THE ROLE OF TRAINING IN OPTIMIZING INTERNAL CONTROLS FOR FINANCIAL SUSTAINABILITY

Abstract

The financial sustainability of non-rotating informal financial groups (IFGs) remains a major concern for development practitioners and policymakers, particularly in emerging economies where such groups play a critical role in poverty reduction, financial inclusion, and community development. Although internal controls are widely recognized as crucial for accountability and safeguarding of financial resources, their effectiveness may depend on the capability to understand and implement them. This study investigates how financial literacy training influences the effectiveness of internal controls and, consequently the financial sustainability of informal financial groups. The research, anchored in the Resource-Based View (RBV), conceptualizes financial training as a strategic capability for enhancing competency in financial management and compliance with internal controls. Drawing on empirical data from 60 IFGs in Kirinyaga County, the study adopts an explanatory embedded mixed-methods design to test the interaction effect. Primary data collected via questionnaires were analyzed for descriptive and inferential statistics using Stata. The study employs interaction-based logistic regression within a generalized linear model framework to predict potential interaction outcomes. Results revealed that interactions between financial literacy training and internal controls had a positive and significant influence on financial sustainability. The findings emphasize the critical role of training in complementing internal controls to enhance the capacity to understand, implement, and monitor. The study therefore recommends a sound risk management approach that integrates internal controls and financial literacy training, as their alignment rather than isolated implementation is critical to strengthening resilience and achieving long-term financial sustainability.