Abstract: Mobile money, also referred to as mobile payment, mobile money transfer and mobile wallet, generally refers to services operated and performed from a mobile device such as mobile phone, credit or debit cards; the intersection of both banking and telecommunications services. It involves a diverse set of stakeholders from both mobile phone operators and financial service institutions. Mobile money services have been defined as electronic money accounts that can be accessed via mobile phone. Mobile money services offer secure and convenient means for banked and unbanked people to send and receive money with mobile phones at home and abroad; anywhere at any time. Lending is one of the most important functions of commercial banks. Yet, lending is at times associated with non-performing loans. Non-performing loans (NPLs) are a monumental challenge to the banking sector. This study sought to determine the effect of mobile lending process on non-performing loans in commercial banks in Rwanda. Precisely, the study the study assessed how loan appraisal process, documentation process, loan disbursement process, and monitoring and evaluation process affected NPLs in commercial banks. The study adopted a descriptive survey research design. The credit officers working with Ecobank Kigali branch in Rwanda constituted the target population. The 110 credit officers working with 12 branches of ECOBANK in Rwanda. A sample of 87 credit officers was obtained from the study population using stratified random sampling method. The study used both primary and secondary data. A structured questionnaire was used to collect data from the sampled respondents. A pilot study was carried out prior to the main study with the aim of determining both the reliability and validity of the research instrument. The researcher obtained requisite permits and consents before collecting data. The Statistical Package for Social Sciences Version 21 software was used to facilitate data analysis. Descriptive statistics and inferential statistics was used in the analysis. Descriptive statistics was encompassing frequencies, percentages, means and standard deviations. Inferential statistics took the form of Spearman rank correlation coefficient and multiple regression. The results of the analyses were present in tables. Interpretatively, for NPLs to increase by a single unit, loan appraisal process, borrower’s documentation process, loan disbursement process, and monitoring and evaluation process had to be changed by 0.582 units, -0.418 unit, 0.054 units, and 0.063 units respectively while holding other factors (1.396) constant. According to the findings, it is clear that loan appraisal process was the most important element of mobile-cash loans in regard to non-performing loans in commercial banks. On the other hand, documentation process negatively impacted on non-performing loans. Illustratively, commercial banks are supposed to improve how they appraise the loans they lend on the mobile platform in order to arrest the escalating NPLs. The study concluded that Ecobank in Rwanda failed to demand for personal information of borrowers and also information regarding their family members prior to lending them credit on the mobile platform. In addition, the study inferred that commercial banks neither sought information regarding the income sources of borrowers nor their residence before giving them mobile-cash loans. The study suggests further comparative research in respect of mobile-cash loans and normal loans and how such affect non-performing loans among commercial banks in Rwanda. It is also important to conduct an empirical study on the impact of mobile-cash lending on other financial aspects of commercial banks such as financial performance and financial growth.
Keywords: Borrower’s documentation process, Non-performing loans, Ecobank Rwanda.
Title: EFFECT OF MOBILE CASH LENDING PROCESS ON NON-PERFORMING LOANS IN COMMERCIAL BANKS IN RWANDA: A CASE STUDY OF ECOBANK RWANDA
Author: MUHONGERWA K. JULLIETTE, Dr. PATRICK MULYUNGI
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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