Effect of digital lending practices on economic empowerment among women in rural areas in Machakos County and the moderating role of digital literacy

Abstract

Despite the rapid expansion of digital financial services in Kenya, rural women experience significant barriers to economic empowerment. Thus, this study examined the relationship between digital lending and the economic empowerment of rural women in Machakos County, Kenya. The study specifically examined the relationship between loan disbursement, mobile loan repayment, unsecured loans, credit scoring methods, and economic empowerment, and the moderating effect of digital literacy on these relationships. The study was anchored on the Theory of Capability Approach and supported by the Resource Control Theory. The study adopted a positivist philosophy and employed a descriptive cross-sectional research design. Primary data was collected using questionnaires from a stratified sample of 387 rural women in Machakos County who had experience using digital lending services. The findings revealed that loan disbursement, mobile loan repayment, unsecured loans, credit scoring methods, and digital literacy were all positively and significantly associated with economic empowerment among rural women in Machakos County. Mobile loan repayment demonstrated the strongest association with economic empowerment, suggesting the importance of flexible and accessible repayment systems within rural financial contexts. The findings further showed that digital literacy had a positive direct relationship with economic empowerment. However, digital literacy only significantly moderated the relationship between unsecured loans and economic empowerment, while its moderating effect on loan disbursement, mobile loan repayment, and credit scoring methods was not statistically significant. The study concluded that digital lending practices were associated with improved financial participation and economic opportunities among rural women, although the benefits appeared influenced by contextual factors such as affordability, repayment pressure, transparency, and digital capability. The study was limited by its cross-sectional design, which restricted the ability to establish causal relationships, and by reliance on self-reported data that may have been influenced by respondent bias. Additionally, the study focused only on rural women in Machakos County, which may limit the generalizability of the findings to other regions in Kenya. Despite these limitations, the study makes an original contribution to knowledge by examining specific dimensions of digital lending, namely loan disbursement, mobile loan repayment, unsecured loans, and credit scoring methods, in relation to women’s economic empowerment within a rural Kenyan context. The study further contributes to existing literature by empirically demonstrating that digital literacy exerts a selective moderating effect within digital lending ecosystems, significantly influencing the relationship between unsecured loans and economic empowerment while showing limited moderating influence across other digital lending dimensions. The study recommended that policymakers and digital lenders prioritize user-friendly repayment systems, transparent credit scoring practices, targeted digital financial capability programs, and stronger consumer protection measures for unsecured digital lending products. The study further recommended context-specific digital literacy interventions that focus on financial decision-making and responsible borrowing practices among rural women.