Internal control System and organisational effectiveness in micro deposit taking institutions in Uganda

Abstract

The study established the effect of internal control system on organisational effectiveness of Micro Deposit Taking Institutions (MDIs) in Uganda using FINCA as a case study. The study was guided by the following objectives; to examine the effect of the control environment on organisational effectiveness; to evaluate the contribution of risk management on organisational effectiveness; and to establish the effect of monitoring on organisational effectiveness in FINCA. The study used a case study approach adopting both qualitative and quantitative approaches. A sample size of 56 respondents comprising of senior managers, operations officers, IT officers, HR consultants, and risk officers selected using census and simple random sampling methods. Data was collected using self-administered questionnaires and in-depth interviews. The data was analyzed using Microsoft excel and SSPS version 20. The major findings of the study revealed that there is a significant relationship between control environment and organisational effectiveness (r=.545**) where control environment was a predictor of organisational effectiveness. Likewise, a significant relationship was observed between risk management and organisational effectiveness (r=.574**) where risk management was seen to be a predictor of organisational effectiveness. Further still, the relationship between monitoring and organisational effectiveness showed a significant relationship (r=.475**). In conclusion, control environment, risk management and monitoring as dimensions of internal control system, determine organisational effectiveness in Micro Deposit Taking Institutions. The study recommends therefore, that management of the MDI should make efforts to ensure that the internal control system used is able to support the control environment, effective risk management and monitoring so as to promote organisational effectiveness. Finally, recommendation of a longitudinal survey is appropriate to study the true nature of relationship between internal control system and organisational effectiveness, should be considered for further research and a similar study may be carried out on other MDIs.