Internal Control Policy Predictors of Financial Performance in Ghana: An Ordinal Logistic Regression Analysis of Community-Based Credit Unions (CCUs)

Abstract

Community-based credit unions (CCUs) occupy a unique position within the Ghanaian economy because of their special role in facilitating payments and channeling credit to individuals and businesses in remote areas.   Internal control policy mechanisms are critical to their financial performance. To determine significant internal control policy predictors of financial performance, an ordinal logistic regression model is applied. Data was collected from 105 registered and operational CCUs in Ghana using multistage stratified sampling. Statistically significant internal control policy predictors of CCUs’ financial performance were organizational environment (OR=0.34, 95% CI: 0.21, 0.56), monitoring (OR=0.38, 95% CI:0.22,0.65), risk assessment and control (OR=1.52, 95% CI: 1.05, 2.21). A statistically significant interactive relationship was also found between organizational environment and risk assessment and control (OR=3.76, 95% CI: 1.88, 7.61). The financial performance of CCUs appears to depend on a complex combination of internal control policy predictors.