Influence of digital lending platforms design on loan performance among small business owners in Gikomba open-market, Nairobi County

Zeituna, Mustafa
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Strathmore University
Access to loans is instrumental in deepening financial inclusion and supporting small business growth. With the increasing digitization in the Kenyan economy, many digital lenders' availability has been integral in financial inclusion. The penetration of digital loans in the country is seen as a sign of a healthy market. However, determining the loan's quality to the loanee is yet to be determined since the loans are processed instantly. This study sought to establish the effect of digital lending platforms design on loan performance among small business owners in the Gikomba Open air market. The study specifically examined the effect of instantaneous processing, service automation, and remote processing on loan performance. The study further sought to establish the moderating effect of demographic factors on the relationship between digital lending platforms design and loan performance. The research was grounded on the financial inclusion and fmancial intermediation theories. The study adopted a positivism research philosophy that relied on descriptive research design to determine the association among the variables. The target population of the study was the registered small-scale business owners operating within Gikomba Open-Air Market. A pretest was carried out on the same population on a smaller sample before embarking. The study relied on primary research data collected using a structured questionnaire, with analysis involving descriptive and inferential statistics. The research further applied a partial correlation to examine the moderating effect of demographic factors. This study presented the findings using various graphical representation tools such as charts and tables. The results indicated a positive correlation between instantaneous processing, service automation, remote processing, and loan performance. This implied that the lending platforms' design had enabled borrowers to access multiple lenders, improve their repayment time, and are less likely to default on their loans than when accessing conventional loans. The study concludes that digital lending platform design had a positive and significant relationship with loan performance. The partial correlation results indicate that age, gender, education, and income level significantly moderated the relationship between digital lending platforms design and loan performance. The study recommends that digital lenders should be regulated to adopt the protection of consumers of their products. Further, lenders need to invest in newer technologies that will foster instantaneous processing, improving the accessibility of funds, and increased automation in customer service as this can enhance their client engagement. To lenders, recommendations were for additional emphasis to be made on payment to reduce the default rate. Lenders were also advised to ensure that the borrower's demographic profile is taken into account in loan screening to ensure different limits for different demographics.
A dissertation submitted to Strathmore Business School in Partial fulfillment of the requirements for the award of Master of Science in Development Finance Degree of Strathmore University
Digital lending, Loan performance, Small businesses