INFLUENCE OF THE LEVEL OF CAPITAL ADEQUACY ON CREDIT RISK FOR DEPOSIT TAKING SACCOS IN KENYA INFLUENCE OF THE LEVEL OF CAPITAL ADEQUACY ON CREDIT RISK FOR DEPOSIT TAKING SACCOS IN KENYA

Festus Mithi Wanjohi, D Agnes, Njeru
unpublished
This Study aspires to examine how Capital adequacy affects the credit risk profile of deposit taking SACCOs in Kenya. Capital Adequacy Ratio is the proportion of a bank's capital to its Risk Weighted Assets. On the other hand, Credit risk is the probability that counterparty will fail to meet its obligations in accordance with agreed terms. Credit risk is postulated by the level of Non-performing loans to Total assets. A Causal research design was adopted upon a panel of all deposit taking
more » ... s in the period 2011-2014. The dependent variable is represented by a change in credit risk, while Capital Adequacy is represented by the level of capital to risk weighted Assets. Descriptive and Regression analysis were used to establish the relationship between the variables. The study found out that Capital adequacy as measured in terms of Capital base to Risk weighted assets, has a negative and statistically significant effect on the level of Credit risk of Deposit taking SACCOs in Kenya.
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