ESTHER WAMBUI GITEE2026-03-312026-03-312025-10https://repository.cuea.edu/handle/123456789/631DissertationThe sustainability of microfinance banks is paramount for their functionality and long-term survival and cannot be overemphasized. The effectiveness of internal financial controls is crucial not only for the growth of microfinance banks (MFBs) but also for optimizing their internal operations, which are assessed through risk assessment strategies, control activities, monitoring practices, and the control environment. In recent years, MFBs in Kenya have faced considerable financial instability, highlighting concerns about their internal financial controls. Microfinance banks appear to be highly vulnerable to even minor economic disturbances, as seen in the Central Bank of Kenya's (2023) financial stability report. Their total assets decreased by 4.8 percent, amounting to Kshs. 70.4 billion in December 2022. This decline was mainly attributed to a 3.1 percent reduction in gross loans and advances, raising serious concerns about sustainability. The sector reported a collective pre-tax loss of Kshs. 980 million in 2022, with only a few MFBs maintaining financial stability, while others faced significant losses. This scenario underscores the urgent need to examine the internal financial control mechanisms that influence the sustainability of microfinance banks. The purpose of the study was to investigate the relationship between internal financial control factors and the sustainability of MFBs in Kenya. The study was based on four theoretical foundations: resource-based view theory, management control theory, risk management theory, and institutional theory. The study methodology included a positivist research philosophy and a longitudinal panel research design covering 2016-2023. A census approach was employed, targeting all 14 microfinance banks regulated by the Central Bank of Kenya. Secondary data collection methods were used, utilizing audited financial statements, annual supervision reports, and regulatory filings published by the Central Bank of Kenya and individual MFBs. Control activities were assessed through asset utilization ratio and staff costs; risk assessment strategies through the capital adequacy ratio and total insider loans; monitoring practices through the portfolio at risk and operating expense ratio; and control environment through management efficiency and borrower default risk. Firm size and leverage were considered as control variables. Sustainability was measured using the financial self-sufficiency ratio, while fintech adoption served as a moderator. Analysis was conducted using panel regression in EViews, supported by diagnostic tests which were carried out to ensure reliable statistical inferences. The findings showed that most internal financial control factors failed to significantly influence sustainability outcomes. Specifically, the study failed to reject the null hypotheses for control activities, risk assessment strategies, and control environment, indicating these traditional internal control mechanisms had no statistically significant impact on microfinance bank sustainability. However, the study rejected the null hypothesis for monitoring practices, revealing a significant negative relationship with sustainability, suggesting that intensive monitoring actually undermined rather than enhanced institutional sustainability. The study rejected null hypotheses for control variables, both firm size and leverage, demonstrating strong positive effects on sustainability, while fintech adoption failed to show any significant moderating effect, leading to failure to reject its null hypothesis and indicating that technology integration did not enhance the relationship between internal controls and sustainability outcomes. The study recommends that banks should restructure monitoring frameworks to enhance financial self-sufficiency, maintain conservative leverage strategies, prioritize institutional growth, and treat fintech adoption as a complementary enhancement rather than a primary sustainability strategyen-USInternal financial controlsfinancial sustainabilitymicrofinance banksrisk managementinternal auditcorporate governanceKenyaThesis