Effects of Digital Loans on Financial Performance for Commercial Banks Listed at Nairobi Security Exchange

Abstract

Financial segment has experienced a remarkable transformation, leading to reforms and an expansion of financial products, processes, organizational structures, and managerial approaches within firms. This metamorphosis has been driven by various factors, including technological advancements, changes in consumer behavior, and evolving regulatory frameworks. The primary objective of this investigation was to assess the impact of digital loans on the financial performance of commercial banks listed at the Nairobi Security Exchange. The model summary table presents the outcomes of our statistical analysis, revealing a robust correlation of 76.0% among the variables under examination. This signifies a substantial link between the predictor variables, namely Buy Now Pay Later, Website-Based Loans, and Mobile App Loans, and the regressed variable, which is Financial Performance. The R Square, also known as the correlation coefficient, stands at 0.578, indicating that around 57.8% of the fluctuations in Financial Performance can be elucidated by the influence of Buy Now Pay Later, Website-Based Loans, and Mobile App Loans. However, it is essential to acknowledge the presence of other influencing factors, as the remaining 42.2% of changes in the dependent variable (Financial Performance) cannot be accounted for by our selected explanatory variables. ANOVA table demonstrates that the significance value of 0.000 is less than the specified alpha level of 0.05, indicating the statistical materiality and suitability of the model for modeling purposes. When all factors are kept unchanged, the autonomous value stands at 0.203, implying that financial performance increases by 0.203 units whenever all the variables remain constant. Additionally, an increment of one unit of Mobile app loans leads to a substantial decrement in financial performance by 0.053. Similarly, the addition of a solitary unit of Website-Based loan triggers a noteworthy decrement in financial performance by 0.212 units. On the other hand, a singular increment in Buy Now Pay Later causes a remarkable increase in financial performance by 0.274, assuming all other factors remain constant. As a suggestion for further scrutiny, the researcher recommends scholars to examine any of these as the primary independent variables: cryptocurrencies and blockchain technology, artificial intelligence and machine learning, crowdfunding, contactless and biometric authentication, green finance, robo-advisors, wealthtech, and peer-to-peer (P2P) lending versus financial performance. Exploring these variables in-depth could yield valuable insights into their potential impact on financial performance and enrich the existing body of knowledge in this domain.