The Effect of Technological Innovation on Loan Recovery in a Student Financing Organization: a Case Study of Higher Education Loans Board.

Abstract

Loan recovery and repayment of student loans has been a great challenge throughout the world, the level of student debts are increasing by the day and this has adversely affected the financial health of individuals in general. Due to such difficulties it is necessary for the student loan boards to provide adequate mechanisms of easily repaying the loans so as to increase the amounts recovered by these institutions. This research sought to evaluate the effect of technological innovation on the loan recovery of a student financing organization. Mechanisms of loan payment such as the use of mobile phones, the use of standing orders, credit cards , debit cards and the use of electronic funds transfer services were examined to understand which one is the most preferred method of loan recovery and also examine the potential of the other methodologies in increasing loan recoveries. This study made use of qualitative data readily available from the Higher Education Loans Board database; the data gave the yearly amounts of money collected by respective payment mechanisms for the last ten years. A multi linear regression model was used to analyze the net effect of all these methods of payment on the total loan recovery. The results showed that there is a positive relationship between the various technological innovations and the amount of loan recovered in a given year. Mobile phone payments, electronic funds transfers and the use of standing orders showed a positive effect on loan recovery while the use of debit and credit cards showed a negative relationship with the amount of loans recovered.