Abstract
Virtual lending was introduced to fasten loan repayments but the latter is still a challenge to commercial banks. Banks still experience delays in repayment of loans as well as loan defaults. Delays of repayment lead to an increase in in Kenya non-performing loans ratio, which in turn has a significant impact on the liquidity of the bank. Loan repayment in commercial banks in Kenya has been poor for the last five years as evidenced by the increasing non-performing loan ration among commercial banks in Kenya. This study therefore sought to investigate on the relationship between virtual lending and loan repayment in commercial banks in Kenya. The study also sought to determine the effect of virtual lending policy, virtual lending rates, easy loan accessibility and lack of collateral on loan repayment in commercial banks in Kenya. A descriptive research design was used in this study. The target population was all the 88 staff working the credit department in the headquarters of Equity Bank Limited. Simple random sampling technique was used to select 50% of the target population. This study used primary data that was collected by use of semi-structured questionnaires. Before the data collection, a pilot test was conducted to ensure the validity and reliability of the research instrument. This study used content validity by consulting individuals such as the supervisors who are experts in the current area of study. Reliability was measured by use of internal consistency and a Cronbach‟s alpha of 0.7 was considered acceptable. The research instrument generated both quantitative and qualitative data. Thematic content analysis was used to analyze qualitative data. Quantitative data was analyzed by use of both descriptive and inferential statistics by use of statistical package for social sciences (SPSS version 22). Descriptive statistics included frequency distribution, percentages, means and standard deviation. In addition, correlation analysis and multivariate regression analysis were used to establish whether there is a relationship between the dependent and the independent variables. The study applied a 95% confidence level, which indicates a significance level of 0.05. The data was then presented in tables and graphs. The results indicated that virtual lending policy has a positive and significant influence on loan repayment in commercial banks in Kenya (β1=0.226, p-value=0.012). In addition, the study found that virtual lending rates have a significant inverse influence on loan repayment in commercial banks in Kenya (β2=-0.376, p-value=0.000). Further, easy loan accessibility has a significant inverse influence on loan repayment in commercial banks in Kenya (β3=-0.326, p-value=0.000). Also, lack of collateral has an inverse influence on loan repayment in commercial banks in Kenya (β4=-0.421, p-value=0.000). The study concludes that lack of collateral influences loan repayment in commercial banks in Kenya most; followed by virtual lending rates, easy loan accessibility and virtual lending policy. The study recommends that the Central bank of Kenya should come up with a specific virtual lending policy covering factors such as interest rates, credit approval process and requirements for obtaining credit. The study also recommends that the credit department in Equity Bank should enhance the implementation of virtual lending policy. Also, commercial banks in Kenya should come up with ways of reducing misuse of funds by using automated measures such as checking the credit worthiness of an individual in Credit reference Bureau.
