Effect of Core Capital Ratio Prudential Regulations on Financial Performance of Deposit-Taking Savings and Credit Cooperatives in Kenya

Abstract

The objective of this study was to establish the effect of capital ratio prudential regulations on the financial performance of deposit-taking SACCOs (DT-SACCOs) in Kenya. The study was anchored on the public interest theory and adopted a positivist philosophy and mixed research design with primary and secondary data for the period 2014-2021 Core. The target population comprised 175 DT-SACCOs. Primary data was collected through questionnaires by stratified random sampling on DT-SACCOs regulated by the SACCO Societies Regulatory Authority (SASRA), and purposive sampling was done on the chief executive officer (CEO) of sampled DT-SACCOs. Panel data analysis was used to achieve the study objective. Both descriptive and inferential statistics were used to analyze data. The study findings revealed that core capital ratio requirement had a significant and positive effect on the financial performance of DT-SACCOs in Kenya (β =0.218, t = 6.180, p < 0.05). The study concluded that core capital ratio requirement was vital for the financial performance of DT-SACCOs in Kenya. Based on the study findings and conclusion, the study recommends to leadership in DT-SACCOs to enhance corporate governance and stability in their SACCOs since members seek to invest their resources in areas where they perceive stability and profit. Besides, the study recommends to SASRA to ensure that the risk appetite and investment prudential regulations and restrictions placed by shareholders are taken into consideration while creating DT-SACCOs’ investment portfolio.