EFFECTS OF MOBILE LENDING ON LOAN REPAYMENT IN COMMERCIAL BANKS IN KENYA
EFFECTS OF MOBILE LENDING ON LOAN REPAYMENT IN COMMERCIAL BANKS IN KENYA
Catherine Wanjiru Kuria - Masters of Business Administration (MBA), United States International University – Africa, Kenya
ABSTRACT
The general objective of this study was to investigate the effect of mobile lending on loan repayment in commercial banks in Kenya. The specific objectives of the study were; to examine the effect of mobile loan appraisal parameters on loan repayment in commercial banks in Kenya; to determine the effect of mobile loans credit terms on loan repayment in commercial banks in Kenya and to investigate the effect of institutional factors and their effect on loan repayment in commercial banks in Kenya. The study used descriptive and explanatory research design. Explanatory research design was used to establish the relationship between the variables and the casual effect among them. The descriptive research design gave the central tendencies and the frequencies. The dependent variable was loan repayment while the independent variables were loan appraisal, credit terms and institutional factors. The target population of the study was 63 credit officers working at the headquarters of I & M bank located in Nairobi County in the year 2020. The study used census as the sampling technique thus examining the entire population. The study used primary data which was collected using close ended questionnaires. Regression analysis was used to analyze the data for the study. The first objective examined the effect of mobile loan appraisal parameters on mobile loan repayment in commercial banks in Kenya. The study revealed that there was a positive significant relationship between mobile loan appraisal parameters and repayment of mobile loans. Correlation test results indicated that a positive significant relationship exist between loan appraisal parameters and mobile loan repayment at (p=0.272 r=0.041). The mobile loan appraisal parameters affected 7.4 percent of the changes in mobile loan repayment. Loan appraisal parameters that were discussed included the demographic factors, economic factors and the methods of lending. The second objective investigated the effect of mobile loans credit terms on mobile loan repayment in commercial banks in Kenya. The study found out that there was a positive significant relationship between mobile loans credit terms and mobile loan repayment. Correlation test results indicated that a positive significant relationship exist between mobile loans credit terms and mobile loan repayment at (p=0.381 r=0.003). The mobile loan credit terms affected 14.4 percent of the changes in mobile loan repayment. The factors that were discussed included interest rate, collateral on mobile loans and the mobile loan repayment periods. The final objective examined the effect of institutional factors on mobile loan repayment in commercial banks in Kenya. The study found out that there was a positive significant relationship between institutional factors and mobile loan repayment. Correlation test results indicated that a positive significant relationship exist between institutional factors and mobile loan repayment at (p=0.264 r=0.047). The institutional factors parameters affected 7 percent of the changes in mobile loan repayment. The factors that were discussed included training and monitoring, technology and credit management practices. The study concluded that a significant positive relationship existed between the dependent and the independent variables. The study concludes that mobile loan repayment is affected by loan appraisal factors such as; demographic factors, economic factors and methods of lending. The study also concludes that mobile loan credit terms such as; interest rates, collateral, mobile loan repayment periods and institutional factors such as technology, training and monitoring and credit management practices affect mobile loan repayment. The study recommends that banks that provide mobile loans should not focus on demographic factors as the reason to determine the potential of an individual’s potential to repay a loan. The study also recommends that more emphasis should be put on the economic factors like ownership of a business and the income level of an individual. The study also recommends that the bank should engage in credit terms that are reasonable to their borrowers and offer financial trainings to their borrowers so that they can be financially literate and hence reduction in default rates. The study recommends that future research should involve more banks instead of one.
