INFLUENCE OF MOBILE-BASED LENDING ON THE FINANCIAL PERFORMANCE OF MICROFINANCE BANKS IN NAIROBI COUNTY, KENYA

Abstract

The microfinance banks face challenges in their financial performance which include profitability, loan processing costs, and number of non-performing loans. This study sought to examine the influence of loan disbursement, loan appraisal process, loan repayment terms and convenience associated with mobile-based lending on the financial performance of microfinance banks. The target population for the study was employees working in the department of finance from the 13 registered microfinance banks in Kenya which comprised 130 employees. A sample of 98 respondents were utilized which was derived through Taro Yamane formula. The results found that loan disbursement had a regression coefficient of 0.202. This indicated that a unit increase in the loan disbursement led to 0.202 increase in financial performance of microfinance banks in Nairobi county Kenya with the other variables kept constant. The study concluded that there was a statistically significant influence of loan disbursement through mobile-based lending on financial performance at 5% level of significance. The study found that loan appraisal process had a regression coefficient of 0.227. This indicated that a unit increase in the loan appraisal process led to 0.227 increase in financial performance of microfinance banks in Nairobi county Kenya with the other variables kept constant. The study concluded that there was a statistically significant influence of loan appraisal process through mobile-based lending on financial performance at 5% level of significance. The results found that loan repayment terms of mobile banking had a regression coefficient of 0.205. This indicated that a unit increase in the loan repayment terms led to 0.205 increase in financial performance of microfinance banks in Nairobi county Kenya with the other variables kept constant. The study concluded that there was a statistically significant influence of loan repayment terms of mobile-based lending on financial performance at 5% level of significance. The results found that convenience associated with mobile-based lending a regression coefficient of 0.167. The study concluded that there was a statistically significant influence of convenience associated with mobile-based lending on financial performance at 5% level of significance. The study recommends that the management of the microfinance bank should put an emphasis on the mobile based lending as it was found to have an influence of the financial performance of microfinance banks in Nairobi County, Kenya. Thus the management should place an emphasis on loan disbursement through mobile based lending, loan appraisal system through mobile based lending, loan repayment terms of mobile based lending and convenience associated with mobile based lending.