Influence of digital lending platforms design on loan performance among small business owners in Gikomba open-market, Nairobi County
Date
2020-12
Authors
Zeituna, Mustafa
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
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.
Description
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
Keywords
Digital lending, Loan performance, Small businesses