An Assessment of the factors that influence the level of indebtedness of mobile borrowing micro entrepreneurs in Nairobi County, Kenya
Date
2020
Authors
Karungu, Mary Wangui
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
The proliferation of mobile lending applications has greatly impacted on the ease of access to credit amongst borrowers in Kenya. The advent of M-PESA in 2007 brought immense transformation in respect to mobile money transfer and paved the way for the development of the mobile lending platforms. One of the major problems that MSMEs face is the lack of financing. This has been worsened by the interest rate capping which has made banks more reluctant to lend to them. Left with very few borrowing options, access to mobile lending platforms seems to be an ideal solution to the problem. There has, however, been an increase in the number of people negatively listed on the Credit Reference Bureau for default on mobile loans. There is therefore need to understand whether and how mobile lending has impacted on the level of indebtedness of micro-entrepreneurs in Nairobi City County. Thus, the researcher proposed to assess the effect of mobile loan borrowing on the level of indebtedness among micro-entrepreneurs in Nairobi City County. The specific objectives of study involved; evaluating the influence of demographic factors on the level of indebtedness of the borrowers; establishing the relationship between behavioural factors and the level of indebtedness of the borrowers’ and evaluating the relationship between financial literacy and the level of indebtedness. The study embraced a descriptive and correlational study design through a quantitative survey to evaluate the study questions. The target population involved 224,668 micro-entrepreneurs operating in Nairobi City County and through Yamane Formula; a total of 400 respondents were sampled. Data analysis sought to establish if any relationship existed between the variables via Statistical Package for Social Sciences. The quantitative analysis was conducted by use of descriptive and inferential analysis techniques. Data representation utilised graphs in form of pie charts and tables for means, standard deviation, variances, and correlation coefficients. The study was able to obtain a 71% response rate with the majority of the respondents being over 26 years. The findings of the research indicate that the mobile loan borrowing factors have a positive relationship with the level of indebtedness as indicated by Adjusted R2= .716. The study concludes that behavioral factors, terms and conditions as well as demographic factors have a positive effect on the level of indebtedness. The research recommends that there is need for more regulation to be introduced in the mobile lending industry as well as introduce requirements that can integrate mobile lending into the financial sector. The study further recommends that the management of the mobile lending firms should enhance their screening process and promote better financial literacy.
Description
A Thesis submitted in partial fulfillment of the requirements for the award of the Degree of Masters of Business Administration at Strathmore University Business School
Keywords
Mobile money transfer, Mobile lending platforms., Credit Reference Bureau