Regulatory Costs and Financial Performance of Licensed Deposit taking Credit Co-Operative Societies in Kenya

Regulatory costs refer to the expenses firms incur to comply with industry regulations, including costs related to human capital, time, and technology systems. In Kenya, Savings and Credit Cooperative Societies (SACCOs) contribute over 30% to GDP and hold 80% of national savings. SACCOs are regulated by the Sacco Societies Regulatory Authority (SASRA), which oversees their licensing and supervision to ensure sound financial practices. By 2019, only 177 out of 245 SACCOs that applied for deposittaking licenses had been approved. However, by 2022, the number declined to 176 due to license suspensions and additions. Regulatory compliance is costly, and many SACCOs struggle to balance compliance with financial performance. While compliance is necessary, it should not undermine the financial goal of maximizing shareholders' wealth. The strict regulatory demands have resulted in fewer SACCOs meeting licensing requirements, highlighting the financial strain associated with compliance. This study aimed to assess the impact of regulatory compliance costs on the financial performance of licensed deposit-taking SACCOs in Kenya. Using a census approach, the study analyzed secondary data from audited financial statements of all licensed SACCOs. Logistic multiple regression analysis was employed to evaluate the relationship between regulatory costs and financial performance. Findings from this study are expected to inform SACCO management and regulators on how compliance costs affect performance, and how best to balance regulation with financial sustainability.