Effect Of Mobile Lending On The Quality Of Bank Loan Portfolio: A Case Of Selected Commercial Banks In Kenya

Abstract

The significance of lending in growth and development of the economy is inherent in provision of funding to deficit economic units who engage in productive economic activities. Mobile lending, which is relatively new lending technique to Kenyan lenders, has become a competitive edge for banks. The platform gives lenders easier and wider customer base. Therefore, the present research studied the effect of mobile lending on the quality of bank loan portfolio: A case of selected commercial banks in Kenya. The purpose for this research was to determine the influence of credit information sharing, size of the bank, economic conditions and interest rates on quality of bank loan portfolio as measured by the Non-Performing Loans to Total Loans Ratio. Financial statements were used to collect data from five selected commercial banks offering mobile loans and data analysis involved conducting multiple regression analysis. The research revealed that changes in credit information sharing, size of the bank, economic conditions and interest rates caused a variation of 34.7% on quality of bank loan portfolio. This signaled that 34.7% variation in quality of bank loan portfolio could be related to credit information sharing, size of the bank, economic conditions and interest rates. The study additionally showed a positive strong association amongst interest rates and quality of bank loan portfolio in selected commercial banks in Kenya as indicated by strong positive correlation coefficient. ANOVA results indicated that the general model had a significance value of 0.00% that reveal that the information was perfect for creating an inference as the p-value was less than 0.05. The study also indicated that interest rates had the biggest influence on the quality of bank loan portfolio. The study results lead to a conclusion that interest rates positively affected the quality of bank loan portfolio of the banks. Findings showed that an increase in credit information sharing, size of the bank, economic conditions and interest rates and positively influence the quality of bank loan portfolio of selected commercial banks offering mobile loans, hence the research The research settles on interest rate as having the highest significance on the quality of bank loan portfolio for commercial banks offering mobile loans. This study recommends that the regulator (CBK) should consult with commercial banks offering mobile loans in determination of lending interest rates since it was found to have the highest influence on the quality of bank loan portfolio.