Effect of Mobile-based lending on loan default rate among Commercial Banks in Kenya
Abstract
Mobile based lending has acquired significant concern among Kenya’s commercial banks
because of its importance. Commercial banks’ performance has greatly improved after the
introduction of mobile based lending. Despite the benefits introduced by the increased use of
mobile based lending, evidence shows that mobile based lending has contributed to exposure
to risks. The focus of this study was determining the effect of mobile-based lending on loan
default rate among commercial banks in Kenya. This study was anchored on bank focused
theory, innovation diffusion theory and financial intermediation theories. Descriptive
research design was adopted. The study targeted commercial banks in Kenya. The target
population was 42 commercial banks and therefore, the study used census approach to select
a sample size. Secondary data on loan default rate, mobile based lending, bank size, interest
rate and risk exposure was collected from financial year 2015 to 2019. The data collected
from the field was analysed by use of SPSS version 22.0 and presentation of research
findings was done in figures and tables to enhance its efficiency and effectiveness in
interpretation. This study used the regression model to determine the effects of mobile-based
lending on default rate among commercial banks in Kenya. Mobile based lending was found
to positively and significantly affect (β=0.414, p = 0.004) loan default rate among
commercial banks in Kenya. The study also found that interest rate has a positive and
significant (β=0.482, p=0.002) influence on loan default rate among commercial banks in
Kenya. From the findings, the study found that bank size has a positive and significant
influence (β=0.364, p=0.012) on loan default rate among commercial banks in Kenya. The
study also established that the influence of risk exposure on loan default rate among
commercial banks was significant (β=0.271, p=0.025). It is therefore important for
commercial banks to embrace comprehensive process for loans appraisals-processes that are
being dispersed via mobiles; this will help to improve assessment of borrowers that are credit
worthy. It is also important for them to make sure that the appraisal process involves
examining the credit history of the borrower, their flow of cash, capital, income levels, and
also how frequent they are in borrowing.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1411]
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