Abstract

Microfinance institutions (MFIs) are vital in providing financial services to low-income populations and supporting economic development in emerging economies. However, the sustainability and growth of these institutions are often threatened by risks such as credit defaults, operational inefficiencies, and financial mismanagement. To mitigate these risks, the implementation of risk-based internal auditing (RBIA) has become increasingly important. This study explores the effect of RBIA on the growth and sustainability of microfinance institutions in Buea, Cameroon.

The research aims to assess how the adoption of RBIA practices has influenced the financial performance, risk management capabilities, and overall sustainability of MFIs. It seeks to determine whether RBIA contributes to better decision-making, improves operational efficiency, and enhances the ability of MFIs to manage risks. Additionally, the study examines the challenges that MFIs face in implementing RBIA and how these challenges affect their growth prospects.

A combination of quantitative and qualitative research methods is employed, with data collected through surveys of MFI managers, internal auditors, and key stakeholders in Buea. The study analyzes financial performance metrics such as profitability, loan recovery rates, and asset growth before and after the implementation of RBIA. It also includes interviews with experts to gain insights into the effectiveness of RBIA in enhancing governance and promoting sustainable growth within MFIs.

The findings indicate that MFIs that have adopted RBIA practices tend to have better financial performance and higher levels of sustainability. These institutions are more capable of identifying and mitigating risks, which contributes to improved decision-making and operational efficiency. However, the study also identifies challenges such as limited resources, insufficient training, and resistance to change that hinder the full implementation of RBIA in some MFIs.

The research concludes that RBIA is a crucial tool for enhancing the growth and sustainability of MFIs in Buea, Cameroon. It recommends that MFIs invest in capacity building for internal auditors, adopt technology-driven audit processes, and strengthen their governance frameworks to fully leverage the benefits of RBIA. By doing so, MFIs can improve their financial resilience, foster long-term growth, and continue to support economic development in their communities.

Keywords: Risk-based internal auditing (RBIA), microfinance institutions (MFIs), sustainability, growth, financial performance, risk management, Buea, Cameroon.