Internal Control Systems and Financial Performance of Microfinance Institutions in Laikipia County – Kenya
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Date
2024-10-24
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IJARKE Business & Management Journal
Abstract
Most microfinance institutions have pulled out of the industry altogether because of how much money has been lost in Kenya's
microfinance sector. Return on equity has grown negatively due to low profitability and losses. From the 2015–2016 fiscal
years to the 2022–2023 fiscal years, client deposits declined. After rising in December 2016, the capital base was hit hard by
the growth of nonperforming loans. As a result, liquidity levels will fall in 2019, 2020, 2021, and 2022. This research set out to
address that question by analyzing microfinance institutions in Laikipia County, Kenya, with an eye on their internal control
mechanisms and their impact on their efficiency. The goals of the research were to analyze the financial performance of
microfinance institutions in Laikipia County, Kenya, and how the control environment affected that performance. The research
was based on systems theory. Questionnaires and a descriptive research approach were used to collect primary data. Five MFIs
operating in Laikipia County were the focus of the research: KWFT, Faulu Ltd., Asa Ltd., SMEP, and PAWDEP Ltd. A total
of 289 individuals were surveyed, with 168 chosen at random from the pool of potential respondents. Both descriptive and
inferential statistics were used to examine the quantitative data. Data was shown quantitatively using graphs, tables, and
frequency tables. Based on the findings, MFIs' control chains are ineffective because of their lack of progress in corporate
structure. On the other hand, all of the company's core functions are regulated by established policies and procedures. The
results showed that the staff performed well in carrying out the financial management tasks, with the periodic accounts
reconciliation being the only stumbling block. To aid in the assessment, reduction, and tracking of risks, the MFIs have
devised individualized approaches to risk management. The research found that MFIs' financial performance in Laikipia
County, Kenya, was positively and significantly impacted by control environment. The study suggested that microfinance
institutions (MFIs) broaden the scope of their control measures to include both the degree of compliance and the control
activities involved in authorizing transactions
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Citation
Kisanyanya, G. A. (2018). Internal control systems and financial performance of public institutions of higher learning in Vihiga county, Kenya (Doctoral dissertation, Doctoral dissertation, Kenyatta University).