Effect of Mobile Phone Based Loans on Performance of Small and Midium Size Enterprises in Kisumu County

Abstract

More than 60% of small and medium enterprises collapse before their fifth birthday and among the prominent reason for collapse is lack of capital or cash flow problems, yet the benefits of thriving small and medium enterprises in an economy like Kenya cannot be gainsaid. Many studies have been conducted in the area of mobile phone based loans and their effect on performance within the small and medium enterprises. However, such studies have focused on different variables and cannot be said to have addressed every gap available. It was therefore necessary for the current study to conduct a scientific research on the effect of mobile phone based loans on performance of small and medium enterprises focusing on three variables such as nature of use, repayment method, as well as convenience. The study employed diffusion innovation theory and technology acceptance theory in a correlation study design. The total sample size of the study was 383 while the instrument of data collection was questionnaire. Data analysis was done using both inferential and descriptive analysis methods with the use of SPSS version 23 to compute the primary data collected. The findings divulged that independent variable which was mobile phone based loans explained 43.6% (R2 =0.436) disparity of the dependent variable which was performance. In particular, nature of use had a significant positive effect on performance (β =0.430, p< 0.05). Similarly, the study divulged that convenience had a significant positive effect on performance (β =0.420, p< 0.05). However, the study establish insignificant negative relationship between repayment method and performance (β =-182, p< 0.133). The study concluded that nature of use and convenience should be supported while energy should not be spent on repayment method.