Credit Management Strategies and Sustainability of Digital Lending Applications in Kenya
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Date
2021
Authors
Njenga, Margaret Wangechi
Kavindah, Lucy
Journal Title
Journal ISSN
Volume Title
Publisher
International Academic Journals
Abstract
The sustainability of the rapid emergence
and uptake of Digital Lending
Applications in Kenya is worrying;
Majority of Digital Lending Applications
in Kenya deal with personal loans which
are unsecured and therefore lenders charge
a higher interest rate because of the higher
risk nature of their customers and
thereafter use aggressive debt collection
techniques, this have led to calls from the
general public, policy-makers and the
CBK for the regulation of Digital Lending
Applications. If the current status
continues where millions of Kenyans are
listed with CRB it will be to the detriment
of Digital Lending Applications investors
who will lose their investments and it will
eventually lead to closing down of Digital
Lending Applications which will be a
backward trend to the innovative and
inclusive idea Digital Lending
Applications bring to Kenyans in
comparison to the traditional financial
institutions. The main objective of this
study was to look at the credit
management strategies of Digital Lending
Applications in Kenya and how they affect
the sustainability of Digital Lending
Applications in Kenya. This study
employed descriptive research design
techniques in collecting, analysing,
interpreting and presenting the
information. Descriptive research design
showed the relationship between credit
management strategies and sustainability
of Digital Lending Applications in Kenya.
The study’s population was the Digital
Lending Applications listed in the android
software that are operating in Kenya. The
study collected both primary and
secondary data based on the objectives of
the study. Data collection started by
obtaining a letter from the Kenyatta
University introducing the researcher to
the lending firms. The letter was used to
accompany the questionnaires and
interview guides for data collection, the
respondents were the loan appraisal
officers, credit staff and accounting staff
employed by the Digital Lending
Applications in Kenya. The collected data
was analysed using Statistical Package for
Social Sciences (SPSS) and Microsoft
excel programs, inferential statistics were
applied, and multiple regressions
employed to test the relationship between
credit management strategies and
sustainability of Digital Lending
Applications in Kenya. Figures and tables
were used to present the data. The study
found that credit appraisal strategies
positively and significantly influences
sustainability of Digital Lending
Applications in Kenya; pricing strategies
positively and significantly influence
sustainability and that debt collection
strategies positively and significantly
influence sustainability. The
recommendation of the study is that
Digital Lending Applications in Kenya
should improve their client appraisal
techniques to lower their non-performing
loans. Having a well-performing loan
portfolio will improvement their financial
performance and hence their sustainability.
Digital Lending Applications in Kenya
have incurred loan losses through lenient
standards of lending. The study thus
recommends Digital Lending Applications
in Kenya to improve the way they deal
with risk accruing from credit by
improving their credit risk controls; this
can be done by having an updated
assessment database with a profile of
prospective and current borrowers and
guarantors, it should show a of history repayment patterns and cash flow records
of the borrower. The database can be
shared among financial institutions and
other lending companies to be used during
the credit appraisal process; this can
improve the quality of their loan books.
Description
An Article Published in International Academic Journal of Economics and Finance
Keywords
Credit Appraisal strategy, Credit Management Strategy, Debt Collection Strategy, Digital Lending Applications, Pricing Strategy, Sustainability
Citation
Njenga, M. W., Kavindah, L (2021). Credit management strategies and sustainability of digital lending applications in Kenya. International Academic Journal of Economics and Finance, 3(6), 423-446