Capital Adequacy and Financial Performance of Deposit-Taking Saccos in Kirinyaga County, Kenya

Deposit-taking savings and credit cooperative societies (DT-SACCOs) in Kirinyaga County have experienced fluctuating financial performance despite prudential regulation. This study assessed the effect of capital adequacy on the financial performance of DT-SACCOs in Kirinyaga County, Kenya. A panel study design was adopted, targeting all seven DT-SACCOs operating in the county between 2015 and 2024. A census approach was used, and secondary data were extracted from audited financial statements. Data were analysed quantitatively using descriptive statistics, correlation analysis, and regression analysis. Data were obtained for six DT-SACCOs, representing an 85.71% response rate and 60 observations. Capital adequacy recorded a mean of 12.65% and a standard deviation of 12.70%, while financial performance recorded a mean of 15.64% and a standard deviation of 5.16%. Correlation analysis indicated a positive and statistically significant association between capital adequacy and financial performance (r = 0.779, p < 0.001). The regression model was statistically significant (F = 89.53, p < 0.001) and explained 60.69% of the variance in financial performance (R² = 0.6069). Capital adequacy had a positive and statistically significant coefficient (β = 0.9990, t = 9.4600, p < 0.001). The study concludes that capital adequacy is an important determinant of financial performance and recommends strengthening capital planning by maintaining buffers above minimum regulatory requirements where feasible.