Risk Management Practices and Performance of Mobile Money Lending Firms in Kenya: A Case of Tala Loan Company

Abstract

The business sector is characterized by various types of risks. If these risks are not effectively managed, they have the potential to seriously harm both the industry and the overall economy, leading to significant financial and economic instability. Therefore, the study sought to investigate the effect of risk management practices on the financial performance of mobile money lending firms in Kenya, a case of Tala loan Kenya. The study was guided by the following objectives; establish the risk management practices adopted by Tala loan Kenya, assess the level of financial performance of Tala Loan in Kenya and determine the effects of risk management practices on the financial performance of mobile Money Lending Firms in Kenya. The study was to get measures regarding unsecured loan when it comes to give loans to loan income earners. It was guided by three theories: Portfolio Theory, Financial Distress Theory and Asymmetric Information Theory. It used a descriptive research design. The population of this study was 183 permanent and contractual employees of Tala Loan, Kenya. The study targeted 96 staff members in the senior management team, financial managers and their assistants. The study carried a census and collect primary using a structured questionnaire. The pretest was 10 questionnaires distributed to staff of Zenka Loan, Kenya which was 10% of the target population. To test reliability, Cronbach’s Alpha was used, where both descriptive and inferential statistics was analyzed and findings presented in graphs, tables and percentages. The findings revealed that Tala Loan Company practiced risk identification, risk assessment, risk treatment and risk monitoring as reported by majority of the respondents. The findings also indicated that the level of firm performance at Tala Loan Company, Kenya was satisfactory in term of risk identification, risk treatment and monitoring. The study also revealed that risk management practices had effect on the performance of mobile Money Lending Firms in Kenya. The study recommends that there is a need for proper mechanism for estimating potential losses at the time of entering lending contracts. Also, It is important for the company to involve all the internal stakeholders and train them on risk management polices since these techniques will help curb risk from occurring.