Evaluation of fraud in financial institutions in Uganda: A case of Pride Microfinance Limited (MDI)

Abstract

This paper evaluates the issue of fraud in financial institutions in Uganda with emphasis on Pride Microfinance Limited (MDI). The study seeks to establish the forms of fraud, examine the causes of fraud and determine appropriate strategies for fraud prevention and control in financial institutions in Uganda. The study utilized a descriptive research design using Pride Microfinance Limited (MDI) as the case. A sample size of 100 employees representing 74.6% of the populations was selected using a combination of stratified random sampling technique and purposive (judgmental) sampling technique. Data for the study was collected using a questionnaire for cost and convenience to all the respondents. Notably, the questionnaire was pretested for errors and relevance prior to distribution. The data collected was analyzed using SPSS for means, frequency distributions, and standard deviations and presented using figures and tables for ease of interpretation and elaboration. The results revealed that the common fraud forms at Pride Microfinance Limited (MDI) include deposit slip scams, cyber fraud, misappropriation of assets, and fraudulent loans. The study also found that the major causes of fraud were availability of opportunities for fraud, rationalization of fraud acts and pressure to commit fraud. Opportunities for fraud exist because of poor internal controls for curbing fraudulent activities, lack of ethical culture among the perpetrators, etc. The study further revealed strategies used to prevent and control fraud among which include use of compensation programs, customer due diligence, know your employee procedures, use of antifraud specialists on audits, continuous auditing and strengthening of internal controls. The study however noted that since the reasoning behind a fraudulent activity varies from one individual to another, it makes it difficult for an institution to determine and control the unique staff needs or pressures. From the study, it was determined that fraud can happen in large or small companies across various industries and geographic locations since those willing to commit fraud do not discriminate. It was also noted that the impact of fraud can result into huge financial loss, legal costs, and ruined reputations which can ultimately lead to the downfall of a financial institution. With this, having proper plans in place can significantly reduce fraudulent activities from occurring or cut losses if a fraud already occurred thus the cost of trying to prevent fraud is less expensive to a business than the cost of the fraud that gets committed.