Members’ Equity and Financial Performance of Deposit-Taking SACCOs in Kenya

This study examined the relationship between members’ equity and the financial performance of Deposit-Taking Savings and Credit Cooperative Societies (DT-SACCOs) in Kenya. Despite the role of members’ equity in enhancing institutional capitalisation, its influence on financial performance, particularly in the long term, remains inadequately explored. Guided by a positivist research philosophy, the study adopted a quantitative methodology and a longitudinal research design, analysing data for the period 2010–2024. The target population comprised 165 DT-SACCOs, of which 141 with complete data were included in the sample, yielding 2,115 DT-SACCO-year observations. Data were obtained from the Sacco Societies Regulatory Authority (SASRA) supervision reports and DT-SACCOs’ audited financial statements. The equity ratio served as the proxy for members’ equity, whereas return on assets (ROA) was employed to assess financial performance. Data analysis involved descriptive statistics, including means and standard deviations, Pearson’s correlation analysis, and a panel Autoregressive Distributed Lag (ARDL) model estimated using the Mean Group (MG) estimator. The analysis established a statistically significant positive association between members’ equity and financial performance, as indicated by the correlation coefficient (r = 0.4631, p < 0.001). The panel ARDL results further indicated positive and statistically significant short-run and long-run relationships between members’ equity and financial performance. These findings suggest that stronger equity positions are associated with financial performance among DT-SACCOs. The study recommends that DT-SACCO managers strengthen sustainable equity accumulation while ensuring that capital is allocated and utilised efficiently. The findings provide empirical evidence to inform financing decisions, particularly the development of strategies for sustainable equity accumulation and productive capital utilisation to enhance financial performance.