Sacco Based Financial Characteristics and Financial Performance of Deposit Taking Savings and Credit Co-operative Societies in Kenya

In Kenya, Deposit-Taking Savings and Credit Cooperative Societies have faced significant challenges that have adversely impacted their financial performance. While existing literature has linked financial performance to financial characteristics, there remain conceptual and contextual gaps in empirical research. These gaps prompted the current study to examine SACCO-based financial characteristics as a tool for enhancing the financial performance of DT-SACCOs in Kenya. The study employed a descriptive research design, targeting a population of 190 DT-SACCOs. Using purposive sampling, 181 SACCOs that had been operational since 2018 were selected for analysis. Secondary data from the period 2018 to 2023 were utilized, and a quantitative approach was applied to generate both descriptive and inferential statistics. Panel regression was used to estimate the direct relationship between SACCO-based financial characteristics and financial performance, while also appraising how the Sacco Societies Regulatory Authority risk regulations moderated this relationship. The study concluded that capital adequacy had a statistically significant positive effect on financial performance, indicating that stronger capital buffers enhance profitability. In contrast, asset quality and financial investments showed statistically significant negative effects, suggesting that poor loan quality and mismanaged investments negatively impact financial outcomes. Liquidity, however, was positively associated with financial performance, underscoring the importance of maintaining adequate liquidity reserves. Moreover, the relationship between SACCO-based financial characteristics and financial performance was significantly moderated by SASRA risk regulations, highlighting the critical role of regulatory oversight in shaping financial outcomes. Based on these findings, the study recommends that DT-SACCOs in Kenya should: maintain optimal capital adequacy levels to safeguard financial stability; prioritize careful asset quality management and regular loan monitoring to develop sound lending policies; optimize financial investments to ensure sufficient funding for operational expenses; and maintain adequate liquidity levels to meet financial obligations and improve overall performance.