This study sought to establish the effect of interest rate capping on the financial performance SACCO's in Kenya. The study adopted a descriptive research design. The population of the study consisted of 164 SACCOs duly licensed to operate front office operations. The study used t-test and correlation analysis. The results showed a significant relationship between interest rate capping and financial performance of SACCOs in Kenya. If profitability is improved then there is significant improvement in terms of financial aspects in SACCOs. Credit term had positive and significant correlation with performance of SACCOs; if SACCOs improve the credit terms, the level of their financial performance improve.The study concluded that interest rate capping had an effect on financial performance of SACCOs in Kenya. The study recommended that Management should ensure the adoption of profitability strategies so as to influence financial performance for consistent achievement of organzational goals. The government and stakeholders should ensure that there is favourable external business environment for SACCOs in Kenya.