Fintech lending and financial performance of the micro enterprises in Kenya

Abstract

The advancements of financial technology (fintech) lending in recent years have brought about a paradigm shift in the financial services landscape, addressing the limitations faced by micro enterprises in accessing credit through traditional financial service providers. The study aimed at investigating the effect of fintech lending on the performance of the micro enterprises in Kasarani Sub-county, Nairobi, Kenya. The micro enterprises were clustered in Kasarani, Njiru, Ruai and Mwiki. The specific objectives were to examine the effect of accessibility credit, affordability of credit and financial inclusion on the performance of micro enterprises. The study was centred on three theories: loanable fund theory, bank focused theory and financial intermediation theory. The study used a descriptive research design that utilised primary data. Primary data was obtained through administering semi structured questionnaires and analysed using a multilinear regression model. The target group were licensed micro enterprises actively operating within Kasarani Sub-county as the target population. The sample size was determined using stratified random sampling procedure in accordance with the Yamane formula. The foregoing methodology arrived at a representative sample size of 270 respondents. The micro enterprise population in Kasarani Sub-county was divided into different strata along the 4 wards. Hand to hand questionnaires was the main method of data collection and analysed using SPSS. The quantitative data from the instruments were analysed using descriptive statistics and inferential statistics in the form of the Pearson’s correlations and regression. An experimental pilot test was carried out in Roysambu Sub-county before the commencement of the study where 29 research questionnaires were distributed as per the Mugenda and Mugenda theory of 10% to check on any discrepancies with the designed questionnaire and allowed the investigator to control the moods and attitudes of respondents to the study and undertake corrections before the actual exercise. The study failed to reject all the 4 study hypotheses on the relationship between the variables; fintech accessibility, fintech affordability, financial inclusion and the combined impact of fintech credit accessibility, affordability, and financial inclusion on the financial performance of micro enterprises in Kenya. Correlation analysis pointed to a weak positive relation between fintech credit accessibility and financial performance of micro enterprises and a weak negative relationship between fintech affordability and financial performance of micro enterprises. There was however a moderate positive relation between financial inclusion and financial performance of micro enterprises. The study findings point to the need to realize untapped potential in the industry by leveraging the existing elaborate and vast network created by technology and internet availability. The above is inferred from the empirical evidence of the potential of combined impact of fintech credit accessibility, affordability, and financial inclusion on the financial performance of micro enterprises in Kenya. Technology and more importantly the internet, whose access within the country has taken giant leaps can be leveraged to create awareness and also gather feedback on fintech services and product offerings.