Internal Control Systems and Performance of Microfinance Institutions in Uganda. A Case Study of Kabale Municipality

Abstract

This study investigated the relationship between internal control systems and performance of microfinance institutions in Kabale Municipality, South Western Uganda. The study was guided by specific objectives, that is, to examine the effect of control environment on performance of microfinance institutions, examine the effect of risk assessment on performance of microfinance institutions; investigate the effect of monitoring activities on performance of microfinance institutions and to assess the effect of communication on performance of microfinance institutions in Kabale Municipality. The study employed a cross section survey design to explore information from different stakeholders in selected microfinance institutions at a given point in time. A sample size of 100 respondents was considered for the study, selected by simple random sampling and purposive sampling techniques. Data was collected through primary sources using structured questionnaires and interviews. Statistical Package for social Scientists, SPSS, Ver. 23 was used to analyze the data, and findings were presented in tables and charts. Findings revealed that risk assessment significantly affect performance of microfinance institutions in Kabale Municipality. However, control environment, monitoring activities and communication had a significant effect on performance of microfinance institutions. It was concluded that while all elements of the internal control system are implemented complementary, the role of risk assessment was profound for improvements of performance levels in microfinance institutions, than other components. In due regard, the study recommends that risk assessment be reinforced so as to continuously performance in microfinance institutions in Kabale Municipality

Keywords:Internal Control Systems, Performance, Internal audit, Control environment, and Monitoring activities

DOI: 10.7176/RJFA/14-1-04

Publication date: January 31^st 2023