Effect Of Mobile Lending On Financial Performance Of Commercial Banks In Kenya

Abstract

Mobile lending is aimed at increasing the customer base which can in turn increase the profitability of the banks. The mobile application has made it easy for the commercial banks to transact especially lending loans to its customer throughout the county regardless of the distance. Stiff competition among the commercial banks has forced the commercial banks to invest more in mobile lending to remain competitive in this competitive environment. This study sought to determine how mobile lending influences financial performance of banks in Kenya. 42 banks in operation in Kenya as at 31st December 2018 were the population of the study. Data from 33 banks was availed for the study which was 78.57% response rate. The predictor variable was mobile lending. The control variables were capital adequacy, liquidity, credit risk and bank size. Financial performance was given by ROA and it was the dependent variable. Secondary data was acquired for 5 years (January 2014 to December 2018) on an annual basis. Research design was descriptive cross-sectional design whereas association between variables was determined by multiple linear regression model. SPSS version 22 was used in data analysis. An R-square value of 0.402 that can be translated to mean 40.2% of the variations in financial performance of banks in Kenya can be related to the six chosen predictor variables whereas 59.8% in the changes of performance of banks was linked to other variables that did not form part of this study. From the study it was further revealed that the predictor variables strongly correlated with financial performance (R=0.634). ANOVA results indicate that the F statistic was substantial at 5% level with a p=0.000. Hence it was appropriate in providing an explanation of the relationship between the variables. Additionally, results demonstrated that that mobile lending, liquidity and bank size were positively and statistically substantial values in the study. The study discovered that credit risk have a negative and statistically significant impact on financial performance of banks. The recommendation is that measures should be set up to increase mobile lending, liquidity and bank size as these three has a substantial positive impact on financial performance