Effect of Digital Lending on Financial Sustainability of Commercial Banks in Kenya

Purpose: To examine the effect of digital lending on financial sustainability of commercial banks in Kenya Design/Methodology/Approach: The research design used was descriptive in order to get the present picture of lending innovations and their influence on financial sustainability. The sample used in this study was commercial banks in Kenya that included Tier 1, Tier 2 and Tier 3 banks (a total population of 7 Tier 1 banks, 19 Tier 2 banks and the rest 13 Tier 3 banks). The sampling method was stratified random to identify a representative sample, which guarantees that the insights will be obtained in various categories of banks. The structured questionnaire was used to collect the data where Cronbach alpha was used to test internal consistency and Keiser-Meryer-Olkin(KMO) tested construct validity. Data analysis consisted in testing the assumptions of the Classical Linear Regression Model (CLRM) and these are linearity, normality, homoscedastic. The regression models were used as the main analysis tools to establish the direct effects. Descriptive and inferential statistics were used to present the results. Findings: The model summary indicated that there was a strong positive correlation between the variables and the correlation coefficient of the model (R) was 0.728 and the adjusted R 2 of 0.511 value indicated that the model is robust and capable of account to the number of predictors and sample size. The statistical analysis of the ANOVA results indicated that the regression model was significant (F(4,98) = 27.600, p < 0.05), all together, the digital lending indicators are statistically significant with regard to the financial sustainability of commercial banks. The coefficients table also described the personal effects of each independent variable. The constant (B = 1.000, p = 0.008) Implications/Originality/Value: Therefore, there was adequate evident to reject the null hypothesis that posits: Digital lending positively affects the financial sustainability of commercial banks in Kenya.