the receipt of goods and services. An entity refers to a bank, business, and individual consumers.

The e-water system was established to work through a platform or interface between the customer billing system of NWSC and the vendors who in most cases are the bankers of NWSC; however, the customer’s payments are later reconciled to the accounting system of the Corporation which hold the debtors control accounts.

Constructs /Dimensions of e-water

Components of e-water or the dimensions under which the e-water arrangement is executed comprise of Electronic funds transfers (EFTs), Real time gross transfers (RTGs), Direct Debits/banking (DDs) and Mobile Money payments:

Electronic funds Transfer (EFTs)

Is a payment system where one party to a transaction by instructions asks his bankers to transfer a stated amount of money from their account electronically to the other party as it becomes due without use of cash or cheque transactions based on a given schedule. Transactions are processed by the bank through the banking clearing system or house, and this must depend on the available fund on the payers account to meet the transaction demands.

Real time gross transfers (RTGS)

Real Time Gross Settlement. RTGS is a payment system which is one of the fastest money transferring system between the central bank and other banks. In the RTGS system, the transactions that require settlement are processed and cleared for settlement in "Real time" and on "Gross" bases. The moment a transaction is completed, it is irreversible. "Real time" means settlement is done as and when the transaction is supposed to be processed. There are no delays. "Gross" implies that the transactions are settled one by one without being put together with other transactions.

Goals of RTGS

The major goals of RTGS are

To reduce settlement risk due to settlement lag and the value of the transactions in question.

To reduce credit risk

Speed up the process of high value payments

To give accurate position of the participating bank

Direct Debits/banking (DDs)

Through the Direct Debit banking system (DD) the customer goes to the bank with his NWSC account details bearing the Customer reference (CR) of any of the banks handling a water payment. The Customer supplies his/her credentials to the tellers of the Bank.

These will include the NWSC Customer Reference and Area the property belongs to.

Through the Core Banking the bank teller confirms the details by enquiring with NWSC’s Billing Platform, the details are retrieved through the NWSC billing system which hold the customer data base of the Corporation.

Mobile Money payments

National Water and Sewerage Corporation (NWSC) transitioned to a completely electronic

system dubbed "e-water" in March 2011. Under this scheme, all NWSC payment offices across 23 cities and towns were closed. Water users must now pay their water bills at bank branches or via mobile money platforms offered by the major telecoms Mobile Telecommunication Network-MTN (Mobile Money) and Uganda Telecom Limited-UTL (M-Sente). Within four months of the "e-water" launch, over 20,000 of NWSC’s account holders had switched to the mobile money option, accounting for 10 percent of the total customer base. In excess of USD 300,000 worth of water bills are paid via mobile money channels every month, 80 percent of which derives from Kampala, MTN is the dominant player, accounting for 95 percent of water service revenue collected through mobile money channels.

(Hope, Foster, & Cohen, December,2011) Mobile money is an electronic payment system that enables money transfers to and from an electronic account that can be accessed via an ordinary mobile phone.  Each customer’s account is linked to their mobile phone number by means of an in-built SIM-card application.  Physical cash withdrawals and deposits are facilitated by a network of retail agents.  While configurations vary across providers, the viability of mobile money is premised upon the cost base associated with an agent network, which is lower and more flexible than establishing ‘bricks and mortar’ bank branches.  Mobile money can therefore profitably extend the reach of financial services to those who have traditionally been unbanked, such as low-income or remote households. 

Receivables Control

The dependent variable being studied is trend in the gross or total receivables account. (Walter, 2011) Receivables are monetary claims against the other, these are the amounts collectible from the customers as a result of selling goods or offering services on credit, Accounts Receivable in the general ledger serves as a control account that summarises the total amount receivable from all the customers. The effectiveness of e-water under this variable will be studied by looking at:

the time lag between billing the customer and the customer paying

And the proportion of the bills paid immediately

Total arrears outstanding

All the amount due or a portion against the billing leading to arrears,

If the trend of payment is seen as increasing compared to the period before the introduction of e-water, then the system will be considered effective.

Credit Terms

According to (Anderson, 1995), credit terms are stipulations for granting credit to its customers. They: Credit period, cash discounts, credit limits and special terms.

Credit Period and receivables control

The length time a client stays without paying the credit. The terms "2/10, net 30"mean that a 2 percent discount is given if the bill is paid before the tenth day after the date of invoice: payment is due by the thirtieth day. The credit period, then, is thirty days. The credit period offered by NWSC to all clients without selection is 30 days which is one billing cycle.

Credit Standards

Credit standards or credit vetting guidelines refer to the criteria which a firm follows in selecting customers to whom goods and services could be sold on credit, (Howorth & Wilson, Late payments and small firms, 1999). A firm following a loose credit policy tends to attract customers using very liberal quality standards and credit is granted even to those customers whose creditworthiness is not fully known. In contrast, a firm following a tight credit policy sells on credit on a highly selective basis only to those customers who have proven credit worthiness. It therefore follows that, the more relaxed the credit standards are the higher is the volume of credit sales and the higher are the arrears.

In granting credit, a firm determines how much effort to expand trying to distinguish between customers that will default as it directly influences profitability and cash flows. The procedures and devices a firm uses to select a credit applicant we referred to as credit analysis and this involves gathering relevant information and determining the credit worthiness of an applicant using credit scoring guidelines. The Financial Manager should consider the following five (5) C’s of credit analysis; Character, Capacity, Conditions, Capitals and Collateral.

5C’s (Ross & Westerfield, 1988), (Pandy, 1995) these guidelines are;

1. Character- It is willingness of the applicant to meet credit obligations or the image of integrity / honesty shown in various financial dealing clients with high levels of integrity \honesty are preferred because they make efforts to clear their obligations information such as bank and trade references, level of education, occupational stability, contact persons and historical background are quite relevant.

2. Capacity-Ability of the applicant to meet obligations out of the operating cash flows in the foreseeable future. (Greengard, 2003) urged that care should be taken in assess both the existing and potential capacity to generate revenues in the future to finance the obligations because current capacity may be misleading.

3. Capital – is the applicants financial reserved amount adequate to pay back after meeting day to day obligations, it is a measure by which the credit applicant will meet his obligations (Refuse, 1996).

4. Collateral \security- it is the pledged asset in case of default should be easily marketable, safe or free from any claims and it is the last thing to consider in credit evaluation (Kakuru, 2003)

5. Condition- General economic, social, legal political condition prevailing at that time coupled with the business prospects or future conditions of the business that may affect the customer’s ability and willingness to pay. If the environmental assessment does not show good results then granting unrestricted credit would be a wrong decision.

(Refuse, 1996) The more liberal and well defined the credit appraisal and approval procedures, the higher the likelihood of receivables because most customers are willing to take credits sales and vice versa (Van Horn, 2002). This affects both the sales volume and the number of new customers as well as the available cash in the business. (Bugress & Bryant, 2001) argue that the best time to manage trade credit risk and control delinquency is when evaluating a credit applicant or when performing updates on active customers. This is vital in determining the Company Performance in terms of growth, sustainability and harvest stages.

Credit Applicants Analysis and receivables control

In order to avoid unnecessary bad debts and cost related to late payments, the firm must undertake a credit analysis of the applicant and determine if the company falls above or below the minimum quality standard. If financial statements are provided, the analysis should undertake a ratio analysis, a source and use of funds analysis and perhaps other analysis. The analysis will be particularly interested in the applicant’s liquidity and ability to pay bills on time. Edwards further argues that there are two main reasons for applicant’s worthiness evaluation, profit reasons and sales reasons. By profit he means possible delays in payments or bad debts that affect the profits and by sales reason he means that it is also useful to know the ability of the customer to buy your products. ( Edwards 2004, )

The goal for determining the credit worthiness of an applicant is to analyze the probability that the customer will pay the debt within the agreed time. The depth of the analysis varies a lot in different companies. Some companies make credit decisions based on very shallow information of the potential buyer. The analysis helps to draw conclusions on the applicants’ financial strengths, quality of management and the nature of customers.

Credit Applicants Evaluation and receivables control

Having established the terms of credit to be offered, the firm must evaluate individual credit applicants and consider the possibilities of bad debts losses or slow payments. The credit evaluation procedure involve: collecting credit information, analyzing this information to determine the applicant’s credit -worthiness and finally make the credit decision. The credit decision, in turn, establishes whether credit should be extended and what the maximum amount of credit should be. (James Van Horne, 1980)

Collection procedure

A collection policy is needed because not all customers pay their bill in time, (Helms, Dibrell, & Wright, 1997). Collection efforts determine the actual collection made, average collection period and the size of receivables. Collection effort should aim at accelerating collections from slow payers and reducing bad debts. Collection procedures for past due accounts and responsibility for collections should be established in very clear terms.

The procedures of debt collection range from sending reminders \delinquency letters informing the client of the past due status of the account, making telephone calls in relation to outstanding balances, actual visits to customers, use of litigation measures if the customer continues to ignore all earlier debt collection efforts to pay overdue accounts, employing a collection agency, refusing to grant additional credit to customers and debts are cleared, factoring of accounts receivables enables the company to press over the responsibility for debt collection to discount and factor house (Refuse, 1996) (Bugress & Bryant, 2001).

However, as much as the above been cited, slow paying customers need to be handled cautiously to avoid collection errors (Harris & Graham, 1999). Where long term patronage business is desirable, legal procedures should not be used, as they tend to mark a final point of business dealing between the two parties. A business that considers a change of policy from cash basis to granting credit should do so only if it estimates additional profit on increased sales will yield a return greater than the opportunity cost of Capital, (Knott, 2004) investment in debtors on the volume of credit sales and over aged collection period. If the term has control over volume of credit sales and average collection period parameters of the firm’s credit policy than profitability and liquidity is guaranteed. (Ross & Westerfield, 1988).

According to (Ross & Westerfield, 1988) granting of credit could cause bad debt expenses, which reduce the profitability of the firm. Credit associated costs are broadly categorized into carrying and opportunity costs. Carrying costs are associated with investment in debtors like losses from bad debts, cost of managing the debt like making telephone calls, sending reminders, cost of supervising, production and selling costs because of increased business and costs of field visits. While opportunity costs are because of lost sales from refusing to offer credit.

According to (Bugress & Bryant, 2001), (Van Horn, 2002), effective credit managers should establish optimum credit policies to take into consideration variable like credit terms, credit monitoring and collection efforts and credit standards which mix defines the level of credit sales and receivables as well as the extent of credit risk exposure to the company, extension of credit terms boosts sales, increases debtors and pushes the stock levels required to support higher level of sales, (Knott, 2004) cash flows will therefore be effected by waged payment of debtors.

(ACCA, 2007/2008) puts it clear that a credit policy is a balancing act that managers do in the management of receivables and this is a trade off between liquidity and profitability where by liquidity involves collecting sales, receipts as quickly as possible to reduce the cost of financially receivables balances of profitability is the extending of credit period to customers to encourage additional sale inadequate credit policy management lead to late payments and these cause companies to juggle various forms of short-term finance to fund their working capital requirements (Cowton &Ho,1985)

Credit Monitoring and Follow-up, Billing Procedures and receivable control

A firm needs to proactively and on a continuous basis monitor and control the debtors to ensure acceptable variability within the industry average and success of collection efforts. According to (Fraering & Minor, 1994) inadequate monitoring of the receivables leads to increased levels of credit sales & receivables beyond manageable levels resulting into bad debts. Monitoring of receivables could be done through financial ratio analysis and aged debtors analysis reports among other ways. Financial ratios used in water utilities include Billing for the period, Revenue and Arrears Collection period, Collection Efficiency, Trade Receivables Balance, Trade Receivables Ratio, Average Receivables, Aging of Trade Receivables ( given appropriate software is available), Status of institutional and Private Customers Trade Receivables, Arrears Collection by Agents, Debt Equity Ratio, Average Collection Period (ACP) and Accounts Payable Period. Mwauwasa Credit Policy ,2007,14)

(Kakuru, 2003) further argues that for a firm financial benefit from credit sales, there must be in existence a code organized and credit monitoring process to minimize cases of payment defaulting for example due to business solvency.

Credit Collection and handling of debt in default and receivables control

The credit and collection procedures of a firm involve several decisions as to the quality of account accepted, the credit period, the cash discount given, any special terms such as seasonal dating, and the level of collection expenditures. In each case, the decision should involve a comparison of what is to be gained by a change in policy with the cost of the change. Optimal credit and collection procedures would be those that resulted in marginal gains and equaling the marginal costs.

To maximize profits arising from credit and collection procedures, the firm should vary these procedures jointly until an optimal solution is achieved. That solution will determine the best combination of credit standards, credit period, cash discount policy, special terms, and level of collection expenditures.

Default rate is the measure of the proportion of the uncollectable receivables that is bad debts loss ratio. This ratio indicates the default risk that is the unlikelihood that customers will fail to pay their credit obligations, (Pandy, 1995).

Effectiveness

According to (Norman, 2011) looks at the way a new system is used to reduce of the cash cycle, the length of time it takes from billing the (Invoicing) the clients of supply to the time the client make the payment. Reduction in the cash cycle can enable the organization save large amounts of cash that it can use for further investments and reduces the cost of borrowing to finance these investments.

The effectiveness of e-water will be studied in terms of the ability of the system to meet the customer’s requirements of having the amounts paid posted in their accounts in time, accurately and update done in time to avoid supply disconnections from the perspective of the client, while from the organisations point of view, effectiveness will be viewed form the ability of the system to control arrears growth to a level of not more than 20% of the current month billing and the ability of the system to have the general ledger accurately and on time updated to show the correct arrears position at a given date.

It is therefore important to note that effectiveness of the system will be studied based on its ability to control the level of receivables to the level not more than 20% of the current billing as per the contract signed between the Government of Uganda and NWSC in the GOU performance contract.

NWSC singed a performance contract with the Government of Uganda (GOU) to enable it operate autonomously and avoid divestiture and among the clauses agreed up on was the reduction of arrear by 103% on collections meaning having the current billing fully collected and 3% of the arrears collected every month.

Intervening Variables (IV)

According to (Blumberg, 2011), intervening variables are the variables that have an effect on the phenomenon under study but cannot directly be observed or seen, manipulated or measured and therefore the effects are deduced from the effects of the independent variable (IDV) on the dependent variable (DV), these variable can be quite many but for the purpose of this study, two IV’s will be under study as below

Stability and reliability

Customer confidence

The consumer’s confidence that their money and personal information will not used against their personnel interest. Even if we use an imperfect system, consumers want to believe that vendors, banks and credit card companies will not misuse their personal information (Abrazhevich, 2004). The other aspect is that customers should trust the payment system adopted by the other user. The existing literature points out that high level of user confidence and trust in EPS is a contributing factor for the successful adoption of e-payment systems (Kurnia & Benjamin, 2007).

Concerns about security in the network area reveal that there need to be further improvements in the electronic payment protocol to enhance trust in online payment systems. Due to the increase in bank mergers and acquisitions, customers are sceptical about the security of online payments (Abrazhevich, 2004). It is agreed that online sales are not as safe as conventional sales; people are suspicious since there is no human factor involved in the sale and it is done in a virtual setting (Whiteley, 2000). The existing literature recognises the security concerns of users and the effect they have on the adoption of electronic payment systems (Kurnia & Benjamin, 2007).

Literature Gap

From the literature available and review, studies found out indicated were carried out of Uganda and in mostly developed countries with well developed infrastructure making the system fairly effective, however such studies have not been carried out in Uganda therefore not enough literature is available to show the effectiveness of the system thus creating a gap of insufficient information for the study.

Further , the literature reviewed have only concentrated on e-payment for internet payment for non-utility goods organizations since utility organizations are service providers, not much has been written about e-payments for utilities and as such the existence of a gap which this study aims to fill.

Important still, e-water is an in-house developed platform to be used by NWSC for water bills payments and therefore these types of arrangement is not yet fully know in public circles for literature. Literature reviewed reveal that much of the studies have been on off-the shelve software already developed and not considering in-house developed platforms, the study will therefore add on existing literature especially on the organization tailored needs, this indeed can be used by other utility organizations in Uganda for receivables control..

Chapter 3

Methodology

Introduction

This chapter will comprise of the description of how the research will be conducted. It will include the research design, study population, sampling design and size, data collection methods, data analysis, ethical considerations and limitations of the study.

Research Design

The study will adopt an inductive approach, an inductive approach is appropriate when carrying out case studies of this type, this approach can be used for creating knowledge in areas where there no existing theories. (Yin, 1994). Two reasons motivated my choice of this method; first there are no established theoretical framework for this type of payment arrangement, secondly, The other reason is that there is now constant innovation and changes in e-payment systems available, in many countries and organisations with little regard to standardization, this rules out the possibility of using a deductive approach which is usually based on testing a sort of acceptable theory tested in a new environment.

The study will also take a time series study design by use of panel data which will involve both qualitative and quantitative data collection and analysis. The design is chosen to test the relationship between e-water as an independent variables and receivables control as a dependent variable. The study will adopt a panel data survey because it will be conducted across participants over a short period and is intended to pick representative sample elements of the population. The panel data survey design will be used on account of its rapid turnaround time in data collection.

The researcher will use a mixed method because the data collection will comprise of both qualitative and quantitative approaches. This method of data collection recognizes that there are weaknesses inherent in each type of data. By combining both quantitative and qualitative data, the researcher can neutralize the weaknesses involved in each single method of data collection (Creswell, 2003).

Study Area and Population

The study population will comprise of both management and senior staff that execute and interact with the debtors control functions of NWSC, The study will take representative samples from all the regions where NWSC has offices in the country. However, due to time, costs and convenience in order to get representative data sample, the study will cover 22 respondents from a population of 197 respondents, these are the staff who can give clear information whether in their observation the system is effective.

Sampling Design

The researcher will adopted a stratified sampling strategy to ensure a representative sample of the target population. Respondents will be categorized according to their departments and role in the e-water and receivables control functions.

Table , Showing Towns under the management of NWSC-water service supply.

Central Eastern Western Northern

Kampala Tororo Bushenyi Lira

Mubende Jinja Kasese Gulu

Entebbe Lugazi Kabale Masindi

Hoima Mbale Mbarara Arua

Masaka Iganga Fort Portal

Mukono Soroti

Lugazi

Sample Size

From the towns under the management of NWSC as indicated in the table above, a sample of 22 staff of NWSC will be used in the study, representing about 29% of the population, these are the staff who are directly involved in the activities of receivables control, they will be picked as per the category where they fall as indicated in the schedule below.

Table . Showing Sample Size

Category

Population Size

Sample Size

Area Managers

22

4

Commercial/billing officers

14

6

Accounts officers

22

4

H/q Finance & Accounts department

10

4

Revenue Unit

9

4

Total

77

22

Source: Primary Data.

Data Collection Methods

Data will be collected by use self-administered questionnaires, interviews and review of documents for both primary and secondary data. Quantitative and Qualitative approaches will be used.

Data Processing and analysis

In order to ascertain the required quality of accuracy, consistency, uniformity, proper arrangement and completeness of the data, the questionnaires collected will be compiled, sorted, edited and coded. Qualitative data will be coded using R. Yin coding theory, and analysed afterwards. The data will be processed and analyzed using R.v3 tool for panel data. Data will be presented in the form of frequency tables, graphs and pie charts, correlations, multiple regression analysis and interpretation of the output given in order to answer the research questions.

Validity of the Instrument

Validity is about the ability of the instrument to measure what the researcher intends to measure. An instrument that is valid for a specific situation or audience may not be valid in a different situation or for a different group. The researchers will carry out a pre-test on the questionnaire and interview guide using a sample of questions by sending to selected respondents to justify the use of the instrument.

Reliability

As the quantitative data will be pulled from the company’s data base, we assume it is reliable, a sample of questions will be sent to respondents who are not part of the intended respondents in the study. This will help to ensure consistency and dependability of the research instruments and their ability to tap data that answer to the objectives of the study or otherwise the researcher will have to think of another instrument. In order the improve reliability of the instruments, all the questionnaires will be recorded.

Ethical Considerations

The researcher will obtain a permission letter (Authority) from Maastricht School of Management (MsM) to authenticate the study and therefore allow the respondents to freely give the relevant information for the study.

The researcher will seek NWSC top Management consent and support for the study, this is to enable the respondents freely give the relevant data as shall be requested for to enhance the study.

Furthermore, the right to privacy of the respondents will be respected by not getting to the respondents without appointments and not following them to their homes or private places for their responses.

Limitations of the study

The scope of the study will be limited to East Africa (Uganda) due to payment methods used. In many parts of Africa, this is still a new method of payment for utility bills, so the study will be limited only to Uganda

Major towns under NWSC management. There are a number of towns in Uganda, however not all the water supply system is under NWSC; the study will be limited to those towns under the management of NWSC.

Will cover only one utility organisation-NWSC; there are many utility organisations in Uganda; the study will concentrate only on NWSC as a sample for the other utility organisations since they have similar characteristics.

Planning Horizon

Date/Period

Activities

By who

Expected output

28th,march 2013

Submission of 10 page proposal

Self-James ojera

10 pager submitted

4th-5th April

Proposal presentation

Self-Ojera

Proposal presented

April-July

Proposal improvement, Submission of 1st & 2nd draft version to supervisor questionnaire designing and pre-testing for validity and reliability, data collection

Self and supervisor

Proposal improved and questionnaire designed and tested, data collected.

August 2013

Compiling the thesis report.

Submission of 1st &2nd draft version for review.

Self with the assistance of the supervisor

Report reviewed and adjustments made where necessary and properly compiled.

19th -23rd August 13

Presentation and defence of thesis.

self

Thesis defended

28th march 2013 will be the submission of the 10 page proposal to MOE as requirement and as a way for preparation for the presentation and therefore a spring board to the main thesis proposal; this will be done by the researcher.

4th and 5th March 2013 is the presentation of the proposal with a power point presentation where the researcher will present to evaluation committee the topic and motivation for the research in order to get an endorsement for the study.

April-July is the period for the improvement of the proposal when the researcher will be in full contact with the supervisor in order to come with a concrete proposal that shall promulgate to the period of questionnaire designing and distribution for data collection which should take place between 7th -21st july 2013, the researcher plans to collect the data as quickly as possible to enable data entry and analysis to fasten the process of completing the thesis also during this period the student will be able to present to the supervisor a draft copy of the report for review.

August 2013 will be the period for concluding the report and review with the supervisor to enable production of the final copy of the thesis report leading to the presentation and defence from 19th -23rd August 2013.



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