ABSTRACT:- Capital adequacy has been alarming in most deposit taking savings and credit deposits globally affecting financial performance. Capital adequacy provides adequate amount of capital to guard or cushion member deposits and creditors against losses brought on by business. The auditor general report highlighted some problems like low profit margin faced by western Region SACCOs. The study objective was to establish the effect of capital adequacy on financial performance of deposit taking savings and credit cooperative societies in western Region, Kenya. The study was guided by Capital buffer theory. A cross section research design was used. The study targeted a population of 7 deposit taking savings and credit cooperative societies in western Kenya. The study employed census sampling. Secondary data was collected from audited financial statements.  Panel data was analyzed using descriptive and inferential statistics. Descriptive statistics comprised of minimum values, maximum values, mean and standard deviation and inferential statistics consisted of correlational analysis and random effects models. Data was presented using tables. Regression model showed that there is a negative and significant effect of capital adequacy and financial performance with a coefficient of -0.3671. The study showed that changes in capital adequacy causes 54.77% variation in financial performance. The study concluded that capital adequacy had a negative and significant effect financial performance. It is therefore recommended that SACCOs should minimize losses by embracing on proper mechanisms that can enable them improve financial performance. Further, the study recommended that SACCOs ought to keep capital reserves at the recommend levels all the time.