Effect of Internal Control Systems and Financial Performance of Microfinance Institutions in Uganda
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Date
2026-03-12
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Uganda Christian University
Abstract
The study examined the effect of internal control system and financial performance of Microfinance institutions in Uganda, Nile Microfinance being the Case study. The objectives of the study were: To assess the effect of control activities on financial performance of Nile Microfinance (U) ltd. To examine the effect of risk assessment on financial performance of Nile Microfinance (U) Ltd. To assess the effect of control environment on financial performance of Nile Microfinance (U) Ltd. A cross sectional survey design was adopted using the quantitative method. The study population will be 36 consist of. The sample size is 33. Simple random sampling technique will be used to select the Nile Microfinance institutions top management workers while purposive sampling was be used to select the cashiers and loan officers. Data was collected using questionnaire survey. Data analysis involved use of descriptive analysis. The major findings were that the effect of control environment on financial performance, the effect of risk assessment on financial performance and the effect of control activities on financial performance. Control environment including separation of duties lead to low chances of engaging in fraudulent behaviors by employees. Through effective risk assessment, the financial institution can understand the potential impact of these risks and prioritize their resources to manage them appropriately. Control activities play a critical role in ensuring the accuracy and reliability of financial statements. The researcher concludes that there is a significant positive relationship between internal control systems and the financial performance of Microfinance financial institutions in Uganda. To enhance the effects of the internal control system on finance performance of Nile Microfinance (U) Ltd, enhance monitoring mechanisms; strengthen the credit risk management and; regular review and consistent updates on loan portfolio
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Undergraduate research