Effect of loan-loss provisioning on financial performance of deposit taking SACCOs in Kirinyaga County, Kenya

Savings and Credit Co-operatives in Kenya are required to adhere to regulations set by the SACCOs Regulation Authority. Among the regulations is the requirement that the management has to present a myriad of reports including; the Capital Adequacy Return report, Liquidity Statement report, Statement of Financial Position and Statement of Deposit Return. The Return on Investments report compares land, building, and financial assets to SACCO's total assets and its core capital. Despite the existence of prudential guidelines, their influence on the financial performance of deposit-taking SACCOs in Kenya remains contentious with some claiming regulatory compliance in the form of SASRA prudential guidelines has a positive influence while others argue that SASRA regulation has insignificant influence on the financial performance of deposit taking SACCOs. This study seeks to determine the effect of loan-loss provisioning on the financial performance of Deposit-taking SACCOs in Kirinyaga County, Kenya. The study adopted a cross-section descriptive research design. The study population was 10 deposit-taking SACCOs in Kirinyaga County over the period 2017-2022 relying on secondary data. Data analysis involved descriptive and inferential statistics. From the inferential results, the study concluded that loan-loss provisioning positively and significantly affected the financial performance of the deposit-taking SACCOs in Kirinyaga County. The study recommended that the deposit-taking SACCOs in Kirinyaga County ought to strive to be capital-adequate as well as manage their loans efficiently. Being capital-adequate ensures that the SACCOs can expand their operations and hence be sustainable, competitive, and finally profitable. Managing its loans through periodic classification of the loans and having room for loan loss provision ensures the sustainability of the SACCOs.