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Metropolitan Journal of Academic and Applied Research

Relationship Between Mobile Banking Services And Loan Performance Of Selected Microfinance Institutions In Mukono District.

Authors: Akampurira Sarah1 , Musiimenta Nancy2

Journal: Metropolitan Journal of Academic and Applied Research (MJAAR)

Volume/Issue: Volume 4 - Issue 10

Published: 01 Jan 1970


Abstract

The integration of mobile banking services is a pivotal strategy for Microfinance Institutions (MFIs) in Uganda to enhance operational efficiency and financial sustainability. However, the specific relationship between these digital services and tangible loan performance metrics within the unique context of Mukono District required empirical investigation. This study sought to examine the relationship between mobile banking services and the loan performance of selected MFIs in Mukono District. The study employed a cross-sectional research design and a mixedmethods approach. A structured questionnaire was administered to a sample of 85 staff members from selected MFIs, and key informant interviews were conducted with senior managers. Data analysis was performed using SPSS version 26 for descriptive statistics and STATA version 17 for inferential analysis, including a multiple regression model to test the relationship between mobile banking indicators and loan performance. The descriptive statistics revealed strong positive perceptions among MFI staff regarding the role of mobile banking. Key findings included high mean scores for mobile transactions increasing repayment convenience (Mean=4.21, SD=0.92), the use of mobile platforms for loan applications (Mean=4.12, SD=0.98), and the belief that mobile banking has improved overall loan performance (Mean=4.14, SD=0.96). Critically, regression analysis confirmed a statistically significant positive relationship between the use of mobile banking services and improved loan performance (p < 0.05), indicating that enhancements in mobile service utility directly correlate with reduced portfolio-at-risk and higher repayment rates. The study concludes that mobile banking services are a significant determinant of loan performance in MFIs within Mukono District. The convenience, improved communication, and monitoring capabilities afforded by mobile platforms positively influence borrower repayment behavior and institutional portfolio quality. The findings affirm the applicability of the Technology Acceptance Model in the microfinance context, where perceived usefulness and ease of use drive positive financial outcomes. It is recommended that MFI management should: (1) intensify investments in robust and user-friendly mobile banking platforms, (2) implement continuous client education programs to enhance digital literacy and trust, and (3) collaborate with telecom providers to improve network reliability and reduce transaction costs. Policymakers should foster an enabling regulatory environment that supports innovation while ensuring consumer protection in digital finance.
Keywords

Mobile Banking, Loan Performance, Microfinance Institutions, Portfolio-at-Risk, Technology Acceptance Model, Mukono District, Uganda.

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