Abstract: Despite of the achievements of Umurenge SACCO, challenges remain, such as small loan high Non Performing Loan (NPL) ratio of 12.5%, no connection to payment systems, a number of fraud, and high interest rate on the loan in Umurenge SACCO (24%).The purpose of this study is to study the role of internal control systems on financial performance of savings and credit cooperatives in Rwanda: a case of SACCOs in Gasabo District. The study will test three objectives which are to analyse the functionality of internal control system of Umurenge SACOO in Gasabo District, to examine the level of financial performance of Umurenge SACCO in Gasabo District and to assess the relationship between ICS and financial performance of Umurenge SACCO in Gasabo District. The study design of this research is descriptive using quantitative and qualitative approaches. The target population of this study is made of the employees of SACCO who are aware of the financial information. These employees are Managers, Accountants, loan officer and Cashiers who are 60 employees. The researcher used purposive and census sampling techniques as the target population is small the sample size was equal to the population 60 respondents. To collect primary data the questionnaire was used as research instruments. After collecting data they were edited, coded, recorded and tabulated and then analyzed using SPSS. Descriptive statistical was used such as frequency, percentage, mean and standard deviation to analyse the level of functionality of internal control. Correlation and regression analysis was used to test relationship between internal control and financial performance of Umurenge SACCO in Gasabo District. Spearman coefficient correlation between Control environment and financial performance was 0.315 and the p-value of 0.01. This implies that there is a significant weak correlation between Control environment and financial performance. The spearman rho correlation between Risk assessment and financial performance was 0 .409. This implies that the relationship is Weak correlation between Risk assessment and financial performance. The spearman rho correlation between Control activities and financial was 0.379. This implies that the relationship was weak. As all P-values are less than 0.05 all the relationship are significant.The coefficient of the correlation (R) was 0.473 and the coefficient of determination (R square) was 0. 224. This implies that the predictors of internal control system contributed 22.4% % on the financial performance of SACCOs in Gasabo District.Findings showed a p-value of (0.003) which is less than the level of significance (0.05).This implies that internal control system indicators have a causal effect on the financial performance of SACCOs in Gasabo District. However, the researcher found that each coefficients of internal control separately doesn’t statistically affect the financial performance because P-values of all indictors are greater than the 0.05 level of significance. This implied that all predictors should be applied together to get influence on the financial performance. The management of SACCOs in Gasabo District should continue to apply internal control system in their management in order to maintain the rules of regulation in the management. As these institutions are among the core factors of economic development of the country, they should show a transparency in their working. Also they should strive to increase the profitability of their SACCOs, because findings showed that it was at a moderate level. A moderate level is not satisfactory. This is necessary because the profitability is the main indicator of financial performance. A firm which has a high profitability is a firm which a high chance to survive.
Keywords: Internal Control Systems on Financial Performance of Savings and Credit Cooperatives.
Title: INFLUENCE OF INTERNAL CONTROL SYSTEMS ON FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT COOPERATIVES IN RWANDA: A CASE OF SACCOs IN GASABO DISTRICT
Author: Emmanuel Habineza, Dr. Patrick Mulyungi
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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