Does Mobile based Lending affect Loan Performance? Evidence from Commercial Banks in Kenya

Abstract

Abstract

The push for financial inclusivity has led to the introduction of digital lending by financial institutions. Some of popular digital lending channels include Mshwari by NCBA bank, KCB-Mpesa by Kenya commercial bank, Pesa-pap by Family bank and Timiza by Absa bank. Since the introduction of Mpesa services in Kenya in 2012, there has been an increase in delinquency. The foremost aims of this review were to examine the impact loan appraisal process, cost of loans, loan disbursements and loan repayment period on loan performance of Kenyan banks. Technology acceptance theory, financial intermediation preposition and information asymmetry theory guided this analysis. The research philosophy of positivism, which emphasizes objective measurement and observation to acquire knowledge was adopted in this analysis. The study examined a population of 38 commercial banks operating in Kenya by year 2023 using a descriptive research approach. A purposive sampling method was employed to acquire a sample size of 76. Questionnaires are employed to collect primary data. The analysis mainly targeted credit staff working for the various commercial institutions. Descriptive statistics such as measure of central tendency (mainly mean) and variability (express by statistical dispersion) were used to analyze the data. Inferential statistics such as regression and hypothesis testing were used to show the relationship between mobile-based lending and loan performance of commercial banks in Kenya. The findings demonstrated that loan appraisal process, cost of loan, loan disbursement, and loan repayment period have a Substantial impact on loan performance of Kenyan banks. The study highlighted that proper loan appraisal, low cost of loans, managing disbursements and favorable repayment term will help improve loan performance. The analysis on mobile based lending and loan performance of Kenyan banks has contributed to theory, policy and practice. It enhances theoretical understanding of the relationship between mobile based loans and loan performance through insights into how technology has eased lending process and enhanced financial inclusivity. In practice, the study has given guidance to lenders on how various factors of mobile lending have influenced loan performance. The study has implications for policy formulation, as technology is being embraced by commercial banks, and drive for financial inclusivity there is need to maintain a sound lending process that protects investors and other stakeholders. The policies should ensure they offer an enabling environment for financial innovation and still ensure loan performance.

Keywords:       Mobile based lending, Loan appraisal process, Cost of loan, Loan disbursement, Loan repayment term, and non-performing loans.