Abstract:
This research investigated the correlation between the internal mechanisms used to manage operations and finances within Microfinance Institutions (MFIs) in Uganda, as well as their impact on the institutions' growth. The study specifically examined the internal control systems and financial reporting regulations employed by MFIs in Uganda. It also analyzed the effects of these internal controls on the growth of MFIs, along with the influence of financial reporting regulations on their growth. The research utilized a case study research design, employing mixed methods that encompass both quantitative and qualitative approaches, to gain a comprehensive understanding of the subject. A sample size of 158 respondents was selected from UGAFODE Microfinance, the organization where the study was conducted, using both random and purposeful sampling techniques. Primary data was collected through interviews and questionnaires, while secondary data was gathered through a review of relevant documents. The findings of the study indicated that UGAFODE had effective internal control processes and adhered to sound financial reporting regulations (Mean Score: 4.3, SD: 0.4), demonstrating a commitment to maintaining the integrity of its operations in the industry. Additionally, the research revealed a significant positive relationship between internal controls and the growth of MFIs in Uganda (r = .657**, p = 0.002). Based on these findings, it was concluded that there is a noteworthy correlation between internal controls, financial reporting, and the growth of MFIs in Uganda. The results suggest that effectively managing financial reporting plays a predictive role in the growth of MFIs in Uganda.
