Purpose: The purpose of this study was to examine the relationship between portfolio quality and financial sustainability of microfinance institutions in Kenya. Research Design, Data, and Methodology: The analysis was based on a panel dataset of 30 microfinance institutions for the period of 2010 to 2018. Data was obtained from the Microfinance information exchange (MIX) database, and it was analyzed through descriptive and inferential statistics with the aid of STATA. Based on the results of the Hausman test, the study adopted the fixed effect regression model to test the research hypothesis. Results: The study found that portfolio quality had a positive significant effect on financial sustainability of Microfinance institutions in Kenya (β= 0. 211; p-value < 0.05). For the control variables; firm age had a positive effect (β= 0.773; p-value <0.05), while firm size (β= -0. 749; p-value < 0.05) had a negative effect on financial sustainability. Conclusions: The study concluded that portfolio quality has an important influence on the financial sustainability of microfinance institution. The study recommends that managers of microfinance institutions should devise good collection policies to improve portfolio quality while lessening loan default rate. The portfolio quality may improve the overall profitability and enhance investor confidence in their strategic decision-making on refinancing.

Abstract
1. Introduction
2. Literature Review
    2.1. Theoretical Literature: Institutional Theory
    2.2. Empirical Review
3. Research Design
    3.1. Target Population and Dataset
    3.2. Research Model
    3.3. Panel Unit Root Tests
    3.4. Test for Homoskedasticity
    3.5. Test for autocorrelation
4. Results and Findings
    4.1. Effect of Portfolio quality on FinancialSustainability
5. Conclusions
References

• Stephen K. BITOK(Department of Accounting & Finance, Moi University) Corresponding Author
• Josephat Y. CHEBOI(Department of Accounting & Finance, Moi University)
• Ambrose KEMBOI(Department of Management Science, Moi University)