The Moderating Effect of SACCO Size on the Relationship Between Adoption of International Financial Reporting Standard 9 and Financial Performance of Deposit-Taking SACCOs in Kenya

Abstract

IFRS 9 imposes common expected-credit-loss and financial-asset measurement requirements on regulated financial institutions, yet the capacity to implement those requirements may differ materially with institutional scale. This study examines whether SACCO size moderates the relationship between adoption of IFRS 9 and the financial performance of deposit-taking SACCOs in Kenya. The analysis uses an unbalanced panel of 1,543 SACCO-year observations from 177 institutions over 2016-2024. Financial performance is measured by return on assets, IFRS 9 by a post-transition implementation-period indicator, and SACCO size by the mean-centred natural logarithm of total assets. Fixed-effects models with SACCO-clustered robust standard errors were estimated, with additional sensitivity tests for alternative outcome scaling, size measurement, time trends, financial-condition indicators and cross-sectional dependence. The IFRS 9 × size interaction was positive and statistically significant in the primary model (β = 0.0033352, SE = 0.0011702, p = .005). Conditional estimates moved from -0.0044709 at the 25th percentile of size to -0.0005325 at the median and 0.0035180 at the 75th percentile, indicating that the estimated association became less negative and eventually positive in point-estimate terms as SACCO size increased. The interaction remained significant across several alternative specifications, although it became non-significant under Driscoll-Kraay standard errors (p = .205). The findings show that the relationship between IFRS 9 implementation and financial performance varies with SACCO size. The findings suggest that SASRA and other sector stakeholders should consider differentiated implementation support, with greater technical assistance, staff capacity building, data-system strengthening and expected-credit-loss modelling support directed towards smaller DT-SACCOs.

Keywords: IFRS 9, SACCO size, financial performance, moderation, deposit-taking SACCOs, Kenya

DOI: 10.7176/EJBM/18-10-05

Publication date: October 30^th 2026