Internal Control and Financial Performance of Tier 3 Commercial Banks in Kenya


  • Sylvia Mbithe Wambua Business, PhD Student, Jomo Kenyatta University of Agriculture and Technology, Kenya
  • Prof. G. S Namusonge Business, Jomo Kenyatta University of Agriculture and Technology, Kenya
  • Prof. Romanus Odhiambo Business, Jomo Kenyatta University of Agriculture and Technology, Kenya


Banks play very important role in economic development of nations as they largely wield control over the supply of money in circulation and are the main stimuli of economic progress. Commercial banks face a myriad of challenges including internal control in establishing and maintaining financial performance. The general objective was to assess financial internal control on financial performance of Tier 3 Commercial Banks in Kenya. The specific objectives were to establish moderating effect of bank regulatory framework on internal control and financial performance of Tier 3 Commercial Banks in Kenya. Schumpeterian growth model theory was used. The study adopted descriptive and explanatory research designs. Target population for this study constituted all managers drawn from Tier 3 commercial banks in Kenya. Research approach was proportionate sampling where sample was based on proportion of the population. Simple random sampling was employed in picking managers. Questionnaire was the main tool of collecting data for independent variables while secondary data was collected for dependent variables from published annual returns obtained from Central Bank of Kenya. Combination of descriptive and inferential statistics was used to analyze collected data. Factor analysis was used to summarize information contained in a number of original variables into a smaller number of factors without losing much information. Pearson product moment correlation analysis and multiple regression analysis were employed to test the relationship between independent variables and dependent variable. Data presentation was done descriptively using percentages displayed on graphs, pie charts and tables. The sample size was 129. A modified Likert scale questionnaire was developed and used. A pilot study was carried out using a sample of 13 managers from Tier 2 commercial banks in Kenya which assisted in refining of the instruments of data collection.

 Findings indicated that correlation matrix of internal control ( =0.318, p=0.000) had linear relationship with financial performance. Regression results indicated that coefficient of internal control was 2264.5, while and bank regulatory framework, moderator, had a model where F=8.033, . This implied that coefficients of internal control as independent variable was positive and significant at 5% level while bank regulatory framework, as moderating effect, was also positive and significant. The findings of the study indicated that internal control influenced financial performance while bank regulatory framework moderated relationship between the internal control and financial performance of Tier 3 commercial banks in Kenya. It was recommended that commercial banks should implore internal controls by enhancing internal audit, surprise check, maker checker system and management exemption reports so as to increase the financial performance of Tier 3 commercial banks in Kenya.


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How to Cite

Sylvia Mbithe Wambua, Prof. G. S Namusonge, & Prof. Romanus Odhiambo. (2022). Internal Control and Financial Performance of Tier 3 Commercial Banks in Kenya. International Journal of Sciences: Basic and Applied Research (IJSBAR), 63(1), 45–59. Retrieved from