Factors Affecting The Choice Of Mobile Lending Platforms Among Small And Medium Enterprises In Tharaka Nithi County In Kenya

Abstract

Small and medium enterprises (SMEs) have limited access to credit despite their contribution to global economic development and employment creation. The advent of digital lending through mobile lending platforms has improved access to credit for SMEs. However, since mobile lending platforms are unregulated in Kenya, predatory lending is rampant and hence it is vital for SMEs to make informed choices when they are selecting mobile lending platforms. The purpose of this study was to determine the factors affecting the choice of mobile lending platforms among small and medium enterprises in Tharaka Nithi County in Kenya. Specifically, the study sought to determine the effect of transaction cost, risk, and ease of use on the choice of mobile lending platforms among small and medium enterprises in Tharaka Nithi County in Kenya. This study applied a descriptive research design on a population of 745 small and medium enterprises in Tharaka Nithi County. A sample of 260 small and medium enterprises were selected and questionnaire were applied to collect data. The collected data was analysed using descriptive statistics (means, percentages, frequencies, and standard deviations) and multiple linear regression. The presentation of the findings was through figures and tables. The study findings determined that transaction costs had a significant and positive effect on choice of mobile lending platforms by SMEs in Tharaka Nithi County, Kenya (β= 0.185, p < 0.05). Additionally, study findings indicate that risk had a positive and significant influence on the choice of mobile lending platforms among small and medium enterprises in Tharaka Nithi County in Kenya (β= 0.169, p = 0.001). Further study findings indicated that ease of use had a significant positive influence on the choice of mobile lending platforms among small and medium enterprises in Tharaka Nithi County in Kenya (β= 0.314, p < 0.05). After considering the research's findings, the study offers important recommendations. First, the study recommends to policy makers and regulators such as Digital Lenders Association of Kenya (DLAK) and Centra Bank of Kenya to design an effective legal and policy framework that will guide the mobile lending institutions to have transaction costs that are fair and within the CBK legal legislation. The study also recommends to mobile lenders to enhance security of their applications through securing the application’s code, securing the back end, effective mobile encryption and educating their users on security. Lastly, the providers of mobile lending applications should develop the applications while considering platform compatibility so that the apps can work on several phone models, have simple navigation, have concise and clear content, minimize the number of steps when a user is seeking a mobile loan and reduce the need for scrolling through the application’s user interface.