EFFECT OF DIGITAL FINANCIAL INNOVATIONS ON LOAN PERFORMANCE OF DEPOSIT TAKING SACCOs IN MOMBASA COUNTY

Abstract

Financial institutions are now able to become more efficient while also putting the needs of the client first thanks to technological advancements in the digital financial sector. With the increasing competition, DT SACCOs in Kenya have sought to leverage on the different digital financial innovations to enhance their financial and operational performance. Despite adopting such innovations, SACCOs continue to deal with substantial percentages of loans that are not performing and a spike in non-performing loans is an indication of the typically negative performance of loans. This was the basis for this study which sought to investigate the effect of digital financial innovations adopted by SACCOs in Mombasa County on their loan performance. The researcher analyzed three theories—the diffusion of innovation theory, the open innovation theory, and the disruptive innovation theory—as well as the literature of related studies in order to identify the research gaps that served as the foundation for this study. A sample size of 70 respondents was drawn from a target population of 190 using the Nassiuma formula. The demographic for the study was the board of directors and personnel of the six DT SACCOs in Mombasa County. The study used a descriptive research design. Both primary and secondary sources of information were used to gather the data. The structured questionnaire underwent a pilot test to determine its validity and reliability for the primary data. The various SACCO financial accounts, reports, and databases were used to gather the secondary data. SPSS, a computerized statistical package for social sciences, and Excel were used to examine the data. The data was examined using descriptive statistics, such as mean, figures, frequency tables, and standard deviation. Inferential statistics was done using the multiple regression analysis and the z test. The results of the regression model demonstrated a statistically significant effect between process digitalization, mobile banking technologies, application programming interfaces, and online banking and loan performance. The study findings indicate that digital financial innovations have a substantial effect on loan performance in DT SACCOs in Mombasa. In conclusion, DT SACCOs have seen an increase in the quantity and quality of loans as well as better monitoring and loan repayment convenience upon adoption of digital financial innovations. Ultimately, the number of loans in default has significantly reduced. the number of loans in default. The study recommends that DT SACCOs should review their operations to clearly understand other factors that are contributing to the increase in members defaulting in paying their loans on time