The Moderating Effect of SACCO Size on the Relationship Between Prudential Regulations and Financial Performance of Deposit-Taking SACCOs in Kenya.

Abstract

This study investigated the moderating effect of SACCO size on the relationship between prudential regulations and the financial performance of Deposit-Taking Savings and Credit Cooperative Societies (DT-SACCOs) in Kenya. Prudential regulations, including liquidity, capital adequacy, credit, and investment requirements, are critical for maintaining financial stability and safeguarding depositor funds. Using a fixed effects moderation model, the study analyzes panel data from 175 SACCOs spanning five years (2015–2019). SACCO size, measured by total assets, serves as the moderating variable. The findings reveal that SACCO size significantly moderates the relationship between credit and investment regulations and financial performance. Larger SACCOs benefit from greater resources and operational capacity, allowing them to effectively implement investment regulations and achieve enhanced financial outcomes. However, SACCO size negatively moderates the relationship between credit regulation and financial performance, indicating challenges for larger SACCOs in managing credit risks. Conversely, no statistically significant moderating effect of SACCO size was observed for liquidity and capital regulations, suggesting these regulations uniformly impact SACCOs regardless of size. Future research could explore additional factors, such as governance structures, that may interact with SACCO size to influence financial outcomes.

Keywords: Prudential Regulations, Financial Performance, SACCOs Size.

DOI: 10.7176/RJFA/16-5-02

Publication date: June 30^th 2025