Mobile Banking Impacting the Performance of Microfinance Institutions: A Case Study from Rwanda

Marthe Uwamariya (), Claudia Loebbecke and Stefan Cremer ()
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Marthe Uwamariya: Department of Media and Technology Management, University of Cologne, Cologne, Germany
Claudia Loebbecke: Department of Media and Technology Management, University of Cologne, Cologne, Germany
Stefan Cremer: Department of Media and Technology Management, University of Cologne, Cologne, Germany

International Journal of Innovation and Technology Management (IJITM), 2020, vol. 17, issue 01, 1-18

Abstract: Globally, high costs and loan defaults are the biggest threats to microfinance profitability and sustainability. This explorative study investigates how and to what extent mobile banking can foster the performance of microfinance institutions (MFIs). It expands the traditional dimensions of Transaction Cost Economics (TCE) by adding a loan default aspect. The study offers an explorative case study on “Urwego Opportunity Bank” (UOB) — Rwanda’s first commercial mobile service. Based on qualitative data collected through semi-structured interviews from the bank’s staff and its customers, the case shows how mobile banking allows for reducing transaction costs and loan defaults and thereby increases efficiency of MFIs. Further, it identifies high agent visibility, and sufficient savings to drive the usage of mobile banking — which, in turn, promotes the deployment of financial services to still unbanked parts of the population in emerging economies.

Keywords: Microfinance; mobile banking; IT for development; transaction costs; loan defaults (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S0219877020500017

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