Effects Of Mobile Based Loans On Operational Performance Of Selected Commercial Banks In Kenya

Abstract

The banking sector in Kenya is dynamic characterized by stiff competition through entry of other digital lending platforms like Tala and Branch, the changes in the needs of the customers and advancement in technology. Banks are now faced with a challenge of how best to meet or exceed the needs and expectations of their customers given the fact that other new industry participants are now offering credit facilities tailored to the needs of their customers in a timely manner without need for collaterals. Survival in such an environment therefore requires that commercial banks adopt mobile based lending. The study sought to determine then influence of mobile based loans on operational performance of commercial banks. The study was further supported by the following specific objectives: to determine the effect of the quality of mobile based loans on operational performance of selected commercial banks in Kenya, to assess the effect of the quality of non-performing mobile based loans on operational performance of selected commercial banks in Kenya and to establish the effect of firm size and human capital in the relationship between mobile based loans on operational performance of selected commercial banks in Kenya. The study adopted a adopted a correlational design. The target population comprised of 42 commercial banks and census was used. Secondary data was collected in the study over a period from 2014 to 2018. The collected data was analyzed using SPSS by means, standard deviations and regression analysis. The study established that the quality of mobile based loans, quality of mobile based non-performing loans; firms’ size and human capital all have significant effect on operational performance. The study concludes that mobile base loans have significant effect on operational performance. The study recommends that the management team of all commercial banks should significantly invest in mobile based lending platforms including development of Applications (Apps) so that more loan transactions are carried over the mobile phone and thus significant improvement in operational performance. Commercial banks should enhance the monitoring and appraisal systems before issuing loans to customers through the mobile phones. The Central Bank of Kenya (CBK) should formulate sound regulations and guidelines that would safeguard commercial banks from loose of cash through non performing mobile based loans that customers access through their mobile phones. Senior management team of commercial banks in Kenya should invest resources in growing the asset base and hiring more competent and qualified employees as these are key variables that positively enhance operational performance of any banking institution