Effect of Mobile Credit on Bank Performance: Evidence from Commercial Banks in Kenya

Abstract

This study sought to analyze the effect of mobile credit on the performance of commercial banks in Kenya. The objectives for the study were: to determine the effect of mobile credit on each of performance measures that is; financial performance, operational efficiency, customer satisfaction and organization effectiveness and also investigate the moderating effect of government policy towards mobile credit and its effect on commercial banks performance. A positivism research philosophy by means of a descriptive research design was used in this study. The data used for the study was collected from mobile credit companies and banks. The study utilized primary as well as secondary data on access to mobile credit and its effects on the performance of the organization. The primary data collection tool used was a questionnaire which composed of open ended and closed ended questions. The multiple linear regression analysis at a 95% confidence interval was used in analyzing the collected data. The data collected was analyzed by using multiple linear regression analysis at a 95% confidence interval. Subsequent the collected data was then analyzed and presented using tables and figures for ease of interpretation. The study found that all the financial performance indicators used in this study: net profit, total assets, liquidity, excess liquidity and earnings per share increased after the introduction of mobile credit which implies improved financial performance. On the other hand, proportion of non-performing loans declined after the introduction of mobile credit indicating increased operational efficiency in debt collection. The study further found that the introduction of mobile credit enhanced overall performance, operational efficiency, customer satisfaction and organization efficiency. The study further found that government policy enhanced growth of mobile phone loans in Kenya. The study found enhanced operational efficiency in loans collection, returns on shareholders and enhanced customer satisfaction due to mobile credit introduction. Customer satisfaction was driven by cost effectiveness of the mobile phone loans, ease of access of mobile phone loans, empathy considerations in accessing loans, adequacy of the loan sizes, ease of borrowing, security levels, lack of errors and systems failures, and customer support services. This study recommended that banks invest in product innovation especially product extension on mobile credit platforms to ensure that the revenue streams in mobile credit are enhanced. Secondly commercial banks should engage in massive customer awareness creation and education on use of mobile applications to access mobile loans as well as come up with strategies to overcome the mobile phone accessing costs which are a major hindrance. Finally, commercial must exploit data collection and analysis benefits apparent in mobile credit banking. Finally, there is need for a review of the interest rates capping law which has hindered the growth of mobile phone loans in Kenya.