Effect of Mobile-Based Lending Platform on Non-Performing Loans in Commercial Banks in Nakuru Town, Kenya

Abstract

This study sought to determine the effect of mobile-based lending platform on non-performing loans in commercial banks in Nakuru town, Kenya. Precisely, the study assessed how loan appraisal process using the mobile platform affected NPLs in commercial banks. The study adopted a descriptive survey research design. The 172 credit officers working with 37 branches of commercial banks based in Nakuru town when the study was done, comprised the study population. A sample of 64 credit officers was obtained from the study population using stratified random sampling method. A structured questionnaire was used to collect data. A pilot study was carried out prior to the main study with the aim of determining both the reliability and validity of the research instrument. The Statistical Package for Social Sciences software was used to facilitate data analysis. Descriptive statistics and inferential statistics were used in the analysis. The results of the analyses were presented in tables. The hypotheses were tested at 95% confidence level. The study observed that loan appraisal process was a very important element of mobile-based loans in respect of NPLs. The null hypothesis was rejected. The study also found that, the more commercial banks emphasized on lending through the mobile platform, the more they were likely to record NPLs. It was also concluded that the loan appraisal process had a significant relationship with NPLs. The study recommends that commercial banks should have a comprehensive process of appraising loans advanced via mobile platform in order to enhance the mechanisms of assessing creditworthiness of prospective borrowers.