The Effect of interactive risk management strategies on financial sustainability of informal financial groups in Kirinyaga county, Kenya

This study analyzed the effect of interactive internal controls strategy on financial sustainability of informal financial groups (IFGs) in Kirinyaga County, Kenya. IFGs serve as alternative development tools. Their role in broadening financial access has been acknowledged worldwide. However, the groups experience a myriad of challenges relating to risk exposure and sustainability thus leading to high rates of failure. It is estimated that 25% of informal financial groups prematurely disintegrate due to liquidity and default problems. Additionally, IFG members lose 15% to 25% of their savings annually. This trend is a cause for concern and raises considerable doubt on the effectiveness of their risk management. To address issues underlying these risks, the study using descriptive research design, targeted 60 non-rotating IFGs with 806 members registered with the County Department of Social Services Kirinyaga County and examined the effects of interactive internal controls strategy on financial sustainability of IFGs. Primary data was collected using a questionnaire and responses corroborated with key informant interviews. The data was analyzed for descriptive and inferential statistics using STATA software. Specifically, descriptive statistics included measures of central tendency and dispersion while inferential statistics drew from correlation and multiple linear regressions. The study established that an interaction of internal controls with financial literacy training had a significant positive effect on financial sustainability (β= .0001, p= 0.000) while the interaction of internal controls with fiscal management had a significant negative effect (β -.0579, p= 0.000). In conclusion, financial sustainability is enhanced by the interactions between; internal controls & financial literacy training while strengthening the interactions between internal controls & fiscal management through routine risk assessment, contingency planning, operational flexibility, regular review of strategy and appropriate budgetary allocations.