The concept of providing internal audit services for MFIs on the outsourcing terms
Growth and expansion of MFIs with increased competition in the financial market require strengthening the institutional development of MFIs, which is reflected in the need to introduce corporate governance and risk management standards. In this regard, the role of internal audit significantly increases, thanks to which the participants and the Board of Directors of the company receive an independent objective opinion on the current situation regarding management decisions in the company in the field of risk management and recommendations on improving business processes. Currently, the internal audit work often focuses on control and auditing activities, which are aimed at identifying errors and abuses of events that have already occurred and their consequences (subsequent control of operations). An effective internal audit should be focused on the future, including the analysis of future events that may adversely affect the activities of individual departments and / or the MFI as a whole.
At the end of 2017, our company launched a pilot project to provide effective internal audit services to MFIs in the form of outsourcing.
Target segment for internal audit on terms of outsourcing
- Medium and small MFIs, in which it is economically inefficient to have own internal audit service
- MFIs wishing to develop a strategy for the future development of their company (vision);
- MFIs wishing to assess the situation or development of a particular line of business (segment).
Benefits for MFIs
- Fully independent assessment of the activities of MFIs with the presentation of the report directly to the Board of Directors of the company. Thereby, there is a certainty that the internal audit system in an MFI is functioning in an appropriate manner as part of healthy corporate governance. As a result, strengthening the institutional development of MFIs according to the following scheme: independent internal audit – Audit Committee – Board of Directors – Shareholders;
- The experience and approaches of the MLC “Frontiers”, LLC in matters of effective corporate governance, lending, risk management and internal audit;
- The absence of fixed costs for the maintenance of its own internal audit service, employee training, etc.;
- Optimization of internal audit expenses for each MFI that receives outsourcing services;
- Save time – there is no need to search, adapt and train employees in the field of internal audit;
- Implementation of the internal audit function by qualified specialists, taking into accounts the specifics and experience of the company, as well as the terms and conditions of the audit;
- Access to advanced technologies and methodologies for conducting internal audits;
- Flexibility in the use of audit resources;
- Loyalty from potential investors, lenders and MFI partners.
Benefits for MLC “Frontiers”
- Confidence that the internal audit system in certain MFIs is functioning properly in the framework of sound corporate governance;
- Increase in the number of MFIs, including the clients of MLC “Frontiers”, which have an effective internal audit system;
- Increasing the institutional development of certain MFIs and, accordingly, the microfinance sector as a whole.