Research On The Effects Of Internal Control Systems On Financial Performance Of Microfinance Institutions In Senegal

This study examined the effectiveness of internal control system in relations to the performance of microfinance institutions in Senegal.Based on 500 questionnaires was administered to chairman of the audit committee,head of IAF,and the Manager of each of 75 selected microfinance institutions.This study will seek to find out if there are proper and accurate recording of financial transaction,enhancing the accountability of chairman and IAF head in order to improve the productivity and performance effectiveness.Both quantitative data and qualitative data will be collected to address three research objectives and hypothesis.Hierarchical linear regression was carried out in SPSS to establish the relationship between the internal control system and the performance of microfinance institutions in Senegal.The financial performance of SME’s(microfinance institutions)was measured using the rate of return on Assets(RO)A0,Rate of return of Equity(ROE),and the profitability.Internal control was measured by five constructs namely: control environment,risk assessment,control activities,monitoring,and information and communication.The study found out that management of the institution is committed to the controls of the SME’s and they actively participate in monitoring and supervision of the activities of the MFI/SME.On the effectiveness of the internal audit,the study found out the internal audit department is not efficient,doesn’t conduct regular audit activities and doesn’t produce regular audit reports.With regard to control variables in the internal audit function which influenced their performance,like Education level of internal audit function(IAF)head and other control variable like also duration of existence of the SME.It was found out that SMES which have been existence for at least 5 years.The study recommends that the government of Senegal through the Institute of Certified Public Accountants should institute internal mechanisms and policies which should increase accountability and efficiency of microfinance institutions in Senegal.