Adoption of Fintech and Policy Recommendations:

The Case for Digital Lending Platform in Myanmar

Thida Aye

M.Sc., Oxford University (2005)

M.S., Sloan School of Management, Massachusetts Institute of Technology (2008)

A THESIS SUBMITTED
FOR THE DEGREE OF DOCTOR OF PHILOSOPHY
LEE KUAN YEW SCHOOL OF PUBLIC POLICY
NATIONAL UNIVERSITY OF SINGAPORE

2021

Supervisor:
Associate Professor Vu Minh Khuong

Examiners:

Associate Professor Araral Eduardo

Assistant Professor Lee You Na
Professor Mitomo Hitoshi, Waseda University, Japan
 DECLARATION

I hereby declare that this dissertation is my original work and it has been written by me in

its entirety. I have duly acknowledged all the sources of information which have been used

in the dissertation.

This thesis has also not been submitted for any degree in any university previously.

Thida Aye
June 8, 2021

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 ABSTRACT

In recent years, fintech (financial technology), the new industry that uses technology and

innovation to improve and compete with traditional delivery of financial services through

mobile and digital platforms, has been playing an increasing role in shaping financial and

banking sector landscapes. In emerging markets such as Myanmar, where there is no credit

bureaus or access to reliable transactional data due to lack of banking infrastructure, the use

of non-traditional data accessed from mobile phones though financial technology can

enable consumer lending to create verifiable digital credit footprint and facilitate financial

inclusion, which can ultimately bring about upward mobility and financial stability. This

thesis explores the factors that influence the early adoption of digital lending fintech

platform via mobile application technology within Myanmar. Based on the extension of

technology adoption model (TAM) constructs including (a) perceived usefulness, (b)

perceived ease of use, (c) perceived compatibility, (d) perceived trust, (e) perceived

credibility, (f) perceived risk, and (g) perceived cost, the dissertation demonstrates that the

perceived credibility and perceived compatibility are the key predictors to early fintech

adoption whereas perceived cost negatively influence the early adoption of digital lending

via mobile application. The theoretical framework and results give way to fill the large

literature gap for empirical work carried out in Myanmar for the adoption of the first ever

digital lending platform. From the findings of critical factors, it can be shown that accessible

credit can be effectively delivered outside of the traditional branch banking channels which

in turn could help establish relevant and robust financial sector policies for the country and

policymakers should prioritize low cost access to digital technology, advocate for a deeper

understanding of digital technology and promote financial knowledge and literacy

education to develop trust for faster adoption of fintech in Myanmar.

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 ACKNOWLEDGEMENT

Many awesome people have helped and guided me during the past years while I was

working on this dissertation. I am grateful to all of them; I hope that I can thank them all in

person. Many thanks to Prof. Vu, who is indeed a great motivator; without his

encouragement, I would have never been able to arrive at this stage. The other members of

my initial thesis committee, Prof. Naomi Aoki and Prof. Paul Cheung have also greatly

contributed to my learning process as a PhD candidate. All of them have supported and

trusted me, allowing freedom and flexibility in crafting my own path in completing this

thesis. In addition, I would like to thank all other faculty members who took an interest in

my research and gave me tips about relevant literature or theoretical framework

approaches. I’m forever grateful to my parents for the good genes that they’ve passed along

to me, but I’m more indebted for the guidance and patience that they employed in raising

their most challenging child. Last but not least, a very big thank you must go to my dearest

husband, Nick, for his unfailing love, trust, understanding and companionship.

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LIST OF ABBREVIATIONS

API Application Programming Interface

ASEAN Association of Southeast Asian Nations
CBM Central Bank of Myanmar
CRM Customer Relationship Management
E-commerce Electronic Commerce
FEC Foreign Exchange Certificate
FIL Financial Institutions Law
FSP Financial Service Provider
GDP Gross Domestic Product
GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit
IFC International Finance Corporation
KPI Key Performance Indicator
KYC Know Your Customer
LIFT Livelihoods and Food Security Fund
M-commerce Mobile Commerce
MFI Microfinance Institution
MFSR Mobile Financial Services Regulations
MNO Mobile Network Operator
MOPF Ministry of Planning and Finance
MPU Myanmar Payment Union
MSME Micro, Small and Medium Enterprises
NBFI Non-bank Financial Institution
NLD National League for Democracy
SME Small and Medium Enterprises
SMS Short Messaging Service
SWIFT Society for Worldwide Interbank Financial Telecommunication
USD United States Dollar
USDP Union Solidarity and Development Party
YSX Yangon Stock Exchange

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 LIST OF TABLES

Table 1.1 Three Key Elements of Digital Lending 14

Table 1.2 Most Common Type of Digital Lending Business Models 15
Table 1.3 Typical Features of Different Digital Lending Products 17
Table 1.4 Definitions of Key TAM Constructs 24
Table 2.1 Periods in Myanmar’s Political and Economic System 34
Table 2.2 Comparison among ASEAN Countries 35
Table 3.1 Overview of Stages in Individual Level Process Models 64
Table 3.2 Overview of Stages in Organization Level Process Models 67
Table 4.1 Reliability Statistics 128
Table 4.2 Comparison of Demographics – Population vs. Sample 129
Table 4.3 Age Group Distribution 129
Table 4.4 Marital Status Distribution 129
Table 4.5 Regional Breakdown Statistics 130
Table 4.6 Education Level Breakdown Distribution 131
Table 4.7 Income Group Distribution 131
Table 4.8 Job Position Distribution 131
Table 4.9 Component Matrix 134
Table 4.10 Communalities of Variables 134
Table 4.11 Factor Correlation Matrix 135
Table 4.12 Pattern Matrix before Data Reduction 135
Table 4.13 Pattern Matrix after Data Reduction 136
Table 4.14 Standardized Regression Weights from SEM Path Analysis 138
Table 4.15 Standardized Regression Weights from Regression in SPSS AMOS 139
Table 4.16 Summary Linear Regression Analysis 140
Table 5.1 Summary of Hypothesis Testing Results 147
Table 6.1 Key Considerations in Designing Digital Lending Channel Strategy 173
Table 6.2 Three Stages of Digital Readiness 174
Table 6.3 Potential Partners for Digital Lending Capabilities 177
Table 6.4 Digital Lending Readiness Assessment Framework 189
Table 6.5 Lists of Potential Policy and Regulatory Actions 197

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 LIST OF FIGURES

Figure 1.1 Proposed Conceptual Model 22

Figure 2.1 Summary of Financial Institutions’ Lending Decision Process 47
Figure 3.1 The Theory of Reasoned Action 73
Figure 3.2 Technology Acceptance Model 74
Figure 3.3 UTAUT Model 86
Figure 3.4 Risky Technology Adoption Model 91
Figure 3.5 The Digital Lending Process 99
Figure 4.1 Model Fit Based on Composite Variables 138
Figure 4.2 Model with Standardized Regression Estimates 139
Figure 6.1 Balancing Tech and Touch in Digital Lending Customer Journey 185

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TABLE OF CONTENTS

ABSTRACT

ACKNOWLEDGEMENT

LIST OF ABBREVIATIONS

LIST OF TABLES

LIST OF FIGURES

CHAPTER 1 INTRODUCTION

CHAPTER 2 OVERVIEW OF THE STATE OF FINANCIAL SECTOR IN

MYANMAR

CHAPTER 3 LITERATURE REVIEW OF TECHNOLOGY ADOPTION

CHAPTER 4 DATA, METHODOLOGY AND MODEL

CHAPTER 5 FINDINGS AND POLICY IMPLICATIONS

CHAPTER 6 POLICY RECOMMENDATIONS AND CONCLUSION

REFERENCES

APPENDIX I QUESTIONAIRE

APPENDIX II SURVEY INSTRUMENT

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 CHAPTER 1

INTRODUCTION

1.1. Background

Access to finance is at the core of the economic development process since the well-

being of an economy is largely influenced by the stability and development level of its

financial sector, especially given the fact that the components of GDP, the consumer

spending and investment are also driven by the credit activity. Only efficient and well-

functioning financial systems can support and allocate funding to the most efficient and

productive uses and assigning risks to those who can rightfully tolerate them, hence

furthering GDP growth, and providing prospects for upward mobility and fair distribution

of income. In emerging markets, the extent that the availability and access to financial

products and services is very limited; often, many individuals and small and medium

enterprises are unintentionally excluded from benefiting from financial sector development,

leaving much of the population in dire struggle. The challenge of greater, more convenient

access means financial services are easily available to all, thereby creating equitable

opportunities for each and every participant in the society and tapping their full potential in

an economy and therefore the urgent need to establish policies in line with the growth and

development stage of the specific country is ever more critical.

In a developing country like Myanmar, access to finance is further impeded by

archaic regulations and policies. According to the 2014 report by LIFT 1, 70.0 percent of the

country’s adult population has no formal access to savings, credit, payments, insurance,

pension, etc. This leaves many of Myanmar’s citizens reliant on unregulated informal

providers with significantly higher costs or family and friends. Myanmar’s financial sector

1
Making Access Possible (MAP) Report by the Livelihoods and Food Security Trust Fund (LIFT) (2014). ‘Demand, Supply, Policy and
Regulatory’. Retrieved from https://www.lift-fund.org/making-access-possible-map-myanmar-demand-supply-policy-and-regulatory

9
operates in a high degree of informality where almost all transactions are carried out in cash

only. Perceptions of convenience and ease about using financial services offered by

pawnshops and informal money lenders are prevalent, for the requirements set by

regulated financial service providers are too complex in terms of documentary evidence and

the time taken to process the loans. The retail credit market offered by banking institutions

is also highly restricted by limited capital and capped interest rates for lending as well as

deposits. Local banks are only allowed to lend at 13.0 percent per annum (regardless of risk

level and only with collateral) while deposit interest ranges from 8.0-10.0 percent per

annum with a strict loan to deposit ratio of 80.0 percent. Registered MFIs are also only

permitted to raise voluntary deposits after several years of establishment and they are also

experiencing hardships to bring in foreign capital into Myanmar for expansion of their loan

portfolios. Overall, Myanmar financial sector has serious regulatory impediments which

limit the growth of the business and product offerings of formal financial institutions with

respect to manage risk and returns.

Credible efforts have been taken by the Myanmar government and many

development financial institutions to improve the situation. In October 2015, it was

announced that the government targets 40.0 percent of the total population to utilize

financial services by 2020 and for 15.0 percent to have access to more than one financial

services product. After telecom sector opened up in 2013, Myanmar was also reportedly

cited as the third fastest-growing mobile market in the world after India and China. As a

result, there has been greater adoption of mobile financial services, in particular mobile

payments, offered by mobile operators and their subsidiaries. In December 2016, the World

Bank announced USD 100.0 million credit line to support Myanmar in improving access to

financial products and services for individuals and small and medium-sized businesses with

the objective to promote the development of a stable financial sector, including reforms to

increase the provision of banking services, improved credit access in Myanmar and other
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financial products across the country. In May 2017, the IFC successfully supported the CBM

in developing a regulation for credit reporting based on the companies’ operations and

establishment. The CBM also issued a regulation that provides the basis for credit reporting

companies’ operations and establishment. This served as a key step toward improving credit

access in Myanmar, along with helping the country’s small and medium enterprises. The

first ever credit bureau was first formalized in May 2018 to collect borrowers and their loan

repayment histories to allow for banks and other non-bank financial institutions to better

evaluate the creditworthiness of potential borrowers and ameliorate risk. Ultimately, this

information sharing and credit reporting will enable many consumers, entrepreneurs and

SMEs to quality for the right financing.

While establishing a credit bureau is a good move and expected to be operational

within a couple of years, challenges to data collection without outright mandatory

enforcement for data sharing mean it could be some time before it can practically and

effectively facilitate greater financial inclusion by making credit more widely. Up until 4-5

years ago, all the cooperatives and local banks are run traditionally and do not have

automated or electronic management information systems. The footprints of the ATM and

POS network and other electronic payment system at present are still very limited and the

branch infrastructure for especially commercial banks remains unconnected to each other

as they have all just started to consider or recently adopted core banking software. That

means the quality and integrity of data will be inconsistent. Real time settlement system,

which would allow for basic interbank fund transfer, is still under development. Also,

another point to bear in mind is that a lot of local businesses and SMEs typically do not

practice good bookkeeping or stick to standard accounting methods. As lenders will have to

take into account business prospects and review borrowers’ financial statements to assess

the company’s prospects and repayment capacity, if the accounts are unreliable, it may not

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aid the credit or risk-based pricing for loans and most of the lenders will continue to request

collateral, falling back to the current traditional lending practices.

This particular kind of backdrop where the penetration of smart phones greatly

outweighs that of financial services; the regulatory environment is ineffective and outdated;

existing banking infrastructure and system is inadequate and inefficient and to top it off, the

complete lack of credit bureau calls for the growth of digital lending platform that makes

use of advances in technology and computing power for analytics, artificial intelligence and

machine learning based on progressively digitized and accessible customer data. Customers

are increasingly becoming more and more connected to one another, enabling new lower-

cost mobile and digital channels to allow for remote delivery of digital products and

services. Mother Finance Company Limited2, a non-bank financial institution licensed and

registered in Myanmar decided to offer digital loans to consumers, the first of its kind in

Myanmar. Taking advantage of improving mobile penetration and connectivity as well as

digital literacy of upcoming generation, Mother Finance’s digital lending mobile platform is

focusing their attention to traditionally underserved, down-market customers and micro

enterprises. Their mobile application, both available in android and iOS platforms were

introduced as the first ever digital lending fintech in August 2018. They have collaborated

with us to better understand the factors affecting the early adoption of this technology and

provided us the data for this dissertation to conduct an empirical study of how fintech

adoption develops over the period of nine months since its first inception.

Digital lending, as one of the sub-sectors of fintech, is touted to be one of the most

promising ways to potentially lift the three billion people, who do not have access to formal

financial services, out of poverty, and to create a financially inclusive environment for

everyone’s greater economic wellbeing. Digital lenders can support better socioeconomic

2
Mother Finance is a digital lending fintech startup registered and based out of Myanmar where the author is the CEO and co-founder.

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development by offering products and services that are anchored in quicker turnaround

time, reduced non-performing metrics from utilizing big data and analytics, lower costs,

improved customer journey, and enhanced personalization and user experience. As

everything can be more automated in the digital platforms – origination, decision making,

disbursement, etc. digital financial services can be delivered with more affordability and

expanded to cover throughout the life cycle of individuals and businesses.

1.2. The Context for Digital Lending

Before further delving into the various chapters of this dissertation, the definition

and range of perspective on what digital lending means should be addressed. While many

equate digital lending, typically offered through web-based or mobile-based platforms, with

few human interaction and involvement, higher efficiency of processing, faster outcomes,

etc., digital lending often takes many shapes and forms, encompassing a spectrum of

digitization levels. The lack of clear and precise characteristics which can be deemed as

necessary and sufficient as digital lending accentuates each individual user’s experience and

their digital literacy echelons. Not every digital lender will be fully automated and some will

not be as digital as others, depending on each user’s background and comfort in utilizing

these platforms. In the case of Myanmar, as the banking infrastructure is rather backward

and there is no centralized database for identification verification, Mother Finance as a

digital lending platform still has a lot of manual, non-digital, work taking place on the back

end, especially on Know Your Customer (KYC) checks, transaction reconciliation and

settlement.

For the purposes of this dissertation, we will settle on the definition that captures the

key elements of digital lending, i.e., the process of originating, applying, assessing,

disbursing, and managing of loans that are submitted through digital channels, in which

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lenders use digitized data to offer access to credit and construct effective customer

engagement.

Table 1.1. Three Key Elements of Digital Lending

Choice of Digital Channel Effective Usage of Digitized Data Customized Experience /

 Choosing the right digital channel,
web or mobile based or both,
facilitate customers to easily
interact with the product or
service anytime anywhere
convenient to them
 Customers apply for credit
digitally, get alert for credit
decision via digital notifications
and receive loan in their digital
wallet while repayment reminders
and latest loan statements or
status are available 24/7 without
having to go somewhere or
interact with any loan officers
 Depending on the digital channel,
it could also support collection
efforts for the lenders
Engagement
 Physical credit assessment of borrowers  Digital lenders need to provide a
can be time-consuming and costly which better experience to customers for
may be made efficient from utilizing their digital products and services
digitized customer data by offering faster approvals,
 Credit bureau reports, SMS and call logs, anytime anywhere access,
tax records, real estate, auto loan, and customized communications, and
other bill payments, bank statements, pricing to convince them to switch
online transactions data could all be fed over from existing physical
into credit scoring and assessment channels
algorithms to predict borrowers’ capacity
and willingness to repay
 The same data sources can be applied to
strategize customer engagement and
retention strategies, improve experience,
and journey, and cater personalized
product and service offerings that match
their life cycle
 Once all the input data and customer
repayment behavior are gathered over
time, algorithmic credit decisions can be
made faster with little errors

At a conceptual level, a financial service provider (FSP) can deploy countless digital

lending channels, technologies, tools and systems, many of which help streamline

operations, reduce costs, and increase scale. But for customers to adopt a new digital

lending product or service, it needs to be well-designed, minimize their switching costs,

provide a fast and secured credit access, fewer steps for start to finish, i.e. minimal

documentation needed, choice of disbursement and repayment methods, as well as

receiving an experience that is more personalized. In order to deliver all these promises for

digital lending, the FSP needs to implement the critical procedures, processes, activities,

work scope and systems which would support the adoption of the digital initiatives planned.

Such digital readiness also requires a comprehensive organizational transformation to

develop and deliver an end-to-end process of data-driven credit products that are applied

for, disbursed, and managed through digital channels. The ecosystem for digital lending

process is multifaceted and still evolving even in the most advanced and developed part of

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the world. In reality, it is also hard to plug and play one digital lending model that works in

one country to another as cultural norms, industry practices and regulatory frameworks will

always shape local market term structure of interest rates, competitive landscape and

customer needs. Some FSPs may offer end-to-end digital solutions, while others

concentrate on a specific component of the lending process, i.e. origination, portfolio

management, risk assessment, etc. and outsource or leverage partnerships to complement

their various digital lending models. The most common digital lending business models are

presented in Table 1.2 below.

Table 1.2. Most Common Type of Digital Lending Business Models

Web-based In this model, digital lending products and services are directly delivered to customers via website
Model or a mobile application. Origination, credit worthiness assessment, disbursement, and account
management processes are fully digital, supported by advanced scoring and underwriting using
alternative data provided by the customer as well as various other data sources such as mobile
data, credit bureau information, online banking, and ecommerce transactions, etc. There is little
or no physical interaction with customers, as most customer services would likely be done
through automated chatbots, except when collection process is triggered.
Peer to Peer For P2P digital lending business model, digital credit is originated and disbursed between many
(P2P) Model borrowers and institutional or individual funders. P2P platform plays a central role in managing
their borrower-lender relationship and maintains the product design, credit scoring of borrowers
as well as support for repayment and collection processes while taking an origination fee or a
percentage of the interest income. Some take on the risk of nonpayment and bear the loss; others
build a loss reserve fund for the portfolio from the fees they charged on disbursed amount, etc.
Marketplace Lenders and borrowers make use of marketplace platforms to find one another. This reduces
Model customer acquisition cost for lenders and borrower get a wider set of choices and pricing for
loans. While almost all marketplace platforms charge origination from both sides and borrowers
directly interact with lenders after the match is made, some provide independent credit risk
assessment based on non-traditional data and collection services beyond simple matching
making. Lenders often dictate the loan terms and conditions.
E-commerce E-commerce and social media platforms accumulate a lot of insightful customer data and they are
and Social leveraging this access to this rich data to provide credit products and services. Their distinct
Media Platform brand, distribution network effects and loyal customer base allows them to play the role of
Model origination agent for any third-party lenders and partners to offer closed-loop credit solutions.
Customers are more likely to keep up with their loan repayments to continue using these
platforms’ primary services; non-performance might lead to getting excluded from interactive
participation or further ecommerce purchases.
Supply Chain This is a closed loop digital lending business model where firms within the supply chain
Model and distribution networks partner with each other to leverage accessible data and
industry knowledge and trends to make loans for special equipment financing,
commodity backed lending, invoice financing and factoring, etc. Here it is easier to
enforce repayment since failure to do so may be penalized from getting exiled from the
wholesale or distributor network or being inaccessible for certain raw materials,
stockpile and inventory.
Mobile Wallet Mobile Network Operators with electronic wallets can team up with financial institutions to offer
Model credit access to their subscriber customer base. Data from e-wallet transactions and/or telco
phone usage can be used for credit scoring for lenders to assess appropriate risk and disburse the
loan to mobile wallets while MNO’s physical agent network provides cash in and out facilities.
Initial loan sizes tend to be small but grows gradually as the customer makes regular repayments
and builds up credit history with the lender over time.

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Tech-enabled Incumbent financial services providers operating on traditional brick and mortar branch network
Incumbent can embrace new technologies to transform part or all the processes to digitalized financial
Model products, either in-house or through partnerships. Tech-enablement could mean introducing new
digital customer acquisition channels, money transfers through digital wallets to and from bank
accounts, and digital personal finance, wealth, and asset management tools, with customer service
and business development supported by a physical branch network for a blended approach of
technology and human touch.

The digital lending ecosystem and related business models are always in flux,

reflecting both opportunities and threats for incumbents as well as newly established

fintech players. Everywhere in the world, players in the digital lending business have to

continue testing, refining and evolving their value propositions, aligning to forever changing

customer needs and market demand conditions. Fluctuations due to technologies,

regulation, and customer preferences for digital readiness keep raising the bar for

complexity in strict categorization of digital lending models as they can often overlap, blend

and/or morph into one another. There are a few end-to-end self-funded mobile wallet based

digital lenders in Africa that have now transitioned into marketplace lending platforms with

full-fledged P2P portfolio. It is also common for pure loan origination brokerage platforms

that traditionally serve financial institutions to now move towards in offering third party

risk assessment, credit scoring, customer engagement, and structured finance solutions to

expand the scope of their involvement and go deeper within the digital lending process. No

one can stay complacent about omnipresent competition; there is a constant need to keep

up with the latest technology tools, find their own sweet spot to operate, identify partners to

leverage data and know-how, and push boundaries.

Provided with sufficient technology and tools, a digital lending platform can be

developed, designed and delivered, assuming regulatory requirements are met within the

specific targeted jurisdiction. Digital loans of all sizes for any purposes, i.e. personal,

mortgage, vendor financing, working capital, etc. depending on whether there is sufficient

credit risk profile available from various sources. There will be variations in credit

assessment methodologies, distribution channel, and product design based on how much

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digitization one chooses to go with in terms of customer onboarding, marketing,

underwriting, collection and retention. Different customer segment has different needs so it

is rather essential to differentiate between retail versus business loans and their tolerance

for the risk premium will be different for different industries. Table 1.3 represents the

typical features of different digital lending products are commonly available in the market.

Table 1.3. Typical Features of Different Digital Lending Products

Loan Product  Nano and micro loan for individuals
and small businesses
Credit Risk  Psychometric, attitude and behavioral
based evaluation
Assessment  Prediction models on likelihood of
default and/or willingness to pay
Sources of  Alternative data from smart phone and
telco usage, telco Smart phone data,
Data digital e-commerce transactions
 Credit bureau, utility bills, estate, and
tax filing data if available
 Various data partnerships
 Larger loans for consumers, and SMEs such as
working capital, mortgages, education loans,
invoice financing, auto financing, equipment
leasing, etc.
 Focused on capacity to pay
 Assessment on proof of income, expenses, cash
flow, etc.
 Traditional banking transactions
 Digital tracking of customers’ monthly income,
cash flow and expenses
 Company registry database, insurance, tax
returns, employee social security, etc.

Penalty for  Account suspension or blocked  Account suspension or blocked

 No more additional loans
Repayment  Blacklist
 File report to relevant authority
Lender  Supporting customer engagement to
guide them through the funnel and to
keep to on-time repayment
 Late payments beyond a certain
number of days are typically written off,
or legal action may be selectively taken
to set precedent
 No more additional loans
 Immediate impact on financial and reputation
 Loss of collateral, access to inventory
 Blacklist
 File report to relevant authority
 May seek other forms of personal guarantees or
proof of asset ownership to determine
borrower’s affordability and repayment
 Late payments beyond a certain number of days
are typically written off or restructured
 Defaulting often involves costly legal action to
recover funds

Borrower  Often a fully digital experience with
quick application and decision process
 Need consent to provide personal data
access for credit assessment
 Often falls short of fully digital experience
 Credit assessment may include some physical
on-site checks
 More extensive background checking on
customer and businesses through government
agencies’ database

1.3. Theoretical Framework

The usage of mobile devices have now become so universal that they are not

changing the way consumers relate with their financial institutions and their expectations in

being able to carry out financial transactions such as money transfers, bill payments,

account balance checking and other money management activities without much spatial

17
and temporal constraints. The combination of advancement in technology and mobile

devices via the wireless infrastructure has reshaped the financial services delivery and

consumption (Singh, Srivastava, & Srivastava, 2010). Forbes cited this “mobilfication” as

one of the leading trends of digitization that affect everyone’s daily lives and activities, in

terms of information network and communication regarding entertainment, commerce,

dining, healthcare, social gathering, and banking activities, etc. (Litvin, Abrantes, & Brown,

2013). Mobile phones can be seen as the foremost prominent form of digital technology

usage in Myanmar; as a result, they have become vital to people's everyday well-being

(Dasgupta, Paul & Fuloria, 2011).

Although introducing and adopting new technologies such as fintech is still

considered doubtful in emerging markets like Myanmar, due to the digital and financial

readiness of the consumers, as well as existing infrastructure and limited capacity for

regulatory oversight, fintech is touted as a source of competitive advantage for financial

institutions elsewhere. Despite the significantly high penetration of smart phones in

Myanmar, accessing financial services via mobile application is still very much in its infancy

with tremendous potential for future growth. Due to decades of economic sanctions,

Myanmar has fallen behind almost all the rest of the world in terms of growth and

development, and adopting new technologies can leapfrog over intermediate phases of

development and resurrect a faster path towards a purposeful economy to catch up with the

rest of the modern world. Therefore, discovering the precursors and circumstances of

technology adoption and usage is of major importance to understand consumers’ intentions

for adoption.

Southeast Asia is quickly becoming one of the fastest growing fintech markets in the

world3. One of the key contributing factors to this growth is its insufficient financial

3
https://finovate.com/southeast-asias-fintech-boom-all-you-need-to-
know/#:~:text=Southeast%20Asia%20is%20one%20of,fintech%20markets%20in%20the%20world.&text=Investors%20are%20channell
ing%20funding%20into,year%20on%20year%20in%202018

18
inclusion. The World Bank data undeniably points to a lack of access to financial tools in

southeast Asia and the penetration of banking, insurance and wealth management figures

are also very low in comparison to the developed countries. This makes it difficult for people

to borrow, save, and manage money easily which arise to a tremendous opportunity to

fintech companies to offer innovative opportunities for unbanked consumers to take fintech

services and improve their financial situation. Recognizing this growth potential, especially

for developing countries within South East Asia, investors are channeling funding into the

region, with financial technologies as their primary investment. According to data from CB

Insights, fintech fundraising activity in southeast Asia grew by 143.0 percent year on year in

2018. Fintech investments in Southeast Asia increased by more than 30.o percent through

2018 to reach approximately USD 6.0 billion. All this make studies of fintech adoption and

associated regulatory policy framework particularly attractive and worthwhile.

Indeed, the government in Myanmar has also recognized fintech as a key catalyst in

financial sector reform, which will be more cost-effective and efficient than setting up

branch networks of traditional banking and set goals for increasing the penetration of

banking services among citizens through bank digitalization, provision of digital banking

services, and shifting to cashless payments. Because of the potential of fintech to

democratize access to finance in rural areas with lack of reach to banks, there is an urgent

need to promote fintech adoption in developing countries; hence, we need to understand

better what are the factors influencing fintech adoption by different stakeholders in such

environments. The literature thus far includes few studies conducted in developing

countries about fintech adoption (Shim and Shin, 2016; Kemunto and Kagiri, 2018). And to

the best of our knowledge, there have been no studies on fintech adoption from Myanmar

for digital lending. These above facts lead to the primary research question of “what are the

fintech adoption factors in Myanmar, in the case for digital lending technology via mobile

application platform?” One secondary research motivation that follows this is “what would

19
be the action and policy approach for different stakeholders for promoting fintech adoption,

particularly digital lending, in Myanmar?”

In order to investigate, explain and predict the adoption of fintech, specifically digital

lending, which will improve the effectiveness and efficiency of the process of getting access

to credit as well as financial inclusion, a theoretical framework is necessary in quantitative

studies. A solid theoretic foundation as a basis to understand, analyze, and to assess the

extent of relationships between variables must be anchored to tackle the research questions

of the study. Many scholars have presented present competing theoretic frameworks in the

literature to examine the factors influencing technology adoption. The bulk of the

technology adoption literature today can be found within information systems research but

the majority of the theories and models originate from the studies in social sciences

(Constantiou & Papazafeiropoulou, 2009). The most prominent, yet non-exhaustive, list of

theories and models, that can be potentially applied to this study on digital lending

adoption are presented in Chapter 3.

Finding the exact appropriate theoretical framework to conduct a study on

technology adoption is not an easy task (Constantiou & Papazafeiropoulou, 2009),

especially for digital lending via mobile application. The predominant understanding of

adoption for consumers has been encapsulated in theories such as the Technology

Acceptance Model (TAM) and Innovation Diffusion Theory (IDT). The main TAM

constructs, perceived ease of use and perceived usefulness, are first introduced by Davis

(1989), to gauge whether users would take up a new technology. Rogers (1995) conceive the

IDT which has the following constructs: relative advantage; (ii) compatibility; (iii)

complexity; (iv) trialability; and (v) observability help predict technology adoption. Various

supplementary factors are added to amend the original TAM to better predict technology

adoption in a more comprehensive way, which are all now known as extended TAM (Daud

20
et al., 2011). Detailed background, differences and nuances about the TAM and IDT

theoretical frameworks are further discussed in Chapter 3.

After careful synthesis and review of literature, considering the kind of access and

data we could capture and extract from the survey questionnaire, based on similar studies

previously conducted on fintech adoption, it is determined that extended TAM to be

complemented with the addition of perceived trust, risk, credibility, and cost constructs

from extended IDT to appropriately settle on as the core theoretical foundation of this

study. This conceptual model is very similar to the one presented by Koenig-Lewis in 2010,

where IDT was expanded by coming up with an instrument with additional attributes,

including (i) perceived usefulness; (ii) perceived ease of use; (iii) perceived compatibility;

(iv) perceived trust; (v) perceived credibility; (vi) perceived risk; and (vii) perceived cost

constructs.

Ultimately, this quantitative study should result in an explanation of possible

relationships between the seven independent variables and the dependent variable. For the

model and data analysis, the complete extended TAM factors that are included in the study

are perceived usefulness, perceived ease of use, perceived compatibility, perceived trust,

perceived credibility, perceived risk, and perceived cost, which are the independent

predictor variables and the action to adopt the financial technology, i.e. digital lending via

mobile application is the outcome variable. A prediction model is then constructed and

estimated on the dependent variable based on its covariance with the relevant independent

variables (Kothari, 2004). The study is designed as quantitative correlational research. This

type of ex-post facto studies which begin with hypotheses backed up by a concrete

theoretical framework to determine directional and dependency relations between two or

more variables without inferring any kind of causality (Russ & Hover, 2005). Both

independent and dependent variables are not manipulated further and the research design

is more appropriate in assessing the extent of relationships between the seven independent

21
variables described above and the dependent variable. Chapter 4 includes a more thorough

explanation of the selection rationale of this specific research design.

Figure 1.1. Proposed Conceptual Model

Based on the statistics reported by the 2014 Census in Myanmar, the total population

is estimated as 52.4 million which means the minimum appropriate sample size with a

confidence level of 95.0 percent and a margin of error of 5.0 percent was 385 participants.

For data synthesis and interpretation, a multivariate statistical analysis technique called

structured equation modeling (SEM) is deployed to examine the relationships between all

the variables and help establish an extrapolative model of digital lending adoption in

Myanmar. A survey questionnaire is set up to be accessible on Mother Finance Facebook

Page between June 10-15 of 2019 and it is structured in a way that the sample reflects the

22
distribution of the entire population in Myanmar, in terms of age, income, education,

ethnicity, marital status, and locality, etc. The set of questions are chosen to carefully

construct independent variables representing TAM, i.e. (a) perceived usefulness, (b)

perceived ease of use, (c) perceived compatibility, (d) perceived trust, (e) perceived

credibility, (f) perceived risk, and (g) perceived cost.

Statistical Package for the Social Sciences (SPSS) software’s easy-to-use built-in SEM

function, under AMOS advanced statistics modeling program menu, is used to analyze data

collected from the survey and to simultaneously test the effect of multiple independent

factors or predictors to the dependent variable. SEM is a multivariate analysis tool with

continuous variables and with the ability to handle missing data. While other multivariate

analysis techniques can represent only one relationship between the independent variables

and the dependent variable, SEM can estimate multiple and interrelated relationships

simultaneously, representing a set of latent variables in these relationships (Cooper &

Schindler, 2008). The strength of interrelationships between constructs are also estimated.

The operational definitions of the key terms important to this study to assess the

relationships of independent variables (extended TAM constructs) with the dependent

variable (digital lending adoption via mobile application) are stated below.

23
 Table 1.4. Definitions of Key TAM Constructs

Just as the previous studies by Chih-Yunget al. (2011), Cruz et al. (2010), and

Giovanis et al. (2012), the basic starting off assumption is that there was a correlational

relationship between digital lending via mobile application adoption and the extended TAM

factors as indicated in the above table. It is also assumed that all survey participants think of

digital lending via mobile application technology as intended in this study, i.e., the process

to submit a loan application through a mobile-based digital platform, have their credit

worthiness assessed, receive the decision, and get the loan disbursement. In addition, all of

them are assumed to be truthful in their responses to the survey questions and address each

and every question independently and anonymously without bias and coercion. Another

important assumption is that the web-based form distributed through Mother Finance

Facebook page provided an accessible platform for data collection reflect a representative

24
sample of the population in Myanmar, which follows strict guidelines during data collection.

Mother Finance makes sure that the survey is fairly conducted in a timely manner;

participation in the survey is completely voluntary; all participants are fully informed about

their decision to participate and requested for consent; no participants are put in danger

from their participation; any personal information collection is guaranteed to be kept

confidential and eventually destroyed; and all participants remain anonymous throughout

the survey and beyond.

Two of the most well-known functions in fintech are digital payments and digital

financing. However, majority of prior literature on fintech policy research often focus on

security risk of backend IT systems, data rights and privacy protection for customer identity

and adequacy of regulatory supervision with respect to digital payments and for the latter

topic, concentrate on crowdfunding and P2P lending. Ryu (2018) shows that consumers

have less likelihood to keep using services when they perceive a lack of legal status and

protection for such service. Other policy studies document that central bank support and

strong regulation enable consumers to trust mobile payment services more (Kuo-Chuen &

Teo, 2015). Houstoun et al (2015) convey that excess regulatory constraints and barriers

such as licensing fees, requisite paid-up capital, compliance, cross-border remittance

restrictions, etc. can lead to fintech service providers losing their competitive edge for

innovativeness against traditional financial services.

Similarly, some researchers recommend that fintech should be enabled and

prioritized through policy and regulation to accelerate its development, including selective

interventions to support the service providers such as tax incentives, establishing open and

interoperable systems and promoting financial digital literacy (Buckley & Malady, 2015);

funding access for certain specific innovations (Martin et al, 2019); the creation of an

encouraging and facilitating ecosystem around fintech (Diemers, 2015); low barrier for

entry in terms of capital requirements and licensing (Rau, 2020); acceptance of fintech into

25
government regulatory sandbox which are special, experimental regulatory mechanisms to

allow companies to legally launch and operate new, limited-scope products and services

while generating experiences for both the government and these companies on the

operation of these new products and services (Claessens et al, 2018), etc. It is also noted that

governments are often stretched in amending existing rules and/or rushed to set up new

laws in order to accommodate these new fintech business models and digital financial

services (Fernandez- Vazquez et al., 2019). Therefore, fintech companies should be allowed

to operate within their niche business until they reach a certain threshold in terms of their

total value of assets or payments processed and such approach could then be used to plan

for more permanent and robust regulatory models (Shim & Shin, 2016).

Although there have been previous studies on technology adoption in Myanmar for

information and communications technology (ICT) (Lau et al, 2013), smart phones (Naing

& Chaipoopirutana, 2014), mobile banking (Lwin et al, 2019; Holm & Karlsson, 2019;

Thanabordeekij et al, 2020; Tun, 2020), mobile-based digital learning (Usagawa, 2018),

mobile payments (Lindheim & Grimsrud, 2017), etc., there is little academic research

carried out in the context of fintech adoption and policy within the country setting.

Firstly, this thesis covers an extensive literature review of technology adoption and

uniquely presents the critical factors for fintech adoption from the perspective of early

consumers for balanced sheet based digital lending in an emerging market setting that has

never been addressed before. The regulatory system for fintech can vary greatly among

countries, and each regulatory framework creates a distinct set of circumstances to market

participants; that is, suppliers and consumers of fintech. As such the government, as a

regulator, and the key stakeholders in the fintech ecosystem are significant contributors in

the promotion of fintech adoption (Anagnostopoulos, 2018). Only when adoption of fintech

services by providers are taken up by consumers to utilize those services, facilitated by

regulatory support, the full positive effects of fintech can be realized and accrued to the

26
society as a whole. To that end, policymakers must attempt to foster an ecosystem where

both consumers and service providers are able to obtain benefits from fintech services.

Secondly, this study also contributes to the literature by offering practitioner-oriented

actions and recommended activities from the standpoint of fintech service providers and

policymakers within Myanmar, which has not been done previously throughout fintech

adoption studies.

Therefore, additional theoretical and empirical development is still needed to

understand more about the factors of the digital lending via mobile application technology

adoption or lack thereof in the context of Myanmar. Of course, not all possible factors that

influence technology adoption decisions could be covered and tested but the principal

empirical contribution of this research was the use of the validated Koenig-Lewis et al.

(2010) instrument created from an extended TAM framework, broadening the use of the

TAM theoretical foundation extended by IDT to predict consumers’ adoption of digital

lending via mobile application technology in Myanmar.

However, it is impossible to fully explain all the different aspects of users’ behavior

toward digital lending via mobile application adoption in Myanmar. While TAM is

confirmed to be valid in academic literature for predicting technology adoption, no model or

theory in the practical sense is inclusive enough to address and verify all the determining

factors. One of the main limitations of this study fundamentally stems from the extended

TAM conceptual framework itself. Despite the addition of new constructs to extend the

original TAM, it is still not complete enough to cover all facets of technology adoption.

Adding more extended TAM constructs could add more noise to the prediction model to

result in any decent interpretation of the output. It can always be pointed out that many

unknown confounding factors still exist and they remain untested, which may have

influenced digital lending via mobile application usage in Myanmar. Another limitation is

how the data collection method used in this study was conducted and due to limited time

27
and resources, there may have been far better and more comprehensive ways to extensively

construct the data set.

The proliferation of mobile telecommunications technology has made mobile phones

increasingly common and available for users even in the remotest part of the world (Tobbin,

2012). Mobile phones are so now becoming affordable that people irrespective of their

financial situation can own them (Harma, 2009). Thus, expanding mobile technology based

financial services could help in onboarding new consumers that are unbanked or left out of

financial inclusion process to non-traditional or “branchless banking”. In developing

countries like Myanmar, it is not cost effective to set up brick and mortar branch operations

and banking infrastructure as population density is low. Mobile phones tend to have a much

higher penetration rate than that of banking services. Offering digital lending via mobile

application technology, i.e., making credit accessible simply from a smart phone, can

revolutionize the entire financial sector landscape in Myanmar and bring about a much-

needed positive social change. Therefore, it is imperative to understand exactly what factors

contribute to users’ adoption of digital lending via mobile application (Gu et al., 2009).

Digital lending via mobile application technology would give every Myanmar citizen

the equal opportunity to receive a loan using their smart mobile phones, facilitating under-

banked and unbanked consumers to gain access to one of the most basic financial services.

Incumbent financial services providers (FSPs) as well as fintech companies can benefit from

this study as they become more aware of the barriers that limit users’ adoption. They can

leverage the findings as a competitive edge to reach more customers and drive growth to

their businesses. Expanding digital lending via mobile application technology will also help

financial institutions to drastically cut down their transaction costs and at the same time,

due to the customer focused approach, strengthen their relationship with consumers

(Harma, 2009). Digital lending via mobile application can undoubtedly improve the lives of

28
underserved population in Myanmar because most of them can only afford cheap mobile

devices and now they are now able to access financial services.

This study provides a better understanding of digital lending via mobile application

technology acceptance in Myanmar for those in the ecosystem of financial sector, including

customers, FSPs and policymakers. Digital lending via mobile application technology is

presenting itself to be an innovative way to financially include people who do not have

landline access or broadband internet connections onto the formal financial services arena

(Palani & Yasodha, 2012). The results of this study could potentially guide FSPs in

developing strategies to consider their financial services offering to expand to digital

lending via mobile application and related economic opportunities to financially excluded

citizens within Myanmar. This study is framed and designed to quantitatively identify the

influential factors that attributes to early adopters of digital lending via mobile application

technology and consequently, the knowledge acquired from the outcome of this research

could help lower financial exclusion against the unbanked and under-banked population in

the country.

1.4. Research Questions

The main hope is that this quantitative correlational study will help aid in

understanding more about the technology adoption process of digital lending for early users

in Myanmar and the key factors and inter-dependent relationships between each,

influencing fintech adoption (dependent variable). Consumers in Myanmar still consider

digital lending as an emerging financial technology. Local financial institutions have

introduced mobile banking and electronic wallets as a new distribution channel of their

services to reach out to more consumers but lending remains delivered purely on a physical

basis. As mentioned in Section 1.3, the theoretical constructs of extended TAM are utilized

to evaluate the relative strength of independent variables individually or collectively in

29
relation to the dependent variable. The following research questions are set out to collect

data for the independent variables.

 (Q1): How much does perceived usefulness relate to digital lending via mobile
application adoption among Myanmar consumers?
 (Q2): How much does perceived ease of use relate to digital lending via mobile
application adoption among Myanmar consumers?
 (Q3): How much does perceived compatibility relate to digital lending via mobile
application adoption among Myanmar consumers?
 (Q4): How much does perceived trust relate to digital lending via mobile
application adoption among Myanmar consumers?
 (Q5): How much does perceived risk relate to digital lending via mobile application
adoption among Myanmar consumers?
 (Q6): How much does perceived credibility relate to digital lending via mobile
application adoption among Myanmar consumers?
 (Q7): How much does perceived cost relate digital lending via mobile application
adoption among Myanmar consumers?
 (Q8): Which of these extended TAM constructs of perceived usefulness, ease of use,
compatibility, trust, credibility, risk, and cost have more robust relationships with
digital lending via mobile application adoption in Myanmar?

The related hypotheses below are then derived from the above research questions:

 H1a: Perceived usefulness is strongly related to digital lending via mobile

application adoption in Myanmar.
 H2a: Perceived ease of use is strongly related to digital lending via mobile
application adoption in Myanmar.
 H3a: Perceived compatibility is strongly related to digital lending via mobile
application adoption in Myanmar.
 H4a: Perceived trust is strongly related to digital lending via mobile application
adoption in Myanmar.
 H5a: Perceived risk is strongly related to digital lending via mobile application
adoption in Myanmar.
 H6a: Perceived credibility is strongly related to digital lending via mobile
application adoption in Myanmar.

30
  H7a: Perceived cost is strongly related to digital lending via mobile application
adoption in Myanmar.
 H8a: One or more of these extended TAM constructs of perceived usefulness, ease
of use, compatibility, trust, credibility, risk, and cost are strongly related to digital
lending via mobile application adoption in Myanmar.

1.5. Outline of Dissertation

So far in this chapter, the background and research question in summary, including

rationale for the approach and possible contribution are presented in order to provide the

context for the reader to relate the research findings respectively. The next chapter will

focus on Myanmar’s financial sector – its current development status and problems,

regulations and policies and how they have all evolved over the years to give way to present

day environment and conditions for a fintech player to establish digital lending platform. In

Chapter 3, the literature review for technology adoption and diffusion theories are

extensively discussed and the gaps in the literature are also identified. Chapter 4 includes

descriptions of data and the selected methodology employed is justified and explained,

followed by the research design and process of data analysis. In chapter 5, research findings

from the model and outputs are analyzed and presented. Policy implications and

recommendations for digitizing financial services in Myanmar are address. A theoretical

framework to assess digital readiness of FSPs is developed further by relating empirical

findings and sociological theories. Chapter 6 is the final chapter where some observed

limitations of the investigation and suggestions for future research.

31
 CHAPTER 2

OVERVIEW OF THE STATE OF FINANCIAL SECTOR IN MYANMAR

2.1. Brief Introduction to Myanmar

Myanmar is the second largest country in Southeast Asia sharing land borders with

India, China, Laos, Thailand, and Bangladesh. According to the 2014 census data, it has a

population of 54.2 million where around 4.5 million people reside in the largest city,

Yangon. Together with Mandalay, the second largest city and Naypyitaw, the third largest

and administrative capital, the metropolitan area population reaches over 7 million. While

Yangon is considered to be the economic hub of the country's lower region, Mandalay serves

as the hub for upper Myanmar. Geographically, Myanmar is located in the monsoon region

of Asia. Its climate and natural resources encourage development in agriculture, therefore,

more than 70.0 percent of the processing and manufacturing sector is agro-based and

exports are dominated by agricultural products. It also has rich natural resources such as

precious stones including sapphires, pearls, jades and rubies. Hence, the government's

income is also generated through annual sales. Other natural resources include textiles,

wood products, natural gas, oil, metals and construction materials. Despite of it having

abundance in natural resources, Myanmar's economic underdevelopment has always been

referred to as having 'resource curse' (Pick & Thein, 2010).

Myanmar has ethnically diverse with eight major ethnic groups namely Kachin,

Kayar, Kayin, Chin, Bamar, Mon, Rakhine and Shan and over 100 different languages and

dialects spoken across the country Goddard (2005). Due to the significant priority given to

education in Myanmar society and a strong tradition of monastic education, the literacy rate

is high. However, there is high unemployment in the country amongst the young people.

This is contributed by the existence of a handful of large conglomerates and highly

fragmented small and medium enterprises that are mostly family owned. Religion also plays

32
a significant role in Myanmar communities. Theravada Buddhism is practised by 89.0

percent of the population according to Wikipedia. Therefore, Buddhist beliefs also play a

significant role in conducting businesses and community engagements which in turn are

embedded in the national culture.

2.1.1. Political Structure and Policy Dynamics

Before mentioning the country's state of financial sector and economic conditions,

we should describe the political systems as the government policies tend to change with

changes in political structure. This in tum affects the country's economic conditions. Thein

(2004) describes the economic system of Myanmar in relation to the political systems in the

country in the context of three main periods. We have amended to include a fourth period

ushered by the 2010 elections which brought about a quasi-civilian government run by the

USDP, a military backed institution and subsequent 2015 elections which saw opposition

party, the NLD taking the reins of the government. The political systems of the country

after the colonial rule can be divided into four different periods namely: (1) Parliamentary

democracy period (1948-1962); (2) Socialist period under military rule (1962-1988); (3)

Market-oriented period under military rule (1988-2010); and (4) Democratic reform period

(2010 to the present). As paternalistic authoritarian style of leadership has been prevalent

in the political system in the country from 1948 until 2010, the country's economic system is

similar to control-oriented command economy.

Table 2.1 shows Myanmar's political and economic systems from 1948 (independence

from the colonial British rule) to the present. Immediately after 1948, Myanmar was under

parliamentary governance and market systems until military takeover in 1962. Since then,

military involvements can be seen in every economic and political system. In 2010, it

underwent a dramatic change to political reform towards liberal democracy with mixed

economic system; however, state involvement is still present. Consequently, hierarchical

33
national culture is created over the years affecting the FSPs’ regulatory environment. In

2010, Myanmar has taken a big step towards democratization and changing policies

towards economic liberalization with the hope of sanctions being imposed on Myanmar by

the West to be lifted. Significant improvements such as freedom of public, ease of doing

business, access to telecommunications, etc. were recognized in the country's economic

conditions.

Table 2.1. Periods in Myanmar’s Political and Economic System

Period Political System
1948-1962 Parliamentary democracy
although military caretaker
government took charge
between 1958 and 1960
1962-1988 Socialist, Military rule
1988-2010 Market-oriented, Military rule
2010-present Democratic reforms
Economic System
A mix of socialism, nationalism and
market system
Nationalization, Self-reliance, Military
state-controlled
Transition towards a paternalistic market-
based economy
Opening up to multi-party government
allowing further reforms toward liberal
democracy and economic policies

2.1.2. Economic Conditions

Myanmar ranks 170th out of 190 countries in the World Bank’s Doing Business Index

and 131st out of 140 economies in the World Economic Forum’s Competitiveness Index and

it remains as one of the worst places to set up and operate a business. It is still one of the

poorest nations in the South East Asian region but since 2010, it has seen higher GDP

growth rates. Table 2.2 shows ASEAN countries GDP per capita, annual growth rate and

inflation. Myanmar's high inflation rate has affected not only household expenditures but

also the development of many businesses. Economic sanctions from western countries

based on the lack of democracy and human rights infringement, also contributed to the

country’s poor economic growth prior to 2010. It should be noted that, in citing various

national economic statistics prior to 2010, they cannot always be taken on their face value

due to the doubtful reliability of the information source, methods and integrity of the data.

34
 Table 2.2. Comparison among ASEAN Countries
Country Name GDP Per Capita (USD) GDP Growth Rate (%) Inflation Rate (1) (%)

Brunei 28,290.6 1.3 5.0

Cambodia 1,384.4 7.1 3.2
Indonesia 3,846.4 5.1 4.3
Lao PDR 2,457.4 6.9 1.9
Malaysia 9,951.5 5.9 3.8
Myanmar 1,256.7 6.8 6.2
Philippines 2,989.0 6.7 2.3
Singapore 57,714.3 3.6 0.9
Thailand 6,595.0 3.9 2.3
Vietnam 2,342.2 6.8 4.1
Source: World Bank Data (2017); Note: (1) Inflation Rate is on GDP deflator annual % basis.

Since the adoption of the market-oriented policy in 1988, the foreign exchange

regimes have undergone many transformations. One of them is the official rate being

pegged to special drawing rights at 6.5 kyats per US Dollar whereas the unofficial rates were

significantly higher from it. They fluctuated from 750 to 1,500 during the period of 2007 to

2011. Another major change in foreign exchange regime was to control foreign currency

holdings by Myanmar citizens as well as visiting tourists. In February 1993, the government

introduced the foreign exchange certificate (FEC) where 1 unit of FEC is equivalent to one

US Dollar. The implication was that the country was managing two different exchange rates

regimes; one being the US Dollar and another being the FEC. The dual exchange system

allows the government to take more control over the fluctuation of foreign exchange against

the USD, diversion of funds and revenues and inflation. However, on April 1, 2012,

President Thein Sein’s government decided to abolish this and the Central Bank of

Myanmar (CBM) announced to float the currency, putting an end to the pegged official rates

and the FEC. Subsequently, money changer licenses were issued to banks as well as private

companies in Myanmar.

35
2.2. Financial Sector Regulations in Myanmar

The financial regulations of the financial services providers in Myanmar, the state-

owned and private banks, can be traced back to the colonial Burma. Under British rule,

Burma used 'rupee' as the currency of exchange and the financial institutions were

controlled by the authorities in Calcutta and Delhi prior to its independence in 1948.

Therefore, financial regulatory laws are derived from that of laws established by the British.

Myanmar's banking regulations have been criticized by international communities and

academics for their inefficiencies in facilitating financial resource mobilization and growing

volume of trade and economic activities. From 1980s to the present, the Myanmar's

financial sector has undergone major changes. The first change took place in 1988, along

with the change of government and implementation of market-oriented economic system.

New banking laws were hurriedly enacted in 1990. They are the CBM Law, the Financial

Institutions Law (FIL), and the Myanma Agriculture and Development Law. Hence, with

every change in the political system, Myanmar's financial sector faces new policies.

Due to its underdeveloped capital market, Myanmar's financial system was

fortunately not much affected by 1997 Asian Financial Crisis and 2008 global financial

meltdown. However, this does not mean the country has never experienced any financial

crisis. Given the checkered history of Myanmar financial sector, there exists a very strong

lack of public trust in the banking system. In the 1960s and 1980s, there were several

episodes of local currency demonetization, when the government, supposedly highly

superstitious, yet seemingly arbitrarily, declared that particular denomination bills in

circulation would no longer be considered legal tender. All the privately owned backs in the

country were nationalized in the wake of socialist government policies in 1962. Soon after,

all the banking entities were merged into a single unit which was later dissolved into four

separate military state-owned banks. When the military government aligned themselves to

market-oriented economy, privately owned banks were given another lease in life but 1997

36
Asian financial crisis has decimated most of the economic activities around the region.

Coupled with domestic banking crisis in 2003, triggered by the collapse of informal finance

enterprises and constant pressure from international sanctions, the growth and

development to formal banking sector was left severely handicapped.

Starting in 2010, the newly elected quasi civilian government tried to revitalize and

redevelop financial sector by introducing a set of reforms as part of a broader agenda for

fast tracking the economic growth. Until November 2012, Myanmar banks were unable to

provide money transfers worldwide due to the economic sanctions by European Union (EU)

and the United States (US) unlike banks in other countries. Policymakers in the CBM, with

the memories of 2003 banking crisis forever in their mind, remain perpetually concerned

about inherent financial fragility and the potential for further crises. Thus preferring to

avoid systemic risk, banking regulations have stayed highly restrictive, which in turns

further limits the stability, deepening and strengthening of the financial industry.

President Thein Sein’s government pushed for reform agenda in all fronts targeted

towards a market-oriented open economy, and a more egalitarian political process,

including removing import restrictions, welcoming foreign direct investment in various

sectors, reducing export taxes, etc. Financial sector redevelopment was also prioritized as

they recognize that a strong, stable and well-functioning banking system is critical in

enabling the growth of the private sector. The Foreign Exchange Management Law (FEML)

was introduced in 2012 and the 1990 CBM Law was revised in 2013 and FIL in 2016. These

changes in the legislative front pretty much ended Myanmar’s system of dual exchange

rates, established central bank independence, and set strong prudential standards for the

banking sector. At the same time, the government has advocated for foreign strategic

investment in the banking sector, allowing foreign banks to operate branch and

representative offices in Myanmar.

37
 The entry of foreign banks can be disruptive, particularly since incumbent local

institutions have underdeveloped banking infrastructure, limited enforcement capacity,

weak regulatory framework, and poor understanding of basic financial principles for

market-based economy. On one hand, there is a lot to be learned from foreign banks in

terms of technology and skills transfer, standardized best practices, reinforcing market-

based policies and creating new products and services, etc. However, foreign banks are also

much better capitalized and more efficient than any local banks and competing directly with

them may not bode well for the incumbents. This unleveled playing field may shift

depositors from local to foreign institutions, possibly triggering a liquidity crisis within the

fragile banking system and intense competition tends to promote some risky lending

practices and behaviors. Until May 2019, the foreign banks were restricted from offer full

retail banking services but even after they were given allowance to provide full-fledged

banking services, they still focus mainly on serving foreign companies doing business in

Myanmar or large local conglomerates. Foreign banks have yet to venture into the retail

space and local banks continue to shore the bulk of the depositors’ monies and they still

primarily serve as a more stable source of funding for corporate borrowers, including

domestic banks for the time being.

Apart from the 4 state-owned banks, 27 private banks and 13 representative foreign

banks, there are now over 200 licensed MFIs and 29 NBFIs allowed to provide retail and

commercial lending to individuals, groups and businesses. MFIs are regulated by FRD

under the MOPF and even foreign ownership is allowed. In the years prior to the present

democratic government reign, private banks grew their balance sheet aggressively, buoyed

by the political openness and renewed interest by the western countries and their

governments and assets under management of private banks became larger than those of

state-owned banks. According to the banking sector report by the Milken Institute

(Schellhase et al, 2017), private banks have much larger loan books than those managed by

38
their state-owned counterparts, i.e. representing roughly 61.0 percent versus 15.0 percent of

assets held and have increasingly expanded their deposit base at a very high rate. In 2013,

total deposits were split evenly between privately owned banks and state-owned banks, yet

by 2016, 64.0 percent of total deposits were placed in private banks.

2.3. Limitations in Financial Sector Development in Myanmar

In spite of the recent fast-tracked growth, the financial services industry in Myanmar

remains largely underdeveloped compared to the ASEAN regional peers. In 2017, the

domestic credit provided to the private sector in Myanmar accounted for around 25.0

percent to GDP, versus approximately 40.0 percent (Philippines), 60.0 percent (Cambodia),

and 151.0 percent (Thailand), far lower than regional peers. 4 A significant portion of assets

are held outside of the formal banking system and high dependence on cash is proving to be

a real obstacle to the growth of the formal financial services, falling behind towards

financial inclusion targets set by the United Nations. In 2016, the volume of cash held

outside the banking system was about 15.o percent of GDP versus 30.o percent placed in

bank accounts, meaning individuals and businesses keep about a third of the country’s

currency in circulation in cash, not in deposit accounts, outside of formal financial system

(Schellhase et al, 2017). By contrast, for regional neighbors is well below 10.0 percent.

Likewise, according to a 2014 study by Chamberlain et al (2014), over 50.0 percent of

retail credit was still originated and underwritten by unregulated providers. A recent survey

by the ADB suggest that over 11.0 percent of local businesses have received some form of

bank loan or revolving credit line5 while the UN-ESCAP study finds that around 16 percent

receiving a loan from a bank6. Such statistics indicate the long-standing reliance on

informal banking sector, as well as highly limited access of finance and lack of trust in the

4
Data from WDI database, accessed December 22, 2019
5
https://www.adb.org/sites/default/files/page/536801/mya-progress-challenges-info-paper.pdf
6
https://www.unescap.org/sites/default/files/MBS_Survey_Results.pdf

39
formal banking system. For the purpose of policymaking, grant funding and aid economic

growth, etc., similar empirical studies were conducted in Myanmar and large datasets were

collected to come up with the same conclusion that access to finance is one of the most

debilitating drawbacks for private sector growth. Individuals, households and business

owners mostly prefer to keep savings in the form of physical assets, i.e. cash, gold,

gemstones, land, building and foreign currencies; banks are not to be trusted and cash

placed in banks can disappear during bank runs. Given Myanmar’s historically volatile

event-driven financial sector and wild swings in currency fluctuations, who can blame

them?

With a large amount of assets in the financial system in the informal segment and/or

in physical assets, affordable credit seems out of reach for many. In addition, there is also a

limit on lending exposure to any single counterparty at 20.0 percent of capital and reserves

and overall 80.0 percent of deposits. Since the regulatory constraints are also overbearing

for banks, they cannot justify the business case to expand their loan portfolio to riskier retail

or unsecured segment. The banks, therefore, can only finance a small fraction of private

sector. Majority of businesses are historically and traditionally funded and expanded using

personal savings or with loans from friends and family and retained earnings without ever

approaching a formal financial institution which would undoubtedly request the potential

borrower to submit either land or buildings or US Dollar deposit as collateral. Thus the

physical collateral requirements to get bank financing is overly taxing for most businesses,

especially new startups, micro, small and medium enterprises and they are also unprepared

in terms of providing orderly evidentiary documents and financial statements.

Although, the CBM independently acts as the sole authority for compliance,

supervision, licensing, regulating, and enforcement for the banking sector since 2013, some

aspects of the industry still do not align correctly with international banking standards with

respect to its mandate and policy directions for administrative controls. The four state-

40
owned banks are curiously not under the CBM’s watchful eye, but MOPF only and they are

not required to report or keep up with CBM laws when lending to government-related

entities. In addition to the caps on amount and interest rates on lending, deposits cannot go

above 25 times the amount of the paid-up capital which prevents banks from driving

savings to fund their loan book. Together with 8.0 percent monthly capital adequacy ratio,

there is a 20.0 percent minimum liquidity ratio set for banks to uphold daily and report

weekly to the CBM7, as part of the latest regulations that come out in July 2017 in order to

enforce Basel II standard banking accord. It is highly debatable as to where it is appropriate

for Myanmar to adhere to complete Basel II standards at this juncture of growth and

development stage and the implications for partial or full adoption.

So far, little has been done to limit the banking sector’s susceptibility to shocks; as

mentioned above, all these strict constraints on lending limits, loan tenors not exceeding

one year and collateral demands on borrowers, which will impede financial inclusion for

years to expand access to credit and other financial services to the unbanked in Myanmar.

The worst pain point is the current interest rate regime, whereby the CBM fixing a narrow

range for deposit and lending rates. Currently, the annual lending rate is set at 3.0 – 6.0

percent of the CBM reference rate with a deposit floor rate 2.0 percent below the reference

rate. Such a non-standard, non-market-based interest rates can potentially create many

issues. The right interest rate policy can drive the optimal money market development and a

fixed rate system limits the CBM’s ability to adjust the rates as needed for economic growth;

so depositors and lenders can limit their potential losses during high inflation periods. With

fixed rates, there are few incentives for lenders to compete healthily to come up with new

products or services. In addition, as there are no potential reward to take on higher risk to

expand loan services to down-market customers, the banks primarily focus their loan

portfolio to service large corporations and related party lending becomes commonplace. As

7
https://www.cbm.gov.mm/sites/default/files/regulate_launder/financial_institutions_law_updated_by_cbm_20160303website-1_0.pdf

41
long as there is a ceiling on lending interest rate which is nowhere near informal lending

rates, the banks will not be keen to provide services to rural and underbanked population

where operation costs are likely to be larger.

Up until 2013, land and property were considered the only form of collateral

acceptable to get financing from a bank. Although CBM has widened the collateral

definition to include gemstones, gold, immovable machinery, fixed deposits and treasury

bonds, etc., there is still much reluctance to accept other forms of collateral. Essentially,

almost all loans extended by local banks were short-term overdrafts, so businesses often

find it difficult to take on projects that require long-term investments for their growth and

expansion. Last year, the CBM relaxed the collateral requirements for banks but so far very

few banks have dared to offer unsecured loans but hard-wired processes and people are

difficult to retrain to lend without assessing collateral value. The credit card annual

percentage rate has been raised to 20.0 percent earlier this year.8 Foreign banks are now

also permitted to provide trade finance to local businesses; however the SMEs typically do

not have sufficient credit histories or audited statements to open letters of credit, and are

not ready or prepared to meet the standard documentary requirements for lending. Again,

without a proper credit bureau, and reliability on financial reporting to assess credit risk,

activities of foreign banks will remain largely muted for the next few years.

Any country that heavily relies on cash to its conduct financial transactions is likely

to have its economic development held back because cash slows the pace of financial

activities, increases the cost of transactions and promotes opportunities for corruption and

exploitation. Still to this day, a significant of payments and transfers are done in cash,

including salaries, utilities bills, fee payments to government, etc. Even intra-bank transfers

often involve transporting sacks of cash physically from one place to another. Bank

branches have to reserve a fair chunk of time every day to count cash and close out their

8
https://www.mmtimes.com/news/cbm-raises-annual-credit-card-rates-20pc.html

42
books. Bank checks are also cleared manually, adding up a lot of stall operations time as

well as risk of more human errors and delays. The government has been working hard to

implement the first ever real time gross settlement for automated clearing system called

CBM-Net which would facilitate electronic payments and settlements. At present, only large

transactions between banks and CBM can pass through CBM-Net; interbank settlements,

repurchase agreements, foreign exchange and government treasuries are expected to be

included in the second phase of the system implementation. The Myanmar Payment Union

was also established as a national payment gateway for non-cash payments, transfers and e-

commerce settlement through issuance of debit and credit cards. By 2016, only one quarter

of local banks are left to join the global SWIFT messaging platform. Almost all have initiated

core banking and MIS integration. Some of them have launched internet, and mobile

banking services; a handful have embarked on digital wallets. All of this activity highlights

real hopeful progress. The number of ATMs and point-of-sale (POS) terminals in the

country have grown exponentially.

However, all this development figures and statistics pale in comparison when looking

at other ASEAN countries. Banking penetration is still considerably low at around 25.0

percent.9 For every 100,000 people, Myanmar has about 2 ATMs vs. 32 in Laos and 144 in

Thailand.10 There is no registered national identification verification database nor a credit

bureau, which is briefly mentioned in the very first chapter of this dissertation. All ASEAN

countries have established either a private or public credit bureau that collects information

from various creditors, including banks and microfinance institutions. In Laos, around 10.o

percent of the population has verified credit profiles while close to 45.0 percent of

Cambodians are registered with the national credit bureau in the country.11 A properly set

up credit information bureau would substantially contribute to financial inclusion for

9
https://www.rolandberger.com/it/Publications/Myanmar-Banking-Sector-2025.html
10
https://asean.org/storage/2012/05/ASEAN_MDG_2017.pdf
11
https://sustainabledevelopment.un.org/content/documents/1022cambodia.pdf

43
everyone who needs credit since banks and other financial institutions can then make

reliable credit assessment based on borrower’s verified identify, personal information,

banking transactions and other payment histories as well as past repayment performance,

but not on the basis of how much collateral could be mortgaged. The IFC and the World

Bank Group is closely guiding Myanmar government and relevant CBM officials to help set

up a private credit bureau, which is a joint venture between a Singaporean company and the

Myanmar Bankers Association. In March 2017, the CBM came out with the Regulation on

Credit Information Reporting System and once accomplished, it will be a significant

development milestone which would certainly facilitate credit access to all individuals and

small businesses across the country.

It is recognized that in order to have an effective monetary policy in place, highly

liquid money markets are needed for establishing debt instruments that are sufficiently long

term in nature. In a country like Myanmar, where the regulations are overly restricted,

establishment of efficient money markets is still in budding stage of development. Domestic

banks can borrow directly from CBM through the discount window, favoring one-off trades

and bypassing the opportunity to carry out open market auctions via primary dealing

system for treasuries and disincentivize interbank lending. CBM reference rates are also not

market-based since MOPF is dependent on CBM to fund any kind of government trade and

budget deficits. CBM dictates how banks conduct liquidity management and any excess

liquidity is solved by short-term 2 weeks deposits at CBM or through the purchase and

selling off of treasuries. No other liquidity management tool exists in Myanmar, and the

current operational set up does not promote the need for an interbank market for

repurchase agreements (repos) due to a combination of poor operational infrastructure,

lack of understanding of standardized processes, and resistance towards adoption of new

liquidity management system and modern tools.

44
 Myanmar still has a long way to go compared to developed economies; as of now, the

country is playing catch up to develop its financial sectors on all aspects, including fiscal and

monetary policy direction, infrastructure, enforcement, systems and regulatory controls,

etc. and substantial improvements and efforts are needed for protection against systemic

shocks and efficient mobilization of assets into formal financial system towards optimal

credit allocations for private sector growth and sustainable economic development.

2.4. Current Institutional Lending Practices in Myanmar

Before technology adoption literature is discussed in the next chapter, it is

recognized that the degree to which the institutional environment has an effect on lending

and risk assessment. Changes in different institutional effects on financial institutions and

their responses in the light of these changes should be acknowledged. Without properly

enforced regulations and rule of law in countries such as Myanmar, informal rules, customs

and norms may play significant roles in decision making for credit risk. In developed

financial systems, risk is not an objective fact that can be assessed through statistical

models with respect to detecting behavioral patterns of potential borrowers in their own

circumstantial situation while contemplating their profitability and legitimacy of their

existence in the institutional environment. In Myanmar, due to the absence of data and

models for decision making, all the lending institutions rely on traditional methods of credit

assessment, i.e. trust or relationship based and collateral.

Due to the nature and function of the business, borrowers are the opportunities that

come along with risk and return where banks have to choose the borrowers with high

credibility and repayment ability. However, determining these risks is difficult due to the

difficulty in determining borrowers' credibility arising from asymmetry of information.

Thus, the lending institutions' financing decision making is similar to strategic decision

making process because allocation of limited resources to the right people or businesses

45
requires making appropriate judgments through contemplating risk and return. According

to Deshmukh et al. (1983), lending process is a sequence of credit decisions taken when

facing uncertainty of credibility of borrowers as to both the quantity and quality of loan

demand. It involves four main steps as shown in Figure 2.1: (1) loan application; (2)

assessment of credit worthiness; (3) loan portfolio management and (4) loan repayment.

Firstly, application for a loan is initiated by the borrower triggered by his supposed

need for third party debt. Once the lending institution receives the application, it will look

through the borrower's credit worthiness by evaluating five key elements, i.e. integrity of

character, repayment capacity, availability of capital, asset ownership and

micro/macroeconomic conditions. When the borrower submits the loan application, this

would not reflect the credit worthiness as borrowers do not always provide all the

information required, and even if they do, not all information will always be correct and/or

truthful. The information asymmetry should create cause for alarm for the lender as the

borrower can leverage gainfully at the lender's expense (Bebczuk, 2003).

While evaluating the borrower's ability for repayment, lenders will have to bear in

mind not to cause adverse selection and prevent moral hazard. The former is occurred as a

result of the existence of asymmetry of information between borrower and lender where

financial institutions do not know borrower's repayment ability, thus lead to Stiglitz and

Weiss' (1981) adverse selection problem. Consequently, this could cause borrowers to

engage in opportunistic behavior which in tum gives rise to moral hazard. Therefore,

lenders must ensure that credit is allocated to those who have the capabilities and

willingness to repay the loan and interest and deny those who are not. In doing so, lenders

are engaged in evaluating riskiness of borrowers. As risk assessment of borrowers’

credibility and creditworthiness must be determined quantitatively and qualitatively

through hard and soft information gathered beforehand.

46
 Figure 2.1. Summary of Financial Institutions’ Lending Decision Process

Most financial institutions in the developed world use a mnemonic as a check list and

the most prevalent being CAMPARI (Character, Ability, Margin, Purpose, Amount,

Repayment, and Insurance) (Rouse, 2004). This framework is used primarily in the United

Kingdom while '5Cs' of analysis (Character, Capacity, Capital, Collateral, and Condition), is

mainly used in the United States (Davies and Kearns, 1992). Character has been identified

as a primary factor in both of the analysis frameworks. It is defined as a reputation of the

47
borrower in terms of borrower's credit track record, years of managerial experience,

financial management, expertise and the age of the firm are the variables used to determine

character (Orser and Foster, 1994, Lyn C, 2000). Bryant (2001) claims that character

evaluation is a subjective estimate of the probability that a borrower would honor the

obligations. He also states that high moral standards are indicators that borrower would

make a good effort in repaying the indebtedness.

Gustafson (1989) argues that character is not ethical or moral sense but is a variable

that has significant economic importance. For large businesses, not only the borrower

himself but also the shareholders' reputations and the firm's relationships with its

stakeholders such as customers and other business partners are also required to be

investigated as these are useful information sources for banks to investigate character of

loan applicants and their related parties. Capacity, the second 'C' of the lending assessment,

analyses the borrower's 'ability to repay' which coincides with 'A' in the framework where it

looks at the earning potential and cash flow of the business to determine borrower's

repayment ability. For instance, loan officers will ask for a detailed budget or business plan

from small business start-up borrowers or historical and projected financial statements

from those with existing businesses to demonstrate that they can afford the repayments

(Chapman, 2009). Capital, on the other hand measures the financial strength of the

borrower. The capital of the borrower is determined by the firm's financial position using

risk ratios including liquidity and solvency measures (Gustafson, 1989). The fourth 'C',

collateral is a form of security or insurance against any unforeseen future situations or

developments from borrowers. It has two main uses, liquidation purpose and to assess the

borrowers' commitments in the business (Robbie et al., 1983). This will be further explained

in the next section. The last 'C', the condition, refers to the environment which the

borrower's business is situated. The assessment includes both controllable and

uncontrollable factors. In other words, it is the assessment of borrower's vulnerabilities to

48
the changes in the regulatory, economic, political and technological conditions (Sinkey,

1983). After evaluating the credit risk of the borrower, loan officer will make a decision

whether to grant the loan or reject depending on their acceptance level of risks. If the risk

exceeds the acceptance level, financial institutions simply reject the application. Otherwise,

loan officer would determine the level of risk and set premiums accordingly.

In finance and banking, the term 'premium' is positively correlated associated with

risk. It is the primary component of any risk-return model (Liparii et al., 2011), i.e. the

bigger the risks, the bigger the premium would be. Once again, it could be seen as another

role of risk perceptions. Finance and banking literatures have mentioned premiums a

number of times and the methodologies used to calculate them. However, what they are and

their uses in lending decisions are not mentioned in detail. In general, the concept behind

premium is that if the borrower is somehow perceived to be higher risk, a larger premium

will be imposed. We can never know the real risk due to principal (financial institutions)

and agent (borrowers) relationship. Hence, risk perceptions are more or less similar to

expected return by the lenders or the loan decision makers who have to take into account of

adverse selection, moral hazard and asymmetry of information. These come with costs

which are termed agency costs (Berger and Udell, 2002), including monitoring costs to

ensure agent or borrower conforms to the loan contract; bonding costs to guarantee that

agent or borrower will not carry out certain actions that could cause damage the principal or

lender and/or to ensure that the principal or lender is compensated if the agent or borrower

does take such actions; and residual loss, which results from a divergence of decisions made

by the borrowers and those that would maximize returns to the lenders (Landstrom, 1992).

Hence, lenders often require greater return to cover these costs.

Risk premiums can take place in many forms. In order to explain this phenomenon,

one needs to understand what causes the perceived risk to be higher. It was mentioned in

the previous section that banks assess the borrowers depending on 5Cs framework. In

49
addition to this, there are also other factors that influence risk premium such as the banks'

risk aversion, if the lenders are more risk averse, the risk premium will decrease and vice

versa; the economic risk, if the economy is predictable with interest rates and growth with

low volatility, the premium will decrease; the quality of information, if the companies are

listed, their quantity of information available to the lenders also increase which

consequently reduce the risk premium; the liquidity of the capital market; the risk of a

catastrophe event which can significantly decrease the wealth of banks; the behavioral or

irrational component of the lenders; the illusion of money, which is caused by the expected

inflation rate; and the financial institutions' asset portfoli0 (Lipara et al., 2011). Other

factors apart from the quality of information arise from a country's economic context.

However, when making lending decisions, these risks are reflected on borrowers through

shorter loan maturities, variable and/or interest rates, size of the loans and higher collateral

requirements. These are categorized as externalization of risks to the borrowers (Lane and

Quack, 2002), while guarantor requirements are transfer of risks to third parties (Bessis,

2002). Among them, risk premium is reflected most on interest rates and collateral

requirements.

In the case of Myanmar, where rule of law is weak and the lending interest

chargeable is capped, lenders often rely solely on the value of the collateral provided and the

trust level they have with the borrowers. Financial institutions often perceive that raising

interest rates above the market level will allow them to achieve optimality (de Meza and

Webb, 1987). However, this has been seen as a problem by Stiglitz and Weiss (1981) who

stated that that adjusting interest rates does not reduce adverse selection or moral hazard

but attracts risky borrowers or alters their behavior to adopt risky projects. Imposing

variable interest rates rather than fixed interest rates also typically allows lenders to transfer

the risk of interest rate fluctuations onto the borrowers. Alternatively, lenders may reduce

50
the loan size or increase collateral requirements, use of loan covenants, and/or enforcing

additional conditions onto the loan contracts.

Collaterals are another common tool used by the borrowers to obtain loans. The

greater the quality of the collaterals, the easier it is for lenders to approve loan applications.

There are two different types of collaterals which are business collaterals, pledging assets

owned by the firms and personal collaterals, pledging of assets outside the firm (Berger et

al., 2005). Accepting the former is termed as internalization of risks as financial institutions

absorb some risks in case of business failure, while the latter as externalization of risks

because banks hope to recover their losses through claiming on the borrowers' personal

ownerships. Personal guarantees often signal borrowers' “skin in the game” or serious

commitment to the success of business ventures because no one is willing to take on high

risk projects or to put in minimal hard work unless they know that they have some

probability to lose their collaterals otherwise. Hence, theoretically, it resolves the problems

of adverse selection and moral hazard (Besankor and Thakor, 1987) and prevent credit

rationing (Stiglitz and Weiss, 1981).

Another tool is the covenant which limits the actions of the borrowers. Its intention is

to control and prevent borrowers from engaging activities that conflict with lenders'

interests. This causes borrowers to consult with the lenders to obtain permission if they

want to change their strategies or operational activities. Some authors have found that these

control rights reduce the risk of adverse selections and moral hazard (Clifford and Warner,

1979, Berlin and Mester, 1997). Another tool that is associated with loan covenant is loan

maturity. It is well accepted by the lenders that the longer the loan maturity is, the greater

the risk that the borrowers will alter their risk behaviors. Therefore, lenders tend to give

shorter term loans where negotiations with the borrowers, evaluation and monitoring occur

frequently. These high interest rates and collateral requirements causing high lending and

borrowing costs can be overcome through relationship lending through using soft

51
information. Basically, financial institutions' lending methodologies can be differentiated

into two types, namely, transactional and relationship lending.

Transactional lending involves revolving credit line, cash flow based lending, asset-

based hire purchase, invoice financing, factoring and trade finance. The nature of the

information used in this type of lending is mostly "hard" information (e.g. credit scores

from external credit bureaus) (Berger and Udell, 2004). When these types of hard

information are not available or cannot be solved cost effectively by the aforementioned

technologies, relationship driven lending, occur; this means the primary assessment used by

the lenders is now based on "soft" information (Rajan, 1992). Thus, information availability

determines the types of technologies used by the financial institutions in accessing credit

worthiness of the borrowers. Experienced loan officers and credit comptrollers can collect

information beyond which is available in the financial statements and in the public domain

such as the business owner’s reputation in local community, competitive conditions in the

industry, and any other factors that lender might consider relevant. This is not only

applicable to relationship but also to transactional lending in which "soft" information plays

a complementary role. In interpreting soft information, it is hard to remain unbiased and

objective so that credit assessment decisions can still be made rationally (Pring, 1995).

The uses of these tools are again differentiated into 'going concern' or 'gone concern'

approaches. However, many financial institutions advocated that they employ both

approaches when making lending decisions (Robbie et al., 1983). For instance, in the going

concern approach, collaterals are assessed on the basis of borrowers' commitment to the

business while the gone concern approach view them as a tool for liquidation in case of the

borrowers' default. In these two approaches, the former is more concerned with the

relationship between borrowers and lenders while the latter assumes the past activities to

reflect on the future. These risks result from the high cost of intensive monitoring to avoid

the moral hazard of borrowers when the banks do not have all the required information to

52
judge borrowers' repayment ability. First-time borrowers, small businesses and start-ups

are more prone to higher premium charges on them by the lenders. In summary, other

factors apart from borrowers' repayment ability, the contextual conditions such as

underdeveloped capital markets where financial institutions cannot externalize risks

through credit derivatives, high inflation and catastrophic events (e.g. financial crisis) can

induce higher premiums.

Financial services sector is one of the most regulated industries in the world, among

various regulatory measures, the regulation of paid-up capital is crucial due to the

important roles it plays in financial institutions' soundness and risk taking behavior and its

influence on the competitiveness of financial institutions (Zhu, 2008). In lending, the

decision to extend credit is about whether to take an opportunity to actualize future returns

from investment today. Often, lenders are making these judgements on incomplete

information and uncertainties since the full extent of the riskiness of borrowers are not

readily acquired. To understand the banks' lending behavior in Myanmar, one should

recognize the fact that there is little to no internationalization in its business environment.

Thus, in order to fully comprehend banks' risk assessment procedures and policies, it is

crucial to take account of the institutional environment in which the banks are entrenched

in within Myanmar. Whitley (1999), Lane et al. (2001), and Klein (2003) have emphasized

certain regulative effects of state policy, legislation and intermediary organizations having

an impact on banks' lending behavior and other normative and cognitive effects as

suggested by new institutional theory (Scott and Meyer, 1994, DiMaggio and Powell, 1983).

From the banks' lending behavior literature, four factors are identified: (1)

customers; (2) shareholders; (3) depositors; and (4) competitors. Customers or loan

applicants are one of the most important factors affecting banks' lending decisions. A

borrower's serviceability is usually determined by 5 Cs namely, Character, Cash Flow,

Collateral, Conditions and Capital. In addition, the industry Sector (criteria of assessment

53
under condition) where borrowers engage in doing business can also affect the lending

practices. Banks will have different risk appetites for different industry sectors that the

borrower is involved in (Andrews and Thompson, 2008). Vulnerability and the risk of the

industry also affect banks' lending decisions as assessing borrower's strategic position

includes conducting an overview of the business and risk analysis across three dimensions

namely lending to a particular industry, the borrower's strategic direction in relation to its

competition and how the borrower conducts its day to day business (George, 1991). These

depends on the banks' internal guidelines for allocation of credit with respect to their

acceptable level of risks which can be derived from profitability, market potential, elasticity

of demand, economic cycles and adverse commodity price movements of the products in

that industry. Thus, it is expected that though banks are institutionalized, depending on

their internal policies, banks will respond differently. Relationship between customer and

banks can induce banks to change their risk perceptions. Researchers have studied the

effects of bank-borrower relationship on banks' lending behavior (Berger and Udell, 2002;

Petersen and Rajan, 1995). The underlying concept of relationship lending is that banks

acquire information about the borrower's credibility over time through contact with the

firm, therefore, would have leniency in requirements by the banks on these firms. As a

result of long-term customer relationship with banks, these firms would receive lower

collateral requirements. Depositors and shareholders or senior management are crucial in

banking as they are the suppliers of money creating amounts available for banks to lend.

Competitors also have effects in banks' decision making as increased competition can be

associated with providing loans to customers as not doing so would cause banks to lose

customers, thereby affecting profitability (Olivero et al., 2011).

54
2.5. Fintech in Myanmar Financial Sector

The importance of studying technology adoption with respect to digital lending in

Myanmar has become more important as the country is currently undergoing a new phase

of financial liberalization process after the change in government in 2010. This is a critical

process because it can establish an environment which can efficiently mobilize financial

resources. In most of the countries, in which established capital markets exist, financial

resource mobilizations take place through banks as well as via listings in stock exchanges.

Although Myanmar established its first stock exchange, YSX in 2015, the current capital

market is yet to mature; thus, official mobilization of financial resources can only be done

through the lending institutions, i.e. banks, MFIs and NBFIs. The importance of Myanmar's

financial and economic growth depended on access to finance as it is the only source of

financial intermediation. With no capital market, businesses have only the lending

institutions to depend on for financing their expanding businesses. With massive

technology advances around the world, it is particularly of interest to investigate how

fintech can be utilized to modernize, create more economic value and fast growth in

Myanmar’s financial sector development. While a typical Myanmar citizen may have limited

access to formal banking, mobile phone penetration has neared 100.0 percent.

Digitalization through smart phones and internet access could move millions of people into

the formal banking system, providing them with access to secured, reliable and affordable

financial services.

The 2016 FIL clearly accommodates for electronic transfer of currency. Electronic

payment services are referred to as, amongst other things (i) money transmission, and (ii)

issuance and management of payment instruments – and a “payment instrument” is

defined as “an instrument whether tangible or intangible, that enables a person to obtain

money, goods or services or to otherwise make payment”. According to the FIL, only a MNO

or NBFI may engage in digital wallet payment services in Myanmar. Reference is also made

55
to “credit token business”, which is narrowly defined, meaning the activity of issuing credit

cards, debit cards, store value cards, etc.; and also “e-money”, which is defined as a

“monetary value as represented by a claim on the issuer which (a) stored on an e-device, (b)

issued on receipt of the corresponding funds, and (c) accepted as a means of payment by

persons other than the issuer.” Here, only licensed banks and NBFIs can engage in a “credit

token business” - and “e-money” is governed by separate regulations, namely the Mobile

Banking Directive (2013) and the MFSR (2016). The current regulatory framework does not

fully address cryptocurrencies and P2P crowdfunding directly and compliance and

predictably, startups focusing in fintech in Myanmar close to entirely focus on digital

payments or mobile payments.

In October 2016, Wave Money, a joint venture between Norwegian mobile network

operator Telenor, First Myanmar Investments (FMI) and Yoma Bank, became the first

company to be registered under the MFSR. The electronic payment platform, a mobile

wallet, allows money transfers, providing a hassle free way of sending and receiving money.

Today, after four years’ since the launch of Wave Money, three other MNOs and local

independent company are also offering e-wallet options for mobile payments services under

an official license. Other noteworthy fintech mobile wallets include KBZ Pay, backed by the

largest bank in Myanmar; ONGO, foreign owned independent e-wallet operating in

partnership with Myanmar Oriental Bank; and True Money, a company originally from

Thailand, which facilitates cross-border remittances and domestic money transfers by

partnering with Asia Green Development Bank.

The key contribution to this research would be the practical application of technology

adoption for digital lending platform in Myanmar. There has been extensive academic

research carried out on fintech adoption in different parts of the world including digital

payments (Patil et al, 2017), e-wallets (Trivedi, 2016; Sahut, 2008; Slade et al, 2013),

crowdfunding (Estrin et al, 2018; Ingram et al, 2013), and P2P digital lending (Rosavina et

56
al, 2018; Chen et al, 2012; Lee et al, 2012), no theoretical or empirical research conducted

for fintech adoption nor policy recommendation specifically in Myanmar. This study would

be considered one of the very first dataset and usage of extended TAM to understand the

critical factors affecting digital lending via mobile application technology adoption in the

context of Myanmar. With Mother Finance being the first and only mobile application based

digital lending platform at the time of data collection and subsequent analysis, it also

represents a rare opportunity that the behavioral intention of earliest adopters and/or

potential adoption phase in Myanmar is being observed and verified. As digitization spreads

within the country’s economy and more FSPs move towards digital lending, this study

shines a light on the possibility of offering digital loans, and how to prioritize the important

factors to accelerate the adoption process from the perspectives of policymakers as well as

various stakeholders including customers, and incumbent and fintech services providers.

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 CHAPTER 3

LITERATURE REVIEW OF TECHNOLOGY ADOPTION

3.1. Introduction

Lending money is undoubtedly one of the oldest businesses in the world, right

behind bartering or trading, gambling and prostitution. The principle of lending money has

always been clearly tacitly agreed and remains relatively unchanged from the very

beginning until today, i.e. the need to establish potential borrowers’ capacity and their

willingness to repay. The first ever recorded history of credit was discovered on a 4,000 year

old Babylonian stone tablet reads the inscription: “Two shekels of silver have been

borrowed by Mas-Schamach, the son of Adradimeni, from the sun priestess Amat-

Schamach, the daughter of Warad Enlil. He will pay the sun goddess interest. At the time of

the harvest, he will pay back the sum and the interest upon it.” (Lewis, 1992) and

throughout the middle ages until the beginning of the 20th century, the way credit risk is

assessed and extended for potential borrowers, typically dependent on trust and physical

collateral, by the financial institutions has hardly changed. However, the advancement and

widespread usage of telecommunications technologies within the financial services sector

has completely altered the approach the credit providers deliver services to their consumers.

Mobile phone based distribution channels or mobile applications that allow borrowers to

apply and receive credit have made this practice of relationship based lending has

practically disappeared over time.

In this chapter, the existing literature on technology innovation, adoption and

acceptance will be provided. Research in technology adoption has made significant progress

in constructing theories to study and forecast the causes of technology acceptance

(Venkatesh et al., 2003; Venkatesh & Davis, 2000). All the main theoretical models

reviewed has the same outcome variable, i.e. usage or adoption decision, but they differ in

58
utilizing various antecedents to explain the relationship between beliefs, attitude, intentions

and actual technology acceptance. Countless empirical studies have been produced on

mobile technology acceptance; to name a few, Dikit, Shringarpure, and Pathan (2012),

Singh and Ahmad (2012), Lu (2011), and Tsai, Wang, and Lu (2011). However, none have

specifically focused on digital lending adoption via mobile application technology in a

developing country. The lack of scholarly research calls for an empirical investigation to find

out the exact factors affecting this technology and acceptance like Myanmar. The goal of the

study is to fill the literature gap in terms of knowledge and understanding for digital lending

acceptance of consumers in Myanmar.

Chapter 1 offers the overall summary for the research topic, a brief discussion on the

implication of the study, and related research questions and hypotheses based on the

extended TAM theoretical framework. Chapter 2 paints the backdrop of Myanmar current

geodemographic, economic and political landscape, together with financial sector

development and regulatory environment. It also presents the nascent growth stage of

mobile application based digital platforms active in the country. This chapter explores

deeper into extensive analysis of review of past literature on various technology adoption

theories and models. Key prominent theories and analytical models utilized in fintech

adoption studies are also highlighted.

Most of the adoption models that surface in the literature are designed for use in

studying almost any population across a variety of contexts. Much of what has been written

about the adoption of innovations has its roots in and is d raw n from the sociology (Rogers,

1995; Rogers & Shoemaker, 1971) or organizational literature (Moore, 1991). Organizational

studies, prompted by sociologists and schools of business management, examined the ways

in which new ideas were accepted or not accepted in school systems, health care

organizations, and corporations (Moore, 1991; Rogers, 1995). The innovation literature has

59
evolved into a rich array of perspectives from which to approach the issue of innovation

adoption (Rogers, 1995). Anthropologists and sociologists tend to emphasize culture and

compatibility, whereas economists and psychologists focus on profitability or the individual

(Levine, 1980). Some believe innovation adoption is best studied from the perspective of the

visionary leader, change agent, early adopter or a few key disseminators. Others believe

innovations are best studied by examining the characteristics of early adopters, potential

adopters, or attributes of the innovation itself. A few theorists, such as Rogers (1995),

attempt to provide a comprehensive analysis of perspectives and allow individual

researchers to choose the most useful strategy for a given situation.

For the purposes of this study, different sets of models of adoption are reviewed to

figure out the most appropriate approach for studying adoption of a fintech innovation by in

an emerging market. The traditional roles of visionary leaders, change agents, and key

disseminators may not transfer well to the use case of digital lending via mobile application.

Instead of focusing on one or a few aspects of innovation adoption, models should allow for

a broader, more inclusive approach. In many studies on technology adoption including

Koenig-Lewis et al. (2010), theoretical frameworks’ and constructs are widely used to

determine the extent to which they affect technology and innovation adoption. As a general

rule, researchers often set out a theoretical foundation, followed by constructs that are put

into a predictive model to answer specific questions as to its explanatory power (Creswell,

2009). There have been attempts to combine two or more theories into a novel framework

to make the prediction model more complete (Ndlovu, 2012; Yang, 2009).

3.2. Extant Innovation Adoption Models: Process vs. Variance

Theoretical models useful for guiding research on the adoption of innovations can be

divided into two primary categories: variance models and process or "stage" models (Mohr,

1978). Variance models are used to identify or confirm a variety of in dependent variables

60
acting upon a dependent variable, usually adoption, at a single point in time. Perhaps

because variance models lend themselves to quantitative and statistical analysis popular

with many researchers (Rogers, 1995), they are often used to conduct static "factors

influencing"-type studies of faculty adoption of an innovation. A process model approach in

which adoption was viewed not in such "snapshot" fashion but as a dynamic process during

which a potential adopter (or group of potential adopters) moves through a series of stages.

The introduction of an innovation of any significance often involves potential adopters

becoming aw are of the innovation, gathering information, talking with others, forming

attitudes, and deciding whether to accept to use an innovation in a specific time frame

considered. Although process or "stage" models risk portraying the process in too linear a

fashion, they nevertheless seem to more accurately reflect how an innovation comes to be

adopted or not adopted than variance models (Rogers, 1995).

Most diffusion of innovation research has used variance models (Rogers, 1995) and

has been quantitative in nature (Rogers & Kincaid, 1981). Often, collected data from survey

is highly structured and quantitative data analysis of cross-sectional data is rather rigorous.

Models empirically tested in this paradigm most often examine a variety of independent

variables acting upon a dependent variable (adoption, usually), lending themselves more

easily to quantitative analysis than do process models. Yet Rogers (1995) believes this

reliance on quantitative methods and variance models has been the wrong approach due to

the dynamic nature and perspective of the innovation-decision process. Hence to explain

the causes and sequence of a series of events over time, quantitative structured research

should be supplemented with less structured, more qualitative approach.

Adoption is comprised not of one easily identifiable decision but of a sequence of

decisions; it is thus a process (Hage & Aiken, 1970; Tomatsky et al, 1983). Qualitative

methods thus appear to be the best choice to better understand process. Merriam (1988)

61
says that qualitative research is less concerned with yes or no outcome, but rather with the

process of why or how. Patton (1987) notes a few of the reasons for favoring a qualitative

approach: “Qualitative inquiry is highly appropriate in studying process because depicting

process requires detailed description; the experience of process typically varies for different

people; process is fluid and dynamic; and participants' perceptions are the critical

consideration.”

3.3. Innovation Adoption Process Models: Source vs. User-Centered

Tomatsky et al. (1983) performs a meta-analysis of innovation adoption process

models from the organizational literature to distinguish between process models that focus

on the technological innovation itself ("source-centered models") and those that focus on

the user of a technological innovation ("user-centered models"). The former views adoption

of a new technology from the perspective of the developer or producer of it while accounting

for adoption stages as evaluation, marketing, and dissemination. The latter, on the other

hand, focuses on the end user of the technology. For the case of this study, the primary

subject of interest is consumers or end users of digital lending via mobile application

technology, so user centric approach is more appropriate. The user-centered process models

can be categorized into two: those that use the individual as the unit of analysis, and those

that use the organization as the unit of analysis (Rogers, 1995; Tomatsky, 1983). While each

approach adds different value to the understanding of whether or how innovations are

adopted, the majority of innovation adoption studies are individual-level models (Rogers,

1995).

3.3.1. Overview of Process Models – Individual as the Unit of Analysis

Five main adoption of innovation process models that use the individual as the unit

of analysis are presented in Table 3.1 below, in terms of the most frequently used or cited.

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The individual level process model that appears most frequently in the innovation research

is that of Rogers (1995) first came up with the original four-stage model largely based on the

work of sociologists observing the adoption of agricultural innovations. He later adapted to

a five-stage model which serves as a basic, general framework for conducting research on

innovations and it has been widely used, tested, and only slightly modified now and then.

The first stage in Rogers' (1995) model, knowledge, is characterized by the

individual's exposure and understanding to the innovation and its functional usage. The

second stage is persuasion, which is defined to be the development of a positive or negative

attitude toward the innovation. The third is the decision stage, which is simply the quest for

such activities that lead to either reject or adopt the innovation. The fourth stage is the

implementation which is when the innovation is finally put to use. The final stage is the

confirmation, when individuals seek validation following their decision to initial use of the

innovation. Rogers claims that the final stage of implementation is added to his original

four-stage model as it is important to understand how an adoption decision is put into

action. Havelock (1973) views that how a potential user becomes cognizant of an innovation

deserves a separate initial stage of awareness, followed by interest whereby interest, which

is described as actively seeking information regarding the innovation. Next comes the stage

of evaluation where the user contemplates for a period of time to trying out the innovation

mentally. Then, in the trial stage, the individual actually uses the innovation on a

probationary basis and provided the results are positive, the next stage is that of adoption.

The final stage consists of integration into "day-to-day working life".

Hall, Wallace, and Dossett (1973) comes up with the Concerns-Based Adoption

Model, which develops a “stages of concern” approach to innovations to study

schoolteachers’ adoption to education technology and it has been repeatedly used in higher

education settings as well (Todd, 1992). A potential adopter in the information stage is

concerned about finding out more information about the innovation, and in the next stage is

63
concerned about time and energy commitment needed to adopt the innovation. The

management stage is concerned with being able to manage the usage of the innovation well.

In the consequence stage, there is concern with the results of innovation adoption. The

adopter may follow up with more interest or share with others in the collaboration stage. In

the final refocusing stage, early adopters are concerned with cultivating the usage of the

innovation or optimizing it.

Table 3.1. Overview of Stages in Individual Level Process Models

Hamelink's (1984) model outlines four separate stages of increasing psychological

involvement with an innovation. Similar to Havelock (1973) and Hall et al. (1973), it starts

off with an individual's awareness of the innovation, followed by a period of acceptance of it

to decide whether to use the innovation, and ultimately takes on a more proactive

ownership with the innovation. Finally, Gilbert (1995) proposes a model to analyze the

adoption of instructional technology, he details four levels of change which he names as

follows: independent use, use for presentation/media, use for changing pedagogy, and basic

changes in epistemology. According to Gilbert, in-depth changes for target user adoption

64
can be measured through these stages. This model is particularly useful in studies looking to

better understand the latter stages of technology adoption.

3.3.2. Overview of Process Models – Organization as the Unit of Analysis

The organizational innovation adoption process models are somewhat similar to

those in the individual models, but they are more catered to analyze a more macro or

aggregate level conceptualization. The ten most significant, and relevant adoption of

innovation process models that use the organization as the unit of analysis are summarized

in Table 3.2. Zaltman, Duncan, and Holbek's (1973) model with its focus on the adoption-

decision process, consists of two main stages subdivided into a total of five sub-stages.

Initiation is the first main stage where the adoption begins, which is then subdivided into a

knowledge-awareness sub-stage, when members of any organization are initially exposed to

an innovation's existence and try to collect more knowledge about it; this sub-stage is then

followed by innovation sub-stage where attitude formation takes place; then the decision of

whether to adopt sub-stage ensues. After the adoption decision, the second main stage of

implementation occurs with two sub-stages: an initial trial run and then a continued-

sustained implementation where the innovation technology becomes part of the

organization’s routine processes.

Fung (1992) constructs a six-step model to study innovations in organizations,

beginning with the awareness stage, followed by attitude formation period regarding the

innovation. A yes or no decision is then made. If yes, the adoption phase starts the

acceptance of the innovation's central idea, followed by a trial adoption and then complete

adoption in practice where adopters must either learn to acclimatize or tailor to the

innovation. Finally, after the users’ skills and confidence level increase with each use, full

spread of technology occur in the organization through learning by doing more.

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 Tomatsky et al. (1983) introduces a process model which also begins with an

awareness of the innovation without offering explicit definitions of each of the stages, but

they can be deduced from his individual unit analysis model mentioned previously. Starting

out with awareness, the model is derived with follow-on matching/selection stage when an

organization attempts to fill its needs with the innovation and then selects the one that fits.

Then the organization is in the stage of adoption/commitment, when appropriate decision

is made to adopt and commit to the innovation. In the final implementation phase, the

innovation actual usage commences, and the routinization stage is when the organization

becomes comfortable with the usage of the innovation.

Wilson (1966) studies the task of studying innovations in organizations with a

distinct first stage of conception of the change. This is a noteworthy contribution as

perception of a technology innovation is of vital importance and often, there may be a

mismatch in what an innovation really is versus others’ perception of what it is (Eidgahy &

Bennett, 1991). Yet, none of the other models discussed thus far address this critical

component, i.e., how an innovation is perceived by potential early adopters. The second

stage in Wilson's model demands the proposing of the change and the third stage concludes

with two distinct phases of adoption and implementation.

Milo (1971), perhaps taking a cue from Wilson's (1966) earlier model, also begins his

model with an initial conceptualization of the innovation. The next of the remaining four

stages moves the organization directly into a pilot phase of tentative adoption and is

followed by a pragmatic resource gathering phase. The final two stages consist of larger-

scale full implementation and then, assuming positive outcomes, institutionalization. The

second stage of Mann and Neff's 1961 model permit a pre-existing assessment of the

organization status before the innovation. After accounting for the prevailing situation when

the innovation is still absent, they postulate that members of the organizations must

acknowledge the need for an innovation. This second stage concerns the period when some

66
event occurs which is perceived by some or all members of the organization and gets

motivated to look for a more improved alternative. In the final stage, the organization plans

for the innovation, moves forward with adoption decision, and eventually stable operations

of the innovation ensues.

Table 3.2. Overview of Stages in Organization Level Process Models

Levine (1980) suggests a theoretical framework for describing the process of

innovation resistance. By adapting Mann and Neff's (1961) critical second stage, he starts off

with a macro-level recognition of the need for change. Subsequently, planning and

formulating a solution process kicks in, followed by an initiation and implementation by the

organization. Positive signals allow the innovation routinized within the organization

whereas negative ones will force innovation to cease to exist. Hage and Aiken (1970) begin

with an evaluation phase where the need for change is contemplated. A clear attempt to

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allow potential adoption to assess the necessity of the innovation, as well as to envision the

environment in which the proposed innovation will continue operating. The initiation stage

decides on a solution and search for potential resources. In the third implementation stage,

the organization begins attempting to use the innovation. In the last stage of routinization,

the whole organization accepts the hard work needed to stabilize an innovation that is

deployed.

Harvey and Mills (1970) suggest a theory of organizational adoption to an innovation

in the context of political coalitions, conflicts and bargaining. Rogers (1995) starts with

agenda setting for the model where the need for innovation is uncovered by members

within the organization to solve a problem. In the second stage, the identified problem is

"fit" with a corresponding innovative solution in the matching stage. Implementation begins

with an actual redefining/restructuring of either the organization or the innovation to more

closely accommodate the issue. After this modification, clarifying takes place in which the

meaning of the innovation becomes clearer to members of the organization. Finally,

routinizing occurs if large-scale implementation is successful and the innovation becomes a

part of the institution's normal operations.

Rogers (1995) notes that almost all types of innovation theory and research suffer

from a pro-innovation bias. Essentially, this is the belief on the part of the researcher that

an innovation should be adopted and that there is something wrong with those who adopt

slowly or not at all. This is evidenced in the terminology used to describe adoption (Rogers,

1995), the pejorative terms used to describe non-adopters and those who adopt late in the

process (e.g., "laggards"), as well as in the stages used to delineate the adoption process that

appear to presume eventual adoption. The pro-innovation bias may explain why most

models only briefly discuss the possibility of non-adoption at some point in the adoption

process (Aboelmaged, 2000). Levine (1980) is the only rare academic who allows for the

termination of an innovation as an explicit part of his model. While much innovation

68
research concerns the characteristics of adopters, it is also commonly found that a useful

model to study innovation is one that investigates individual adoption based not on

characteristics of adopters but on a set of variables that in combination influence a person’s

decision to adopt. Perhaps unsurprising that, Damanpour (1991) concludes that models

need to take into account more than one dimension of innovation and concomitantly

include both individual and organizational influences. A shortcoming of the studies that use

individual models is that there are in fact organizational influences (Kozm a & Johnston,

1991) that have not been taken into account.

Another criticism of existing individual models is that they do not explicitly provide

for the larger institutional context in which a technology innovation is introduced.

According to Aboelmaged (2000), the stages of awareness and evaluation, in these models,

generally refer to an awareness and evaluation of the innovation itself and does not allow

for the scenario where an adopter can place larger influences on the adoption process, such

as those family members, friends, and in close community settings. Organizational models,

on the other hand, are certainly useful for the sources of innovation as they may provide

general insight, for example, as to what is going on when an organization appears to be in a

phase of acquiring information, making a decision, or implementing an innovation.

However, one of the primary criticisms of organizational models is that studies of

innovation adoption at this level are rather difficult or realistic to model. After a review of

organizational innovation stage models, Tomatsky et al. (1983) summarize why using the

organization as the unit of analysis is so difficult: “rarely is an entire organization involved;

innovation is usually carried out by small groups or individuals (Pressman and Wildavsky,

1973). At any given point, some parts or groups within the organization are likely to be in

early stages, others are in later stages, and some may not be involved at all. In fact, after

implementation is complete, many if not most parts of the organization may remain

essentially untouched by the change”.

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 Others confirm that individuals within an organization can very often be at varying

stages in the adoption process (Moore, 1991; Rogers, 1995). Rogers states "individual

innovation-decisions are idiosyncratic and particularistic", and thus it becomes challenging

to study organizations that have adopted. This may be why the preponderance of innovation

studies are done using the individual as the unit of analysis. Without a doubt, there would

certainly be problems associated with using the organization as the unit of analysis when

studying adoption at a country level.

In addition, another criticism of organizational models is that few are designed for

use in fintech in a developing country setting. Except for Fung's (1992), and Levine's (1980)

models, most of the organizational innovation adoption process models (Hage & Aiken,

1970; Harvey & Mills, 1970; Mann & Neff, 1961; Zaltman, Duncan, & Holbek, 1973) have

their origins in the organizational literature. However, such models are largely prescriptive,

presenting step-by-step strategies for successfully integrating an innovation into an

organization. Nonetheless, there is certainly value in drawing from some organizational

models to design an individual-level framework appropriately. Existing individual adoption

models posit that potential adopters move directly (and perhaps prematurely) from

awareness to acceptance, for instance, or they only allow for a rather narrow range of steps

that follow an initial exposure to the innovation. They do not allow for the complexity of

responses that a person may have after becoming aware of a technology innovation. For

example, organizational models such as those by Milo (1961) and Wilson (1973) suggest the

use of conception of the change and conceptualization of the innovation as valuable

constructs in the innovation adoption process. When applied to the individual level, these

notions may be helpful in recognizing that how a person perceives an innovation such as

fintech would be based in large part on a personal conceptualization of the innovation and

using it. Eidgahy and Bennett (1991) find perception of a technology innovation critical, and

70
Rogers (1995) finds innovation decisions "are based on an individual’s perceptions of the

innovation" no matter how consonant these perceptions are with reality.

3.4. Overview of Variance Models

Now turning to the literature review on the variance or "factors influencing" type

models, the primary goal is to identify or confirm factors or influences, instead of

understanding the overall adoption process. How and why individuals choose to adopt new

technologies such as social media, internet and mobile technologies has forever been the

focal point of information technology research (Schaupp, Carter, & McBride, 2010). The

principal theoretical models based on consumer adoption and acceptance theories, which

are rather suitable to the special characteristics of Fintech, will be presented in details but

the focus will be on the seven TAM constructs on digital lending via mobile application

adoption. Due to the high failure rate in new products during the past two decades, many

models have been developed to explain and predict the adoption of a system or innovation,

among which Technology Acceptance Model (TAM) has undoubtedly captured the most

attention of the information systems research community (Chuttur 2009). In

particular, TAM has been largely involved to predict fintech adoption, such as mobile

payments (Wu & Wang, 2005; Zhong, Dhir, Nieminen, Matti, Laine, 2013), internet and

mobile banking (e-tickets (Mallat, Rossi, Tuunainen, Öörni, 2009), e-commerce (Smith,

Synowka, Smith, 2014) and so on.

3.4.1 Theory of Reasoned Action (TRA)

TRA by Fishbein and Ajzen (1975) is the first widely accepted theory used in studies

on adoption of information system technology to provide consistency in studies of the

relationship between behavior and attitudes. The core instructions are shown below,

individuals’ behavior intention determines the actual behavior, and it is in turn

71
determined by the attitude towards behavior together with subjective norm. (Ajzen &

Fishbein, 1975). It is primarily used in the social psychological setting (Zhang, Zhu, & Liu,

2012). The theory’s main assertion is that users would adopt computer related technologies

only if they could perceive positive benefits from them. TRA also implies that two factors,

namely, the attitude toward the behavior and the person’s perception of social pressure

included in the subjective norm guided behavioral intentions. According to TRA, technology

acceptance was done in sequence; first, beliefs lead to attitudes which in turn drove

behavioral intentions, and finally to behavior (Dimitriadis & Kyrezis, 2010). An extension of

TRA helped generate another theory used in technology adoption. An extended TRA helps

create the Theory of Planned Behavior (TPB) in which perceived behavioral control was

added as a third determinant to the existing attitude toward behavior and subjective norm

(Yousafzai, Foxall, & Pallister, 2010). Generally, researchers analyzing user acceptance of

new technological applications have used TPB to some extent, but overwhelmingly stick

with the TAM (Tsai et al., 2011).

Originating from social psychology, TRA was based on the assumptions that

individuals are rational, and they take the consequences of the possible actions into account

before the decision-making phase (Fishbein et al., 1975). According to Serben (2014), the

theory is specifically concerned with behaviors where individuals consider the implications

of their actions before deciding whether or not to act. An individual’s behavioral intention is

based on two constructs: attitude toward the behavior and perception of social influence to

perform or not perform a particular behavior. Other moderating variables such as

demographics and traditional attitudes towards an objective were referred to as the

subjective norm. Although the TRA model is a well-established framework, its limitation

was failing to predict whether a person’s behavior was under control. Other limitations of

TRA can be described as the factors influencing the decision-making habits of individuals:

unconscious motives, personality, and demographic (Armitage & Conner, 2001). Both TRA
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and TAM postulates that, individuals’ actual behavior is mainly determined by the behavior

intention. However, as a general model, TRA does not specify the operative beliefs for a

particular behavior, TAM closes this gap by indicating the impact of external factors on

internal beliefs, attitudes, and intentions (Davis, 1989). Furthermore, the other difference

between TRA and TAM is that all beliefs are summed together in TRA, but different beliefs

are regarded as distinct constructs in TAM (Pikkarainen, Pikkarainen, Karjaluoto, &

Pahnila, 2004).

Figure 3.1. The Theory of Reasoned Action

Source: Ajzen & Fishbein (1980)

3.4.2 TAM

The TAM is derived and adapted from the TRA, which is a more generalized theory

(Lindsay, Jackson, & Cooke, 2011). TAM is a theoretical model used to explain users’

acceptance of a new information technology (Gu et al., 2009). First introduced in 1986 by

Davis (1989), TAM has been proven to be a useful valid theoretical framework to predict

users’ behavior toward a new technology (Liu, Min, & Ji, 2009; Qi, Li, Li, & Shu, 2009;

Yung-Cheng et al., 2010). Davis (1989) uses prior researches from various disciplines to

hypothesize that, perceived usefulness and perceived ease of use constructs were

73
fundamental in people’s decisions to adopt information technology. After conducting a lab

study involving 40 participants and two graphics systems, Davis concluded that both

perceived usefulness and ease of use influenced the attitude of the user towards the new

information technology (Davis, 1989).

Figure 3.2. Technology Acceptance Model

Source: Davis (1989)

According to TAM, users’ adoption of information technology is determined by two

particular constructs: perceived usefulness and perceived ease of use (Davis, 1989).

Perceived usefulness is defined as “the degree to which a person believes that using a

particular system will enhance the job performance”, and perceived ease of use is defined as

“the degree to which a person believes that using the system would be free of effort” (Davis,

1989). TAM states that perceived usefulness affects user’s behavioral intention directly,

while perceived ease of use affects behavioral intention indirectly through perceived

usefulness.

However, usefulness is found to be significantly more strongly linked to adoption

than was ease of use. Davis (1989) concludes that perceived usefulness and ease of use are

the predictors for technology adoption. Over the years, TAM has proven to be a powerful,

74
valid, and parsimonious model for predicting user acceptance (Venkatesh & Davis, 2000).

Existing literature shows that TAM is the predominant model used in predicting and

explaining the Information system adoption (Jaradat & Twaissi, 2010; Lindsay et al., 2011;

Liu et al., 2009; Singh et al., 2010; Sripalawat et al., 2011; Tobbin, 2012; Yung-Cheng et al.,

2010) such as fintech adoption. For example, Amin et al. (2012) use TAM as the base

theoretical foundation to conduct a study on mobile banking adoption in Malaysia; by

retrieving and analyzing data from banks customers in Kota Kinabalu, they conclude that

perceived credibility, enjoyment and self-efficacy were related to mobile banking adoption

in Malaysia.

Based on in depth literature reviews, conciseness and validity of TAM to predict and

to explain the user acceptance of information technology (Lindsay et al., 2011), the TAM is

selected as the core theoretical foundation of this study. It has proven to be a robust,

powerful and well-established model for predicting user adoption and acceptance (Shen et

al., 2010). Zhang et al. (2012) conducted a meta-analysis study of previous empirical

researches on m-commerce adoption. According to findings by Zhang et al. (2012), TRA,

TAM, and the innovation diffusion theory (IDT) are the most prominent theories used on

technology adoption studies. Extending TAM is amending the original model with other

factors that can better predict user’s acceptance (Daud et al., 2011). Although, TAM provides

a quick and inexpensive way to gather information about the individual’s perceptions of a

system; the model is insufficient to explain alone all aspects of an individual’s technology

acceptance (Gu, et al., 2009). The perceived usefulness and perceived ease of use constructs

of the original Davis (1989) TAM alone may not fully explain all the facets of customers’

behavior toward technology adoption (Daud et al., 2011).

Consequently, many scholars such as Al-Jabri and Sohail (2012), Chong (2013b), Lee

and Chung (2009), Sanayei, Shaemi, and Jamshidi (2011), Zhou (2011), and Zhou, Lu, and

Wang (2010) have extended TAM by combining it with other theories and models. A good

75
illustration is the Koenig-Lewis et al. (2010) extended TAM version, which was the

theoretical foundation of this study. Koenig-Lewis et al. combined TAM with IDT and other

constructs to study m-banking adoption among young people in Germany. Additional

constructs are added to the perceived usefulness and ease of use constructs of the original

Davis (1989) TAM to make the theoretical foundation more comprehensive. In the

literature, each time researchers extend TAM by adding more constructs to different

settings, they maintain the consistency, reliability, and validity of the original Davis model

(Lindsay et al., 2011). The literature has revealed a multitude of TAM extensions on

technology adoption studies.

Venkatesh and Davis (2000) are the first to extend the original TAM to explain

perceived usefulness and usage intensions in terms of social influence and cognitive

instrumental processes. They add more constructs to make the final version more

comprehensive. A more comprehensive TAM thus includes the subjective norm,

voluntariness, image, job relevance, output quality, and result demonstrability constructs.

Venkatesh and Davis (2000) theorize that subjective norm and image positively influenced

perceived usefulness through processes of internalization and identification. They also

assert that overtime as users are accustomed with the new system, the effect of subjective

norm on both, perceived usefulness and behavioral intention would evaporate (Venkatesh &

Bala, 2008).

Again, in 2008, Venkatesh and Bala further create an integrated model to enhance

TAM. During data collection, they train potential participants on a new system and gave

them paper questionnaires. Participants receive questionnaires at three points in time after

initial training (T1), 1 month after implementation (T2), and 3 months after implementation

(T3) (Venkatesh & Bala, 2008). The results reveal that perceived ease of use, subjective

norm, image, and result demonstrability are significant predictors of perceived usefulness at

all periods (T1, T2, and T3). Venkatesh and Bala conclude that system related

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characteristics enhanced its usability because they helped perform their tasks quickly.

Furthermore, a user-friendly system enhances the possibility of users’ adoption and

enhanced user’s self-efficacy toward the system (Venkatesh & Bala, 2008). The literature

has also revealed that many other scholars have extended the original TAM version to make

it more comprehensive for their studies.

The TAM model has been applied to numerous online applications such as high-

speed data services, 3G adoption and internet usage in the context of customer behavior

(Chong, Darmawan, Ooi, & Lee, 2010; Pagani, 2006; Porter & Donthu, 2006). However,

despite the support for TAM, researchers called for others to discover whether the belief

constructs were mediated by the effect of external variables and if so, which variables were

most important (Porter & Donthu, 2006). Davis (1989) concluded that attitude was the

mediating variable between beliefs and intentions. However, ease of use does not have a

direct influence on usage; whereas perceived usefulness did (Karahanna, Agarwal, & Angst,

2006). The TAM model captures the perceived usefulness and perceived ease of use to

determine an individual's intention to use a system with the intention to use functioning as

a mediator of actual system use. Research showed that the TAM model is a good predictive

model for initial adoption as well as the continued use of a variety of information

technologies (Karahanna, Agarwal, & Angst, 2006). However, there is some indication that

the key limitation of TAM is the lack of predictive power and its ability to adapt to the

endless changes in information technology (Bagozzi, 2007; Lee, Kozar, & Larsen, 2003).

Despite of the numerous citations in information system research, TAM has also

been criticized for its questionable heuristic methodology, limited explanatory capacity, and

lack of practical value (Chuttur, 2009). It is suggested by many researchers that, to increase

the power of prediction, TAM should be integrated into a broader model which

includes organizational and social factors (Legris, Ingham, Collerette, 2003). According to

Legris et al. (2003), TAM and its extensions together can account for 40.o percent of a

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technological system's use. Nevertheless, the two variables, perceived ease of use and

perceived usefulness, are regarded as the most core factors in explaining system use and will

continuous be studied and developed in the field.

3.4.3 IDT

Rogers (1995) put forth the IDT, considered as one of the most popular theoretical

foundations. The IDT assertion is that relative advantage, compatibility, complexity,

trialability, and observability characteristics were the main determinant of innovation

diffusion (Rogers, 1995). The IDT is a theory used to explain how, why and at what rate new

technology spreads through cultures. Since introduced in 1995, IDT combined with other

theories like TAM has been widely used in research of information technology adoption

(Zhang et al., 2012). Lin (2011) combined the IDT constructs (perceived relative advantage,

ease of use and compatibility) and knowledge-based trust constructs (perceived

competence, benevolence and integrity) to study technology adoption in Taiwan where the

result of his empirical investigation showed that perceived relative advantage and ease of

use significantly influenced adoption intention. Sheng, Wang and Yu (2011) integrated IDT

and TAM in their study. They concluded that perceived usefulness, perceived ease of use

and compatibility were positively related to technology adoption; whereas, perceived risk

had a negative relationship to technology adoption in mainland China.

3.4.4 TPB

The TPB is one of the most predictive persuasion theories used in the literature on

technology acceptance studies. The TPB has been applied to a multitude of behaviors to

better understand which individuals behave in which way (Sommer, 2011). The TPB

assertion is that behavioral performance can be predicted from people's intentions to adopt

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behavior (such as adopting a technology), related to their perception of control over the

behavior (Doll & Ajzen, 1992). TPB postulates that the intention to adopt a behavior is

subject to three determinants, attitude toward the behavior, subjective norm, and the

degree of perceived behavioral control (Doll & Ajzen, 1992). The individual attitude toward

the behavior could be positive or negative depending on one's assessment regarding the

consequences and desirability of that behavior. The theory simply asserts that behavior is a

function of salient information, or beliefs, relevant to the behavior (Doll & Ajzen, 1992).

Very few other studies have been used to demonstrate the TPB. One study conducted by

Mattay et al (2006) focus on internationalization of small and medium-sized enterprises

(SME). The results of the study indicated that although the model considers a new

construct, the perceived behavior construct did not address any interactions between the

constructs which made the model appear to be incomplete. Another limitation of the TPB

model relied on the individual conducting a self-report of their attitude without any direct

observation (Thrasher, Andrew, & Mahony, 2011).Sripalawat et al. (2011) integrated TPB

and TAM to study resistance to adopt mobile banking in Thailand. The results showed a

strong influence of subjective norm and social currents to mobile banking adoption in

Thailand; followed by perceived usefulness and self-efficacy (Sripalawat et al., 2011).

3.4.5 Motivation Model (MM)

There are a number of researchers in psychology attempting to explain human

behavior through motivation theory. Proposed by Deci and Ryan in 1985, Self-

Determination Theory (SDT) is one of the most well-known approaches. In SDT, based on a

diversity of reasons or goals that lead to an action, motivation can be distinguished into two

types: the intrinsic motivation, which refers to “doing something because it is inherently

interesting or enjoyable”, and extrinsic motivation, which refers to “doing something

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because it leads to a separable outcome” (Deci & Ryan, 1985). Vallerand (1997) presents a

fundamental model of motivation asserting that different motivational types are influenced

by social factors, and predicts that the different types of motivation will lead to important

cognitive, affective, and behavioral consequences (Vallerand, 1997).

Davis, Bagozzi and Warshaw (1992) adapt the motivational model to explain the use

of computers in workplace, and since then, a stream of information system domain start to

apply motivational model to explore factors affecting new technology adoption. In their

research, Davis, et al. (1992) examine two motivators: perceived usefulness, an example of

extrinsic motivation, and perceived enjoyment, an example of intrinsic motivation. They

conclude that the two factors had significant effect on the use intention. Igbaria, Iivari and

Maragahh (1996) conduct a survey based on the two interrelated motivators about the

computer use in technology, the result implied that perceived usefulness plays a stronger

role than perceived enjoyment in affecting users’ intention. Teo, Lim and Lai’s (1997)

research in internet use in Singapore examine the three motivators, perceived usefulness,

perceived enjoyment and perceived ease of use. Their results turn out to be consistent with

the previous research carried out in Finland. As such, much of the research has been

concerned with the extrinsic motivation and inadequate attention has been paid to intrinsic

motivation (Fagan, Neill & Wooldridge, 2008). However, Yoo, Han and Huang’s (2012)

research indicate that, intrinsic motivation directly impacts behavioral intention while

extrinsic motivation shows no direct impact on behavioral intention on the e-learning in the

workplace in South Korea. These comparisons suggest that, culture differences and the type

of technology should also be taken into considerations when applying the motivational

model in information system domain. To sum up, the motivational model can be regarded

as another typical example transited from the psychology theories, which gets widely

adopted as well as the theory of reasoned action (TRA).

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3.4.6 Task Technology Fit (TTF)

The TTF theory is one of the theoretical foundations used to explain information

systems utilization and describe the relationship between the task requirements of the user

and the functionality of the system and their impact on utilization (Cane & McCarthy,

2009). According to the TTF, the users’ performance impact is triggered when the

technology meets the users' needs and provides features that support the fit of the

requirements of the task (Cane & McCarthy, 2009). Some scholars such as Zhou et al.

(2010) have combined the TTF with other models to extend and integrate with the UTAUT

to conduct a research on mobile banking adoption in Eastern China. Data from two

universities and three service halls in a city located in eastern China is collected and

analyzed to find that performance expectancy, task technology, social influence, facilitating

conditions affected technology adoption in Eastern China.

3.4.7 Rasch Measurement Model (RMM)

RMM is a dichotomous model to measure the ability and difficulty of participants to

conduct a specific task such as digital lending via mobile application technology. This

analytic model helps analyze the likelihood of a person experiencing difficulty performing a

particular task with respect to the person's ability to adopt the new technology more

generally (Yang, 2009). Yang (2009) uses the RMM to explore the hindrance of technology

adoption in Canada. With data collected and analyzed from 178 university students in

Canada, the results reveal that secure system, convenience, and competitive basic fees

structure are the determinant factors to technology acceptance in Canada.

3.4.8 Privacy Calculus Theory (PCT)

The premise of PCT is that the perception of benefits against risk influences

consumer ability to take risk (Ndlovu, 2012). PCT has been used as a theoretical foundation

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in studies on technology adoption. Ndlovu (2012) uses it to evaluate the mobile banking

adoption in South Africa. He purposefully sample to collect data from South African bank

clients. The results show a stronger influence of perceived benefits than perceived risks.

Dinev et al. (2006) also make use of PCT to conduct a cross-cultural study between the Italy

and the United States related to e-commerce adoption. Dinev et al. find that Italians had

lower propensity to trust, lower institutional trust, and a higher perceived risk compared to

the U.S. consumers. Italians also have a lower privacy concerns than the individualistic U.S.

culture (Dinev et al., 2006).

3.4.9 DeLone and McLean 1992 and 2003 Model

Initially developed in 1992, the model is set up using established theories of

communication adapted to Information System (Petter & McLean, 2009). Since then it has

become a standard of measurement of the dependent variable in information systems

research. According to the IS model 1992 the adoption is based on the interrelationships

between six IS success factors: (a) system quality, (b) information quality, (c) IS use, (d)

user satisfaction, (e) individual impact and (f) organizational impact (Sanayei et al., 2011)

Sanayei et al. use the DeLone and McLean 1992 IS model to conduct a study on technology

adoption in Iran using a questionnaire to 304 customers of Bank Mellat Isfahan to

investigate the factors influencing mobile banking adoption. Their results show that trust is

the most influential construct to mobile banking adoption satisfaction in Iran.

DeLone and McLean modify the 1992 model to correct some limitations of the

original version and produced the 2003 model (Petter & McLean, 2009). In their

investigation on mobile banking adoption, Lee and Chung (2009) use the DeLone and

McLean 2003 model where the premise is that system and information qualities are the

most important variables to generate trust to adopt a technology (Sanayei et al., 2011). Lee

and Chung (2009) collect and analyze data through surveys sent to bank 276 South Korean

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customers to learn that trust, system quality and information quality are important factors

to mobile banking adoption in South Korea.

3.4.10 Bass Diffusion Model (BDM)

BDM describes the process of new technology that is adopted because of an

interaction between users and potential users. Lee, Trimi, and Kim (2013) conduct a study

using the bass diffusion model and the Hofstede's cultural dimensions to investigate the

cultural impact on technology adoption. They closely examine two countries with cultural

differences, type I country, the United States, and type II, Korea. Lee et al (2013) found that

in type I culture, innovation factor has a significantly higher level of effect on adoption than

it does in type II culture. However, in type II culture, the imitation factor has a higher

degree of effect on adoption than it does in type I culture.

The literature shows that despite the emergence of various theories and models

described above, many researchers used overwhelmingly TAM and its different variations to

investigate mobile banking adoption in different countries. TAM is a valid and popular

model used to explain and predict users’ acceptance in mobile commerce studies (Zhang et

al., 2012). Although, TAM is a valid model for studying new technology adoption,

complementary models and theories are needed to extend it for some studies (Shen et al.,

2010). Researchers such as Chang, Yan, and Tseng (2012), Dimitriadis and Kyrezis (2010),

JinBaek, Sungmin, and Hoon (2013), Kim and Kang (2012), Li and Zhang (2010), and

Susanto, Chang, Zo, and Park (2012) have used different variations of extended TAM to

conduct their scientific investigations on mobile banking technology. The TAM extension

developed and used by Koenig-Lewis et al. (2010) is the theoretical base for this study.

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3.4.11 UTAUT

Earlier research on TAM identified perceive usefulness and perceive ease of use as an

important antecedent of an individual intention to use a technology (Davis, 1989). Later,

perceived usefulness is shown to be associated with performance expectancy while

perceived ease of use was equated to effort expectancy (Venkatesh et al., 2003).

Performance expectancy and effort expectancy are posited as determinant of an individual

intention to use particular technology. Social influence has foundation from both TRA

(Fishbein & Ajzen, 1975) and TPB Ajzen (1991). The construct of anxiety is further

introduced to information system and Venkatesh et al., (2003) discover that anxiety had no

significant relation with behavioral intension and realize that the need to re-examine this

construct in different context and culture required further attention. Facilitating conditions

are constructed by Triandis (1980) and later adapted by Venkatesh et al., (2003).

According to Porter and Donthu (2006), no prior research has been conducted on

demographic variables and their relevance to the Internet use using TAM. The TAM model

is not suited to applications involving moderating variables and behaviors that were likely to

be based on unstable views. Porter and Donthu (2006) enlist four different demographic

variables to mediate the relationships between the attitude of Internet users and the

demographics (age, gender, income, and race) of the TAM model. Venkatesh, Morris, Davis

and Davis (2003) also incorporate mediating variables also known as moderating variables

(age, gender, experience and voluntariness) in a new model to study how and why

individuals adopt new information technologies. Venkatesh et al. (2003) employ a new

perspective, identifying three constructs regarding the acceptance and use of information

technology. The three pillars of the model are (1) individual reactions to using information

technology; (2) intentions to use information technology; and (3) actual use of information

technology (Alikilic & Atabek, 2012). The result is an enhanced model, known as the unified

theory of acceptance and use of technology.

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 Venkatesh, Morris, Davis, and Davis (2003) theorize a unified model called the

UTAUT to have a better understanding of the drivers of technology acceptance and to assess

the likelihood of success for new technology introductions. The UTAUT is a synthesis of

eight different theories into one concise theoretical framework. The eight theories used

include: the theory of reasoned action (Fishbein & Ajzen, 1975), the technology acceptance

model (Davis, 1989), the theory of planned behavior (Ajzen, 1991), the combined TAM and

TPB (Taylor & Todd, 1995), the diffusion of innovation theory (Rogers, 2003), the social

cognitive theory (Bandura, 1986), the motivational model (Davis, Bagozzi & Warshaw,

1992), and the model of personal computer utilization (Thompson, Higgins & Howell, 1991).

Their research demonstrates that the UTAUT model is able to account for 70.0 percent of

variance in usage intention (Venkatesh et al., 2003; Shaper & Pervan, 2007) as opposed to

any of the individual original eight theories and their extensions (Venkatesh et al., 2003).

Based on these findings, Venkatesh et al., (2003) recommend that future studies on the

UTAUT model should include developing an in-depth understanding of the dynamics that

may influence user acceptance of information. The constructs of UTAUT model are

performance expectancy, effort expectancy, social influence and facilitating conditions

Venkatesh et al. (2003), including anxiety that us established not to have a positive relation

with behavioral intention.

As shown below, the model is comprised of four constructs that play a significant role

as determinants of user acceptance and usage behavior and the moderating variables are

found to be significant as a determinant of intention include gender, age, voluntariness, and

experience. Aforementioned, Venkatesh et al. (2003) also investigate three additional

constructs: anxiety, self-efficacy, and attitude toward technology, but discovered they are

not significant to the effectiveness of the model associated with the other constructs.

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 Figure 3.3. UTAUT Model

Source: Venkatesh et al. (2003)

 Performance Expectancy
According to Venkatesh et al. (2003), performance expectancy is considered the

strongest predictor of intention and is defined as the degree to which an individual

believes that using the system can help him or her to attain gains in job performance.

It is moderated by gender and age and the effect is stronger for men and for younger

workers (Morris & Venkatesh, 2000; Moghavvemi et al., 2011). Gruzd et al. (2012)

indicate that performance expectancy is positively associated with the intention and

use of social media in the context of research practices of faculty using the UTAUT

model.

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 Effort Expectancy
Effort expectancy is defined as the degree of ease associated with the use of the

system (Venkatesh et al, 2003). This construct is moderated by gender, age, and

experience, and is more salient only in the beginning stages of using new information

technology and can have a positive effect on perceived usefulness of the new

technology (Marchewka, Liu, & Kostiwa, 2007). In the most recent work by Gruzd et

al. (2012), effort expectancy is found to be more salient for women than men, as well

as for older people with relatively less effort with the system for the use of social

media in the context of research practices of faculty using the UTAUT model. Zhou

(2007) indicates that effort expectancy strongly affected perceived enjoyment on

satisfaction and usage of in the context of understanding the mobile Internet using

the UTAUT model.

 Social Influence
Social influence is the degree to which users are affected by viewpoints and attitudes

of others in the field of acceptance of technology (Venkatesh et al., 2003). This

construct is moderated by gender, age and experience at the beginning stages of

experience with the new technology. The effect of social influence is more salient for

women when forming intention to use new technology as well as for older workers

(Moghavvemi et al., 2012). Kim and Park (2011) demonstrate that the variables

attractiveness and number of prompters capture distinct aspects of social influence

on consumers’ adoption of innovations in the context of marketing implications

using the UTAUT model.

 Facilitating Conditions

Facilitating conditions is defined as the degree to which an individual believes that

an organizational and technical infrastructure exists to support the system

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 (Venkatesh et al., 2003). Facilitating conditions have an effect on usage behavior

when moderated by age and experience. This construct was originated from the

model of personal computers utilization and the behavioral control construct

(Thompson, Higgins, & Howell, 1991; Eckhardt, Laumer, & Weitzel, 2009).

According to Dulle and Minishi-Majanja (2011), facilitating conditions are strong for

older researchers in respect to open access scholarly communication usage when

using the UTAUT model. This indicates that older researchers would need more

assistance in using open access outlets, especially when gaining access to scholarly

information.

 Intention to Use

According to Venkatesh et al. (2003), a behavioral intention will have a significant

positive influence on usage. Intention to use is defined as a person’s subjective

probability that user will perform a behavior (Moghavvemi et al., 2012; Venkatesh et

al., 2003). In a study conducted by Venkatesh et al (2012) on consumer acceptance of

the mobile Internet and the use of the UTAUT model, the moderating variables

gender, age and experience have a joint impact on the link between facilitating

conditions and intention.

 Gender
Accessing technology applications is the first step to learning from them (Huang,

Hood, & Yoo, 2013). In the UTAUT model, gender is a factor that influences the

major constructs. The influence of gender on new technology adoption received

considerable attention in research (Suhong, Richard, & Hal, 2008). Studies have

shown that, compared to men, women are less likely to adopt and to use new

technology and move through the stages of technology adoption at a faster pace

(Zhou, 2007; Suhong, Richard, & Hal, 2008).

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  Age

With the increased usage of social media by individuals and businesses, it is natural

that much attention is given by researchers to the potential for adopting social media

to market their products and services and engage the customers. The conversation,

and interest of online purchase occurs more with younger users today using mobile

devices and tablets more so than computers. However, with the steady growth of the

number of older adults using computers and mobile devices, the digital divide with

regard to age appear to be closing over time (Soares, Jacobs, Nägle, & Schmidt,

2012).

 Experience

Personal experience may have an impact on technology adoption and use. According

to the UTAUT model, experience has an effect on effort expectancy, social influence

and the facilitating constructs (Venkatesh et al, 2003). It is important to investigate

how users perceive social media usability, how their prolonged intentions are formed

and what their thought process is in order to determine possible uses of social media

applications for enhancing their business to market their products and services and

to connect with the customer. That experience is essential to the learning process in

social media (Shin, Shin, Choo, & Beom, 2011).

The UTAUT consisting only of the aforementioned major constructs affecting

technology usage contribute significantly to information technology research (Lindsay et al.,

2011). Luo et al. (2010) use the UTAUT framework to examine the multi-dimensional trust

and multifaceted risk in initial acceptance of emerging technologies at a university in the

US; the results highlight that performance expectancy is the determinant factor of

acceptance of new technologies and that perceived risk from multiple facets is a salient

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antecedent to new technology acceptance. Yu (2012) utilizes the UTAUT as a theoretical

base to investigate the factors that influence mobile banking adoption in Taiwan and finds

that social influence, perceived financial cost, performance expectancy, and perceived

credibility constructs turn out to be the most influential.

Chong (2013b) uses the UTAUT as a theoretical foundation to test the mobile

commerce adoption in China. He extends the original model by incorporating trust,

perceived value, personal innovativeness, and perceived enjoyment constructs to make the

model more comprehensive. An online survey is utilized to collect data from 140 Chinese

users and the outcome shows that performance expectancy, effort expectancy, social

influence and facilitating conditions constructs are determinant to mobile commerce.

Moghavvemi et al (2012) also states that although the UTAUT model is a robust model and

is widely used in the field of information technology, it is able to explain 69.0 percent of

intention to use technology acceptance. He also concludes that the facilitating conditions

are supposed to explain the role of external factors, unforeseen events and uncertainties

during the time of intention but the behavioral intention cannot predict behaviors that are

not easily controlled (Moghavvemi et al., 2012).

3.4.12 Risky Technology Adoption Model

Security issues have been widely discussed when it comes to the adoption of risky

technologies such as electronic commerce, mobile payments, and mobile banking,

however, seldom paid attention to risk related concerns. Focusing on mobile banking as a

risky technology, Gupta and Xu (2010) proposed the research mainly on risk and control

factors of user adoption. They concluded on their research model that, technology risk

and safety awareness both directly affect the security concerns and the adoption of

intention, as such, security concerns itself also affects adoption intention directly, in the

meanwhile, the effect of safety awareness is stronger than technology risk on adoption

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attention. Their research results implied that, risk and control both play significant roles

in technology adoption, furthermore, control shows stronger influence on user intention.

And hence, they recommended vendors and service providers from risky technologies to

emphasize the control issues in the advertisement and focus on user instructions and

guidelines in order to increase the rate of adoption when launching new technology

based products and services.

Due to the limitation of time and resources, technology adoption studies are

carried out are usually non-financial related, personal privacy, risk and security are not

considered the major factors in many past studies. Gupta et al. (2010) verify that the

inherent risks of most financial technologies impair adoption, and that the perception of

security and privacy concerns affects more so than any other factors in financial sector

technology adoption and provide practical guidelines for risky technologies studies.

Figure 3.4. Risky Technology Adoption Model

Source: Gupta et al (2010)

In summary, all the aforementioned adoption models, although not comprehensive,

in this Chapter are rooted on a diversity of theories; for example, IDT is from sociology,

TRA is from social psychology, TPB and SDT are psychosocial theories. All these

fundamental theories have proven their effectiveness in predicting and explaining a variety

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of human behaviors in differing contexts. On the other hand, TRA and TPB differ from IDT

in the sense that the former focuses on explaining the behavior of individuals. The latter

concentrates on adoption decisions in which the organizational characteristics play a key

role, not the individual. While TPB integrates the notion of perceived outcomes when

forecasting behavior, TAM and IDT focus solely on beliefs about the technology. IDT, TAM

and TPB each adopt a unidirectional perspective towards causal relationship, in which

environmental constructs affect cognitive beliefs, which affect attitudes and behaviors.

There are some overlapping factors between TAM and IDT such as complexity and

perceived ease of use, relative advantage, and perceived usefulness. Likewise, facilitating

condition used in UTAUT capture notions of perceived behavioral control, compatibility

construct.

Most researchers have not made a distinction between the affective component of

attitudes, referring to a like/dislike connotation, and the cognitive component or beliefs,

i.e., the information a person has about an object, issue, or another individual. Perlusz

(2004) argued that both cognitive processes and emotional and affective elements influence

behaviors, stating that models and theories of technology adoption have been so far largely

agnostic about feelings and emotions. With few exceptions such as Venkatesh (2000),

technology acceptance models make use of predictors that are exclusively cognitive, relating

the adoption and actual behavior of a new technology to attitudes, beliefs, and perceptions

(Davis, 1989, Davis et al, 1992; Rogers, 1995; Ajzen, 1991). Some of the previous models

focus on internal antecedents of behavior such as attitudes, values, and intentions while

others focus more on external issues such as norms, incentives, and institutional

constraints. Despite the copious quantities of existing models, extensions, and variations, it

is worth noting that there are still no clear guidelines for the operational definition of the

variables among them.

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 Extensive review of literature indicates that the UTAUT, TAM, and IDT as well as the

many modifications and adaptations of these theories seem to be the most common

theoretical approaches in the field of technology adoption. While the TAM has reliably

garnered a more substantial empirical support over the past couple of decades, it generally

disregards the social influence on adoption of technology, thus it has limitations in being

applied beyond a certain number of workplace settings. In addition, some external variables

need to be added to TAM to provide more consistent prediction of technology use

(Taherdoost & Masrom, 2009). Since the intrinsic motivations are also not addressed in

TAM so the ability of TAM to apply in a customer context where the acceptance and use of

information technologies is not only to achieve tasks but also to fulfil the emotional needs

may be rather limited. The IDT explores a diversity of innovations by introducing different

factors which influence the spread of a new idea. The IDT model integrates three major

components: adopter characteristics, characteristics of an innovation, and innovation

decision process and places more focus on the technology system characteristics,

organizational or individual attributes and environmental aspects, it has less power in

explanatory and less power in explanatory and less practical for prediction of outcomes

compared to other adoption models. Both TAM and UTAUT suggest that actual use of

technology is affected by one’s behavioral intention to use it. In TAM, intended use is

determined by attitude toward using the technology, which in turn is determined by two

perceptions of the system: perceived usefulness and perceived ease of use. Various external

factors affect both perceptions. UTAUT builds on TAM, as well as seven other theoretical

frameworks. It proposes four constructs that affect usage intention—performance

expectancy, effort expectancy, social influence and facilitating conditions. Age, gender,

experience, and voluntariness of use mediate the impact of these expectancies and

facilitating conditions on intention.

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3.5 Fintech as Emerging Technology

In recent years, fintech has become the focus of considerable attention. Advances in

information technologies have led to the rapid development and expansion of fintech.

Fintech is often closely affiliated with a set of new tools that use emerging information

technologies, such as big data, Internet of Things, data analytics (machine learning,

artificial intelligence, etc.) and cloud computing, to broaden, and improve service, quality

and management efficiency in the domain of banking and financial services sector.

Although many researchers and practitioners believe that fintech can reshape the future

of the financial services industry, others are skeptical about the adoption of fintech

because of the considerable risks involved. A more thorough understanding is needed as to

why users are willing or hesitant to adopt fintech, wherein, positive and negative

factors affect their adoption decision.

Arner et al. (2015) explain the differences between traditional financial services and

fintech and that fintech is not a simple combination of information technology and financial

services but an application of technology to traditional services to broaden their scope.

Other researchers, such as Sweeney (2015) and Kuo et al. (2015), term Fintech as products

or services in financial service companies that are created on highly innovative and

disruptive service technologies. Freedman (2006) describes fintech relative to building

systems that model, value, and process financial products such as bonds, stocks, contracts,

and money. Ernst and Young (2015) defines fintech as an innovation in financial services

where technology is the key enabler. Lee (2009) refers to fintech as a type of business

utilizing hardware and software technologies to provide financial services. In this study,

fintech is loosely defined as innovative financial services using new technology tools, such as

data analytics, cloud computing, and mobile and internet technologies.

Although the link between financial and information technology services is not

novel, the opportunities, risks and legal implications of fintech are different from existing

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electronic finances. The current concerns of policy makers and industry arise not from

technology itself but from who is applying the technology of finance. Moreover, the

expanding and strengthening role of technology in itself is a special characteristic of

fintech. Fintech brings new and exciting opportunities to empower people by increasing

transparency, reducing costs or cutting middlemen, and making information accessible

(Zavolokina et al., 2016). Fintech companies are currently expanding their business scope

further to provide innovative and differentiated financial services different from traditional

financial services providers. While mobile payment and remittance solutions represent the

most common type of fintech services worldwide, fintech also includes cryptocurrency,

personal finance management, P2P lending, crowdfunding, budgeting, insurance and asset

management, etc.

Consumers often have different perceptions regarding benefit and risk depending on

individual attitude and characteristics because the benefit and risk for each user can be

significantly different. These differences enable fintech companies to deeply understand the

characteristics of each user group and to effectively deliver their services while meeting the

expectations and customized demands, thereby enhancing the adoption of fintech.

Zavolokina et al. (2016) study the P2P collaboration model between Indonesian banks and

fintech companies. Chang et al. (2016) analyze how Indonesian banks change business

processes in the context of fintech to compete with fintech companies. On the demand side,

the millennials make up the majority of users of fintech companies, in contrast to the older

generation that are the dominant customers of the banks. Therefore, the influence of the

adoption of fintech services from the demand side should be considered. From a static point

of view, studying the impact factors of fintech adoption by users can help provide them with

better services and strengthen the contact between financial institutions and users.

Numerous researchers and industry practitioners believe that fintech can alter the

future of the financial industry. However, the adoption of fintech adoption is still in doubt.

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Some users remain skeptical about adopting fintech because of the considerable risks it

involves. The main adoption barriers are risk issues such as financial (e.g., loss of financial

outcome and extra fee and charges), regulation (e.g., legal uncertainty for adoption),

security and privacy (e.g., identify theft, vulnerability of security technologies), and

operational (e.g., inadequate processes or systems of fintech companies) concerns.

Customers would like to determine the expected value of fintech adoption considering

its benefits as well as risks at the same time, and accordingly make an adoption decision

when its benefits are greater than its risks. Therefore, whether and why customers are

willing or hesitating to adopt an emergent financial service, would provide a critical insight

for regulators, practitioners, and academics.

3.6 Digital Lending via Mobile Application and Mother Finance

Mobile technology was initially introduced in the early 2000’s through SMS and

Wireless Access Protocol (WAP) or General Packet Radio Service (GPRS) enabled wireless

mobile device web browsing (Dasgupta et al., 2011). The SMS application was also one of

the first applications of mobile phone allowing banking transactions (Taleghani, Gilaninia,

Rouhi, & Mousavian, 2011). Over the last two decades, there were unprecedented advances

in internet and mobile technologies (Litvin et al., 2013). Mobile application that facilitates

banking and financial services, which is a symbiosis of mobile technology and financial

services, provides another distribution channel for credit providers (Mahesh & Dubey,

2009). Mobile application technology has brought in a paradigm shift in banking and

financial services industry (Palani & Yasodha, 2012), allowing consumers complete real-

time financial transactions using wireless devices such as iPhone, Android, Blackberry, etc.

(Valentine, 2011). Overall though, most consumers still consider mobile applications as an

emerging technology that they do not widely used yet and are reluctant to put trust into a

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smartphone to conduct financial services activities. Thus, investigating consumer adoption

of new technologies has been a major topic in academic research (Shen et al. 2010).

Although few research has been conducted specifically on digital lending platforms,

mobile banking could be used as a proxy in terms of similarity in rejecting and/or accepting

this new technology. The general consensus is that the majority of consumers are still

reluctant to embrace mobile financial services whole-heartedly. A meta-analysis of mobile

commerce adoption literature conducted by Zhang et al. (2012) show that mobile markets in

China, Japan, Korea, Taiwan and Singapore are savvier in terms of mobile technologies

than those of many other countries. Consequently, the adoption rates differ from one

country to another because consumers’ mindsets and familiarity with the technologies. Lee

et al. (2013) use Hofstede's cultural dimensions and the bass diffusion model to examine

cultural differences of mobile phone adoption in South Korea and the United States and

conclude that in individualistic cultures such as the United States, people sought

information on their own from direct and formal sources, whereas in collectivistic cultures

such as South Korea, people rely more on collective behavior of other-like-minded

individuals who previously use the technology to decide on the adoption.

Dinev et al. (2006) use the PCT to conduct a cross-cultural study between the United

States and Italy to find out that compared to Americans, Italians have a lower propensity to

trust, lower institutional trust, and a higher perceived risk. These cultural differences could

significantly affect the way people of different backgrounds take up mobile financial

services. Although, mobile financial technologies added ubiquity, flexibility and mobility to

conventional banking channels such as, ATM, phone banking, Internet banking, etc. (Lin,

2013); the majority of consumers are still reluctant to adopt it. Empirical investigations are

crucial to understand the factors affecting such kind of adoption and security is often cited

as one of the main areas of concern affecting acceptance of new mobile financial

technologies (Dass & Muttukrishnan, 2011). The internet by essence is not a secure

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environment so consumers’ privacy can be jeopardized with identity theft and fraud

(Pearlson & Saunders, 2006). Although mobile financial technology use is not widespread

enough to attract serious criminals (Fest, 2009); security threats still exist. Actually,

consumers’ perception about security threats can mobile banking or fintech adoption. Most

consumers fear that mobile phones can easily be hacked and infiltrated by new malwares

created to infiltrate mobile devices and exploit personal information and data (Garrett,

2011).Thus, any Internet-based technologies such as Internet and mobile financial services

share the same type of dangers and are exposed to similar threats.

Mobile phones, specifically smartphones, have becoming more powerful; used not

only for voice or text messaging, but also for streaming videos, accessing the Internet, and

conducting mobile financial services and retail commerce transactions (Cruz et al., 2010).

In the last few years, smartphone usage has grown an integral component of people’s daily

routines including day-to-day business activities (Barnes & Barnes, 2012) such as financial

transactions. The sophistication of mobile devices and the technology revolution triggered

an implosion of researches on technology adoption (Hoehle, Scornavacca, & Huff, 2012).

The tremendous advances in mobile technology helped create mobile banking that has

revolutionized the banking and finance industry worldwide (Palani & Yasodha, 2012). A

mobile application is an interactive channel in which people conduct banking activities such

as balancing accounts, making payments, credit applications and other banking

transactions through a mobile device (Al-Akhras et al., 2011).

Mother Finance’s mobile application allows users to register and apply for an

unsecured loan 24 hours a day using their mobile phones without going to physical

locations of financial institutions or a computer with access to the Internet. The customer

can borrow as an individual or a micro SME owner. Consumers can access anytime

anywhere access-to-credit services including (a) their personal account information and

statement, (b) loan status, (c) past loans and repayment history, (d) notifications and alerts

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on accounts’ activities, etc. The lending process for Mother Finance refers to the sequence of

activities it performs to provide credit – from acquiring and onboarding a customer, to

evaluating the customer and disbursing the loan, to receiving repayments and following up

on past due loans. Throughout the lending process, Mother Finance primarily builds

customer engagement and loyalty through Facebook Messenger based high-touch

interactions that adapt to client needs and preferences. In its purest form, Mother Finance

mobile application digitize the traditional lending process by utilizing digital channels for

acquisition, disbursement, repayment, and engagement and by leveraging digitized data

and advanced algorithms for credit decisions, collections, and customer engagement. Each

step in the digital lending process for a Mother Finance is described below.

Figure 3.5. Digital Lending Process

Customer Acquisition

A digital lender, like Mother Finance, may acquire customers using a mix of digital

marketing tools and digital onboarding channels, including but not limited to USSD, SMS,

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and online applications via web or mobile platforms, enhanced by strategically designed

physical touch points and referrals. Digital marketing tools include SMS blasts, search

engine optimization, online banners, Secure Quick Response (SQR) codes, and social media

advertising campaigns. However, remote onboarding can also be enabled by centralized call

centers with human agents or AI-driven chatbots. An important aspect of acquisition is the

customer’s identification; digital lenders commonly make use of innovations in digital

identity and electronic KYC (Know Your Customer) regulations to access government or

private sector verified records, triangulating customer-entered information about their

identity and eliminating the need for the customer to come to a physical location to submit

KYC documents for verification.

Digital acquisition channels increase efficiency and provide a rich source of digitized

data that can be used to assess the customer and, in turn, offer a whole range of customized

products. They also offer cost-effective ways to advertise and provide key product

information to prospective clients, which can bolster transparency. However, as noted

above, physical marketing is still important to address questions and build trust in the

initial stages of customer acquisition, particularly in markets with low financial or digital

literacy. The type of channel (direct or indirect) through which the customer is acquired will

dictate the nature of user data available and the type of relationship with the customer.

Direct acquisition can be difficult and expensive, but it allows the digital lender full

ownership of customer data and direct access to the customer.

Another option is to partner with a data-rich third-party such as an MNO or e-

commerce platform to leverage their customer databases, but this will require a well-

planned and resourced partnership strategy. Indirect acquisition via partners provides the

financial institution with prequalified customers, but this often requires that they source or

originate the customer and have access limited by the commercial terms of the contract.

Before partnering, Mother Finance weighs the pros and cons, while keeping in mind what

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data the potential partner could offer to supplement the information it already has on its

customers.

Approval and Data Analytics

At the heart of digital lending is the potential for lenders to access and use digital

data to make quicker, automated, and more accurate underwriting decisions. Mother

Finance uses both conventional and alternative data sources and advanced algorithms and

analytics to quickly and remotely ‘score’ potential clients and make credit decisions. Many

lenders supplement self-asserted and independent bureau data with knowledge about the

specific borrower collected in the past, as well as call data records, digital transactions (e.g.

supplier payments, e-commerce payments, mobile money payments, etc.), and social media

information to better understand individual behavior and expand access for ‘thin file’

customers that may have previously been rejected. Decisions are typically made in seconds,

improving turn-around time and the customer experience. In Myanmar, without a credit

bureau and registered ID database, majority of the population would be considered thin file

borrowers; credit worthy yet unable to get access to financing.

To score customers in terms of creditworthiness, the data is fed into algorithms that

predict capacity and willingness to repay; Mother Finance utilizes advanced algorithms

based on iterative machine-learning techniques to improve their analysis over time.

Regardless of the complexity of the scoring tools, digital lenders often accommodate for a

greater level of initial defaults, as the algorithms or risk analysts ‘learn’ from the emerging

patterns and adjust. This is done by allowing almost anyone to borrow up to a low threshold

limit, and analyzing their repayment behavior and its corroboration with the alternative

data collected. These lenders should also ethically weigh how to handle defaulters during

this early stage, particularly for small loans, so as not to overly penalize early adopters who

(unknowingly) were helping to test and refine the algorithm.

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Disbursement and Repayment

Digital lenders disburse loans and collect repayments remotely through digital

channels, such as bank accounts, e-commerce accounts, or mobile wallets. These cashless

channels improve operational efficiency and reduce fraud by providing a clear audit trail.

They also allow for rapid, sometimes instant, disbursement providing customers with access

to their funds in a matter of seconds. Repayment comes through the same channel,

sometimes by auto-debiting the account, although this practice is not allowed in Myanmar.

For example, some digital lenders effectively manage risk by deducting repayment from

future sales.

Collection

Digital lenders leverage data and algorithms to support their collections process.

Some deploy delinquency scorecards that track customer behavior and propose customized

recovery strategies. Delinquent customers are blacklisted and lose access to future credit –

which can be a powerful motivator. However, an effort to build financial capability into

product design can help customers understand the long-lasting financial implications of a

negative credit score. This goes beyond standalone financial literacy training, which is often

ineffective. That is why Mother Finance judicially integrate the content and delivery of

educational messages into digital product design and rollout to minimize their collections

burden and the negative repercussions for customers. One tactic is to create short

educational posts and articles that explain key messages on repayment, which field staff can

show to customers on their phones or tablets.

Partnerships can also support collections – from leveraging third party collections

infrastructure for late stage collections, to securing loans against future e-commerce or POS

transactions. However, just as other fintech, Mother Finance has built both an in-house as

well as external collection agent to beef up their own collections’ capability for early stage

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collections, given how important an ‘adjust and learn’ approach is to manage portfolio

performance, particularly after launching new products.

Customer Engagement

Digital lenders use digital channels and customer data to build an intuitive,

convenient, and customized customer experience throughout the lending process. This

involves both outbound (lender to customer) and inbound (customer to lender)

communication and account management. Mother Finance often sends customized

communications, reminders, surveys and product offers based on customer behavior, and

customers are empowered to easily access and manage their accounts, raise questions, or

report issues or complaints. Channels can range from simple SMS, call center support, or

Interactive Voice Response (IVR) systems, to the use of self-service online portals, chatbots,

and in-app messaging. At the heart of this is a lender’s desire to understand a customer’s

individual behavior and preferences, quickly address their problems or concerns, and create

solutions that make sense to the customer on a personal basis. In order to ensure a long-

lasting, high-quality relationship between the lender and the client, it is important to

protect the client through responsible lending practices, for example, by giving simple

explanations of the terms and conditions during acquisition, explaining the consequences of

not making repayments on time when disbursing the loan, and ensuring accessibility of

channels to address customer complaints.

3.7 Literature Review Specific to Key Variables

Offering financial services through mobile application technologies has become a

new business model influenced by all kinds of factors (Sheng, Wang, & Yu, 2011). Among

the various theories and models, many scholars in the literature (Chang, Yan, & Tseng,

2012; Dimitriadis & Kyrezis, 2010; JinBaek et al., 2013; Jin Baek & Sungmin, 2012; Susanto

et al., 2012; Zhenhua, Qingfei, & Shaobo, 2009) use TAM or one its different variations to

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investigate mobile banking adoption worldwide. The Koenig-Lewis et al. (2010) extend

TAM is found to be a more appropriate theoretical base for this study. Koenig-Lewis et al.

merge TAM with IDT and added (a) perceived usefulness, (b) perceived ease of use, (c)

perceived compatibility, (d) perceived trust, (e) perceived credibility, (f) perceived risk, and

(g) perceived cost constructs. As the literature reveals, different scholars use different

perspectives to assess and interpret the perceived usefulness, risk, trust, and credibility, and

other constructs (Yu, 2012) of technology adoption. The following discussion of the

literature focuses on the seven TAM independent variables of this study.

Perceived Usefulness (PU) and Perceived Ease of Use (PE)

Perceived usefulness and perceived ease of use are the two fundamental constructs of

the original Davis (1989) TAM. While the former is defined by Davis (1989) as the

“subjective probability that using technology will increase the individual’s performance”, the

latter is defined as the “degree to which the user expects the target system to be free of

effort” (Davis, 1989). Potential adopters make a decision to use a particular product only if

they think it is easy to use and provides satisfaction to them (Mburu, 2012). Mburu (2012)

finds that perceived usefulness and perceived ease of use directly influenced technology

acceptance in Kenya. In their respective studies, Daud et al. (2011) and Singh et al. (2010)

look at mobile banking technology adoption in Malaysia and India respectively. Both

studies had similar conclusion revealing that perceived usefulness and perceived ease of use

factors were significantly related to technology intention in Malaysia and India respectively

which are in line with the findings of Davis (1989).

Jihyun et al (2012) investigate on the personal traits of college to high-tech

involvement, experiment proclivity, and brand leadership using TAM and gratification

theory as a model for mobile commerce adoption. Their findings preset that those personal

trait variables had significant impacts on the perceived ease of use and usefulness, which

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affect mobile commerce adoption. Daud et al. (2011) added constructs such as perceived

credibility, customer awareness, and perceived risk to extend TAM. Still, perceived

usefulness was the strongest factor to affect mobile technology adoption in Malaysia

followed by credibility and awareness factors. Similarly, Reji Kumar et al (2012) and

Riquelme et al (2010) both find perceived usefulness being a stronger predictor

consecutively while the perceived ease of use is concluded as not to be significant factor in

India. Nevertheless, the two original TAM constructs, perceived usefulness and perceived

ease of use are not significant predictors of mobile banking technology in Malaysia in a

study conducted by Amin et al. (2012). Therefore, this study can help figure out the extent

of relationship between perceived usefulness and ease of use constructs and adoption in

Myanmar.

Perceived Compatibility (PC)

Perceived compatibility could affect the adoption of digital lending via mobile

application. In a study on mobile banking adoption in Saudi Arabia, Al-Jabri and Sohail

(2012) find that compatibility is the most significant factor to predict mobile banking

adoption. A study conducted by Wessels and Drennan (2010) on mobile banking technology

adoption in Australia discovers that perceived usefulness, perceived risk, cost and

compatibility affect consumer acceptance. Koenig-Lewis et al (2010) study the adoption of

mobile banking in Germany and find that compared to predictors such as perceived

usefulness and perceived risk, perceived compatibility all have a strong effect on the

technology adoption. The compatibility construct not only had a direct positive effect but

was also an important antecedent for perceived ease of use, perceived usefulness and

credibility to German consumers (Koenig-Lewis et al., 2010). Giovanis et al. (2012) conduct

a similar study in Greece and find perceived compatibility to be the only factor affecting

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Internet banking adoption. This study is expected to predict if perceived compatibility was

related to digital lending via mobile application adoption in Myanmar.

Perceived Trust (PT)

A lack of trust toward a new technology is a potential reason for delayed acceptance

of e-commerce activities (Kim & Prabhakar, 2004). Previous studies have found that trust

plays an important role in the users’ willingness to engage in online transactions such as

making purchases online (Lee & Chung, 2009). Trust acts a critical role on consumers’

positive perception about mobile banking (Shan & Lu). In a digital banking or mobile

financial services world in which people conduct online transactions, consumers have to

trust both the digital or electronic channel as the medium of transaction and the financial

institution providing the service (Kim & Prabhakar, 2004). The perceived initial trust could

be a significant factor affecting consumers’ attitude toward mobile banking technology

adoption (Chung and Kwon, 2009). Building trust in mobile banking can be challenging;

however, once trust is established, it can last for a long time due to stickiness.

Privacy and data security concerns affect trust, which is considered a key foundation

to gain customers and prevent churn. Trust in technology adoption is a multi-dimensional

factor that includes trust in service providers/vendors, trust in technologies, and structural

assurance (Liu et al., 2009). Kim, Shin, and Lee (2009) investigate the mechanisms

associated with the initial formation of consumers’ trust in adopting mobile banking

technology. They examine the individual significance of the structural assurances, relative

benefits, personal propensity to trust and firm reputation antecedents. Kim et al. (2009)

find that the relative benefits, propensity to trust, and the structural assurances factors had

a significant effect on initial trust in mobile banking. Dimitriadis and Kyrezis (2010) analyze

the impact of trust on technology-enabled distribution channels by testing the internet and

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phone banking adoption and discover that trust is a key factor leading consumers’ adoption

of technology.

For Shan and Lu (2009), perceived structural assurance and compatibility positively

influence in building initial trust among consumers. Tobbin (2012) investigates the factors

affecting mobile banking adoption among the unbanked farmers in Ghana where up to 90.0

percent of the population are inaccessible to formal financial services and the perceived

trust, along with perceived ease of use and usefulness constructs are found to significantly

influence the unbanked farmers to adopt mobile banking. Chong (2013a) conduct an

empirical investigation on mobile commerce in adoption in China and it is realized that

trust is the most significant factor. Dass and Muttukrishnan (2011) also view trust as an

essential factor influencing mobile financial services. This study is helpful in assessing

whether perceived trust is a predictor to digital lending via mobile application adoption in

Myanmar.

Perceived Risk (Risk)

Although digital and mobile financial services provide great convenience, and

efficiencies, they also represent significant security concerns towards consumers (Shen et

al., 2010). Perceived risk can be viewed as people's opinion that they are susceptible to

various threats causing self-protective behavior (Luo et al., 2010). Review of the existing

literature reveal that there are various kinds of risks were affecting mobile banking

technology adoption (Hanafizadeh, Behboudi, Abedini, & Jalilvand, 2012). Despite the

popularity of smartphones usage, the risk of inadvertently disclosing personal or sensitive

information to other unauthorized parties that may use it inappropriately (Yung-Cheng et

al., 2010) is one of the risks affecting adoption. The risks of breach of privacy and security

can prevent consumers provide their official identification, access health data, or engage on

banking transactions on their smartphones than on their laptop (Chin, Felt, Sekar, &

Wagner, 2012). That is why there is a strong need to build on trust in order to decrease

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perceived risk (Zhou, 2012) as consumers may be concerned with risk and uncertainty upon

initially adoption of digital lending via mobile application.

Several mobile banking adoption studies have shown that perceived risk is one the

main reasons people refused or were unwilling to adopt (Dasgupta et al., 2011). Shan and Lu

(2009) attempt to understand the effect of the three antecedent factors, structural

assurance, compatibility and relative advantage, to develop initial trust to adopt mobile

financial technology. The findings show that perceived structural assurance and

compatibility positively influenced the initial trust while perceived relative advantage was

not that influential (Shan & Lu, 2009). Dasgupta et al. (2011) also carry out a study on

mobile banking adoption in Romania and find that perceived value, self-efficacy, credibility,

and tradition constructs within of the conceptual framework had significant positive impact

on adoption. In the more recent studies by Hanafizadeh et al. (2012), Shen et al. (2010), and

Yung-Cheng et al. (2010), the perceived risk is a significant predictor of mobile banking

adoption. For example, perceived risk has a negative relationship with mobile banking

intention of acceptance in China (Sheng, Wang & Yu, 2011). Security risk and trust are also

found to be the more significant factors affecting the intention to adopt mobile banking

activities in South Korea (Kim and Kang, 2012). Consequently, this study investigates

whether or not perceived risk is related to digital lending via mobile application in

Myanmar.

Perceived Credibility (PC)

Certain people perceive that mobile banking transactions are free of security and

privacy threats and are secure enough to preserve their privacy (Wang et al., 2006). Amin et

al. (2012) and Daud et al. (2011) claim that perceived credibility is among the most

influential factors affecting mobile banking adoption. Based on the study conducted on

mobile banking adoption in Malaysia, it is found that to be the most significant factor

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together with perceived enjoyment and self-efficacy. Daud et al. (2011) also examine the key

factors that influence the adoption of mobile banking in Malaysia. Surveying 300 banking

users in Malaysia, they find that perceived credibility is critical to adoption, in addition to

perceived usefulness and awareness. This study help assess whether or not perceived

credibility was related to digital lending via mobile application adoption among Myanmar

consumers.

Perceived Cost (Cost)

Costs related to access or usage can be a barrier that could hinder technology

adoption (Techatassanasoontorn & Kauffman, 2013; Wang et al., 2006). According to

Zhang, et al. (2012), while perceived usefulness and perceived ease of use play important

role in information technology acceptance, other constructs such as, perceived trust,

perceived risk, perceived enjoyment, including perceived cost also influences in mobile

commerce adoption. Yung-Cheng et al. (2010) researched a benefit-cost perspective of

mobile banking adoption in Taiwan and both the benefit (i.e. convenience) and cost (i.e.

security) are found to be strong factors for Taiwan consumer’s decision of adopting the

mobile banking service. Cruz et al. (2010) also find that perceived cost influenced Brazilian

consumers adopting mobile banking as well as Wessels and Drennan (2010) for perceived

risk and cost being negatively related to mobile banking adoption in Australia. Along with

perceived cost, low perceived relative advantage and complexity were the three main

reasons behind the reluctance of Brazilians to embrace mobile banking. Yang (2009)’s

investigation reveals that not only security concern was a factor of resistance, but also basic

fees and charges for mobile banking web connections hindered mobile banking adoption in

Taiwan. The findings of this study help assess the extent of relationship if any between

perceived cost and digital lending via mobile application in Myanmar.

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 Digital lending via mobile application is one of the newest technology-enabled

distribution channels of credit made possible by the widespread adoption of mobile phones

even in low income countries (Anderson, 2010). Such mobile financial services offer lots of

services concerning account information, payment and transfers, investment, support and

content service (Dewan, 2010; Elbadrawy & Aziz, 2011). However, the majority of

consumers resist adopting mobile financial services; therefore, it is necessary to understand

what prevents them from adopting digital lending via mobile application (Koenig-Lewis et

al., 2010). Despite the various studies on digital and mobile financial services that have

been carried out, none has focused on the factors affecting digital lending via mobile

application adoption in Myanmar. Thus, this study helps to fill that gap in the literature.

In the literature TAM model, compared to other theoretical foundations, is

understood to be a more robust theoretical foundation to study new technology adoption

such as fintech but depending on specific context, complementary models and theories are

sometimes needed in some conditions to extend it (Shen et al., 2010). Upon taking a closer

look at a number of mobile banking acceptance studies on what influences consumers to

adopt this new product or service (Yu, 2012), which is somewhat similar to digital lending

via mobile application technology, the extended TAM version of Koenig-Lewis et al. (2010)

is selected as the theoretical foundation in this study. Hence this study investigates the

relationship between the digital lending via mobile application and the TAM constructs of

the Koenig-Lewis et al. (2010) instrument: (a) perceived usefulness, (b) perceived ease of

use, (c) perceived compatibility, (d) perceived trust, (e) perceived credibility, (f) perceived

risk, and (g) perceived cost. The results may be beneficial to consumers, and financial

institutions by providing a comprehensive understanding of the factors that are affecting

digital lending via mobile application technology in a developing country. This study may

bring social change by helping financial institutions develop proper strategies to add more

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consumers whom may have been previously ignored and unattended, and expand their

market share based on further insights synthesized from Myanmar market.

In Chapter 4, the detailed methodology is explained including the sampling frame,

research design, and data collection procedure and analysis methods. The rationale for

research rationale, threat to validity and summary descriptive statistics are presented. The

main analytical used for this research – the SEM statistical tool is also discussed. Finally, in

Chapter 5 the survey results, the statistical analysis of the data, and results analysis are

concisely presented, including all the key findings, interpretations of research outcomes and

policy implications as well as recommendations of the study. Chapter 6 addresses the

limitations, scope implications of social change of the study are reiterated and ideas for

future research are highlighted.

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 CHAPTER 4

METHODOLOGY, DATA AND MODEL

4.1. Introduction

The quantitative correlational methodology based on extended TAM constructs is

applied to figure out the determinants of adoption of digital lending via mobile application

technology. The independent variables, perceived usefulness, perceived ease of use,

perceived compatibility, perceived trust, perceived credibility, perceived risk, and perceived

cost, are factors that influence digital lending adoption in Myanmar and the decision to

adopt digital lending via mobile application is the dependent variable in the analytic model.

The overall research question: Out of the seven constructs, which ones affect with digital

lending via mobile application adoption in Myanmar the most? This chapter covers a

detailed discussion of the research methods and design rationale, followed by the

description and explanation of data variables and the model as well as the instrumentation,

data collection process and analysis, and the threats to validity discussions.

Understanding the factors affecting digital lending via mobile application technology

in Myanmar is critical to improving financial inclusion goals and access to credit. If the

technology system is poorly designed and do not meet user needs, then the perceived

benefits will not be achieved, and money will have been spent ineffectively. Invaluable

information can be extracted from this study for financial institutions and policy makers to

attract more consumers to adopt digital lending via mobile application. Although there are

three main research approaches, namely, quantitative, qualitative, and mixed methods. A

quantitative design is deemed to be more appropriate because relationships among

variables were assessed in this study. The rationale of choosing a quantitative design is due

to the fact that the study consists of an empirical observation and measurement based on

existing theoretical foundation. Quantitative investigations rely on the theory-driven result

interpretations that may lead to a confirmation, extensions, or questioning of an existing

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theory (Gelo et al., 2008). Quantitative designs are more suitable at studying large groups of

people, and generalizing the findings from the sample being studied to a broader population

(Holton & Burnett, 2005).

There are four major quantitative research types, which include observational,

experimental, correlational, and descriptive (Holton & Burnett, 2005). The correlational

quantitative design is used to answer the research questions and to test the research

hypotheses in this study. Generally, in quantitative correlational studies, the relationships

among two or more variables are assessed without inferring causality (Holton & Burnett,

2005). Correlational investigations always start with hypotheses generated from a theory,

and end with a relational assessment among two or more variables without revealing the

direction of causality (Russ & Hover, 2005). Due to time constraints, this quantitative

design is set up with an existing validated survey instrument based on an extension of

Davis’ (1989) TAM, augmented with IDT’ s constructs to collect data on early adopters of

digital lending technology.

4.2. Justification for Choice of Model Constructs

As described in the Chapter 3, there have been many attempts and works to explore

models of technology acceptance and the diffusion of innovations; however, the models

have different weaknesses in predicting the behavior of individuals and organizations. In

these technology adoption studies, researchers were faced with a large number of similar

constructs offered by many theories and often found that they cherry pick and choose

constructs from the models and/or opt for a preferred model that would fit the context; as a

result, the other models were largely ignored (Venkatesh et al, 2003). Based on the

thorough literature review and meta-analysis of previous studies carried out, our choice to

model narrows to TAM, IDT and UTUAT in determining the key factors that affect early use

cases for digital lending.

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 Although UTUAT outperforms other models, i.e., TRA, TAM, TPB, MM, IDT, etc. for

behavioral intention more Venkatesh et al (2003), it is not superior for actual technology

use (Venkatesh et al, 2012). In our study, we are actually looking at early users of digital

lending technology and we are not focusing on the intention of users to adopt this particular

technology and as such moderators such as age, gender, experience, and voluntariness not

especially useful and maybe out of context, since almost all early adopters have similar

background, age, previous experience with mobile applications. Although moderators can

be valuable, they may be applicable and become relevant only when there is significant

variation in those moderators across individuals within the same context. Voluntariness, for

instance, assumes that individuals coming in contact with a certain technology have

considerable latitude in their adoption and usage decisions—this need not be true in

settings where the senior management may mandate the adoption and use of the technology

by all individuals. In other words, moderators may not be universally applicable to all

contexts and hence run the danger of being non-relevant in certain settings. Perhaps, this is

one reason why a majority of the prior studies do not consider these moderators in their

research. This is why we also decide to forego moderators in our research model because

prior studies have not explicitly theorized individual characteristics or not reported

information about these moderators, and we believe in our research context that the

absence of these moderators does not completely undermine the results of our theoretical

model based on direct effects.

As the survey was posted on Mother Finance Facebook page, the potential

participants would be followers of Mother Finance. Therefore, only those who know about

Mother Finance mobile application and/or have tried and/or used it would be taking part in

the survey. The main exogenous constructs in the UTAUT model may be considered as

representing contextual factors (i.e., facilitating conditions and social influence) and

technology attributes (i.e., performance expectancy and effort expectancy), even when they
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may be regarded as perceptions held by individuals regarding the context and the

technology. Despite the evidence that these four constructs account for a significant

proportion of variance in the adoption and usage behaviors, a key element missing from the

UTAUT model is the individual characteristics that describe the dispositions of the users

may be crucial in explaining their behaviors. Prior literature highlights several individual

characteristics including attitude, computer self-efficacy, and personal innovativeness

(Chong, 2013a).

The inclusion of attitude in technology adoption is consistently applied in TAM and

its extensions and it is assumed that attitude entirely reconciles the relationship between

beliefs and intention. TAM suggests that the easier a technology is to use and the more

useful it is perceived to be, the more positive one’s attitude and intention toward using the

technology will develop (Davis et al, 1989; Taylor & Todd, 1995). The relationship between

attitude and behavioral intention postulated in TAM implies that, all else being equal,

people form intentions to perform behaviors toward which they have positive attitude. In

the case of digital lending, the primary purpose of using the technology of getting access to

credit may far outweigh the hesitancy of using the technology itself. That is why we have

borrowed from TAM the constructs, the perceived usefulness (performance expectancy in

UTAUT) and the perceived ease of use (effort expectancy in UTAUT) to reflect that the

extent to which the digital lending via mobile application is useful and consistent with

performance expectations and is easy to use can influence the individual’s attitude leading

to adoption, similar to Al-Qeisi et al (2014). The construct of facilitating conditions from

UTAUT does not apply in our case which is not a mandatory organization level technology

adoption, since they are usually defined as the degree to which an individual believes that

an organizational and technical infrastructure exists to support use of the technology

(Venkatesh et al, 2003). Social influence construct is also redundant for our study because

Mother Finance is primarily using social media channel to market and acquire customers
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and the word-of-mouth effect is already in place in the Facebook page community of friends

of friends of customers.

The decision to accept and adopt a particular technology for each and every

individual is complex, even more complications arise when trying to examine the factors

which influence whether those individual adoption decisions can be shared and

disseminated within the society. Both TAM and IDT share similar premise that adopters

assess technology innovations on the perception of their characteristics, or postulates that

those having favorable features are likely to be more adopted. TAM presents that when

users are offered a new technology innovation, two key factors, namely perceived

usefulness, and perceived ease of use, influence their decision about how and when they will

use it. While IDT incorporates more comprehensive factors that drive diffusion if a

technological innovation, accumulated empirical evidence has shown that TAM provides a

better mechanism for explaining user acceptance recognition and behavior. Since the survey

participants are early adopters, we believe that TAM should be supplemented with

additional constructs from IDT that address the actual use of technology, including the

complexity of the technical innovation components such as compatibility, technology

features and functionality, interoperability, usability, etc. and go beyond intended or

perceived use as the end point being studied.

We examine the five characteristics of IDT to establish a hybrid technology adoption

paradigm with TAM, namely, relative advantage, complexity, observability, trialability, and

compatibility. Relative advantage is defined as the degree to which an innovation is

considered as being better than the idea it replaced, which is similar to the notion of

perceived usefulness from TAM. Complexity is the end-users’ perceived level of difficulty in

understanding innovations and their ease of use, which is comparable to the notion of

perceived ease of use from TAM, albeit different sign direction. Observability is the degree

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to which the results of innovations can be visible by other people. Trialability refers to the

degree to which innovations can be tested on a limited basis. For our study context, we

consider that observability may be irrelevant due to the fact that the study utilizes a web-

based survey on the fintech service provider's Facebook page, so all participants are well-

aware of the technology and since it is a freely downloadable mobile application, every

potential adopter can try it out, trialability would not apply as a technological characteristic.

Last but not least, compatibility construct is associated with the fit of a technology with

prior experiences and for our study and refers to the degree to which innovation is regarded

as being consistent with the potential end-users’ existing values, prior experiences, and

needs. This would be common sensibly and logically significant in their decision to utilize

the technology for early adopters of digital lending.

This paper integrates the TAM and IDT to take advantage of both theoretical models

which can better reveal how different factors influence individuals’ acceptance intentions

and usage behavior in digital lending adoption process for early users. Prior to distribution

the survey, we understand from Mother Finance that they have been already operating for

nine months and they have clearly recognized the critical issues facing the customers before

choosing to adopt the technology, which also give us specific ideas on the realistic factors

that influence the adoption of digital lending that reflect the reality on the ground in

Myanmar. Past research has shown that there are several differences in technology adoption

between developed and developing countries (Basu, 2004; Zhu, Kraemer, & Xu, 2006;

Poon, 2008), respectively privacy, security, and trust. Each factor is closely related to one

another since the user needs to trust the service or product or find it secured enough in

order to respect the privacy principles. However, neither privacy nor security were highly

ranked in a meta-study about adoption to mobile banking (Shaikh & Karjaluoto, 2015), but

trust was highly ranked. For Myanmar, digital banking is previously unheard of until

Mother Finance launched its mobile application, we believe it is crucial for consumers to
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gain trust in the technology that it is safe and secured. Due to the lack of digital and

financial literacy, some consumers have only limited cognitive knowledge resources

available, they will attempt to reduce the complexity and uncertainty of fintech services by

applying mental shortcuts such as trust. As trust is revealed by past studies to be highly

influential in technology adoption (Thagard, 2018; Mansour 2016; Chandio et al, 2013;

Mukherjee & Nath, 2003; McKnight & Chervany, 2002; Ramsay & Smith; 1999, Rousseau

et al, 1998), we incorporate in our model as one of the key constructs for the study to

appropriately echo the needs and localized context. Two types of trust are crucial when

assessing the potential barriers of technology acceptance: institutional trust and trust in the

channel/technology. Research has shown that initial trust is influenced by institution-based

trust which refers to the individual’s perceptions of the institutional environment or service

provider (McKnight & Chervany, 2002). Trust in the service provider is a key issue in

improving consumer’s trust relating to the electronic banking infrastructure, thus reducing

the overall perceived risk (Yousafzai et al., 2010). Only if consumers have built sufficient

trust in the digital lending service provider, are they prepared to transfer this positive belief

to the technology (Rotchanakitumnuai & Speece, 2003).

This research seeks to build upon the common elements of the TAM and IDT, namely

perceived usefulness, perceived ease of use and compatibility by adding into a conceptual

model a number of constructs that have frequently been cited in the consumer behavior

literature, but not adequately incorporated into these underlying theories. The decision to

utilize a technology product or service, which is innovative and disruptive both to the

market and to the individual end user can involve a high level of perceived risk. Perceived

risk has been theorized in terms of two principal components – the probability of something

happening, and the consequences of the outcome (Koenig-Lewis et al, 2010). From a

customer’s point of view, it is potentially difficult to assess and differentiate the various risk

dimensions such meaningfully (Zhao et al., 2008), such as performance, social,

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psychological, physical, performance and time, especially if they have never come across

and/or experienced digital lending via mobile application. Different users may evaluate

each dimension and weigh the risk differently. Early adopters may often feel anxious about

security issues and have concerns for privacy. Since digital lending operates virtually, in a

distant impersonal environment, customers may also feel unsettled to fill in their personal

information to register for an account and then apply for a loan which requires divulging

their identification, home address, workplace and salary, etc. Such submission of personal

details can induce implicit uncertainty through fears of being hacked or leaked, resulting in

manipulation of personal privacy. There is evidence that an individual’s level of perceived

risk affects negatively towards using Internet services (Polasik & Wisniewski, 2009). Chen

(2008) finds that risk negatively affects consumers’ intention to adopt mobile payment.

Amin’s study (2008) about the adoption of mobile phone credit cards suggests that

customers’ preference to a completely secured system. In the case of digital, the intangibility

of the service, requiring additional personal information to arrive at the final step of

applying for a loan, prevents potential customers being able to fully evaluate the service in

advance.

If we examine the studies on mobile banking adoption which is closest to digital

lending via mobile application, again the three most commonly used theories are TAM, IDT

and UTAUT, where TAM is again the most frequently utilized. There does not seem to be

any difference in the choice of model across different countries, thus studying an emerging

economy does not affect the choice of model in the current study. It is commonplace to add

several relevant variables to TAM, IDT and UTAUT to investigate the motivators for

acceptance of a new technology based on each underlying case study. Many research papers

can be found presenting the perceived cost as one of the essential factors for early adopters

on mobile and/or internet banking (Wessels & Drennan, 2010; Laukkanen and Lauronen,

2008; Riquelme and Rios, 2010). If you think of Myanmar which is a developing country
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with poor economic performance and the type of customers Mother Finance is targeting,

i.e., low-income segment of the population, one could imagine why cost would be a

significant factor naturally. Although the mobile application does not have any direct cost of

usage, there are other actual transparent and quantifiable costs of acquisition and use such

as mobile data charges, adopters typically face a range of relatively hidden transaction costs

which are likely to influence whether their decision to adopt, including time and

concentration needed to fill in the registrations and uploading the required documentary

and photo evidence for the loan application. Due to lack of comparison for other digital

lending service providers, customers may also assume a higher cost for novelty. Several

studies suggest that perceived costs could be a major barrier for the adoption of mobile

banking (Dahlberg et al., 2008; Kleijnen et al., 2004). Wu and Wang (2005) also find that

costs have a significant negative effect on users’ behavioral intention to use m-commerce.

Another important concept likely to affect uptake of digital lending services, and not

adequately reflected in current existing models, is perceived credibility. Perceived credibility

is broadly defined as the belief that service provider is trustworthy and has the required

expertise to carry out the supposed service fully (Chung et al, 2009). In other words, the

lack of perceived credibility is evident in potential consumers’ concerns to depend on the

technology or unwillingness to proceed further to use the technology. Research has

suggested that credibility has a significant positive effect on the adoption of internet

banking (Wang et al., 2003) and mobile banking (Luarn and Lin, 2005). Since Mother

Finance is a start-up that is offering digital loans, it is important for them to understand the

impact of well-recognized brands on similar service, in the case of future competitors. How

much would it make a difference for adoption if the same type of digital lending services

were to be offered by an incumbent financial institution like a bank, that would be perceived

as more credible than a fintech startup?

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4.3. Methodology Overview and Data Collection

This study was focused on determining the factors affecting adoption of digital

lending via mobile application among Myanmar consumers. Thus, the target population of

this study was the entire 52.4 million population within Myanmar of different age groups,

income levels, education levels, marital status, and so forth. A web-based survey method

was used to collect data for this study. Consequently, self-administered surveys were sent

randomly through Mother Finance’s Facebook Page (See Appendix I). The recruitment

period of survey participants was 7 days, in which responses are collected. Convenience

sampling method was used to gather information from people who are most conveniently

available, and it also called accidental or haphazard sampling. Convenience samples are

often used in exploratory and descriptive research where time and money are critical

constraints. Convenience sampling is beneficial to obtain a large number of completed

questionnaires quickly and economically. Therefore, most of the researchers generally opt

for such type of non-probabilistic sampling method. Nevertheless, biases are common when

it comes to testing new products and services (Arvidsson, 2014). However, as previously

stated, this study was not performed to produce generalizable results, instead to achieve a

deeper understanding of the digital lending adoption in Myanmar.

Because of the lack of a reliable sampling frame, it proved difficult to conduct a

random sampling for all the end-users using digital lending in Myanmar. At the time of the

survey, Mother Finance was the one and only fintech service provider offering digital loans

through a mobile application. Thus, in this study we adopted a non-random sampling

technique, i.e., convenience sampling to collect the sample data. There may be a potential

research bias in the sampling method due to the selection of a sample of willing

respondents. Mother Finance has made sure that the participants are reminded that their

participation in this study was voluntary and that they could decline to participate or

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withdraw from participation at any time without penalty. Participants are informed that

their responses would remain confidential and anonymous. The Koenig-Lewis et al. (2010)

instrument selected for this study is already a validated instrument used in a peer-reviewed

research. The instrument’s convergent and discriminant validity are assessed, and the

standardized loadings were all above 0.5 with the majority being above 0.7 (Koenig-Lewis et

al., 2010). All survey items generated from the Koenig-Lewis et al.’s (2010) instrument are

based on prior empirical studies and showed internal reliability, convergent and

discriminant validity (see Appendix E).

Once the survey is distributed through an embedded URL, anyone that has access to

the URL within Myanmar can participate. The survey instructions include details on how

survey participants could take the survey and explanations to participants that their

responses are voluntary, anonymous, and confidential. The data collection process is

conducted, by Mother Finance, according to ethical guidelines such as, (a) voluntary

participation for participants in which people are not coerced into participating in research;

(b) informed consent in which the researcher clearly notifies participants that their

participation is voluntary; (c) no harm which requires that participants are not put in

danger; (d) confidentiality guaranteeing that any information collected is kept confidential

and eventually destroyed, (e) anonymity essentially making sure that the participants

remain anonymous throughout the study. The data collected is passed on as secondary data

to carry out the empirical research for this study.

The survey data is first analyzed using SPSS software to produce descriptive statistics

including percentages and frequencies. The SPSS descriptive outputs such as graphs, charts,

tables and box plot were used to summarize demographic information. Report summary

include age, gender, education levels, income, profession, location of participants, and box

plots and histograms were used to examine the distribution normality and to remove

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outliers of the sample of this study. Descriptive statistics methods are used to calculate

standard deviations and the score range to show how the variables were distributed. To test

the hypotheses, SEM tools under SPSS AMOS program menu is utilized to analyze data, and

report the outcomes. The relationships of the constructs of the proposed model and the

digital lending via mobile application adoption are evaluated using SEM statistical tools,

testing simultaneously for the effect of multiple independent predictors to the dependent

variable. Finally, the strength and the direction of the relationships between the seven TAM

constructs (Independent Variables) and the action to adopt digital lending via mobile

application (Dependent Variable) are also predicted.

Researchers deploy statistical techniques which are utilized to support the

repeatability of the findings that confirm or counter the original hypothesis (Clayton, 2010).

In this case, the structural equation model (SEM) is used not only for testing hypotheses

dimensionality, but also relationships among latent and observed variables (Cooper &

Schindler, 2008). As a statistical tool, SEM is a powerful alternative to other multivariate

techniques which are limited to presenting only a single relationship between the dependent

and independent variables (Cooper & Schindler, 2008). Most structural equation models

such as SEM are commonly referred as Linear Structural Relations (LISREL) implying

covariances between observed variables (Cooper & Schindler, 2008). SEM methods will

help examine the correlations between digital lending via mobile application adoption and

the seven TAM constructs. Multiple and interrelated dependence relationships will be

estimated simultaneously; and unobserved or latent variables are represented in these

relationships and measurement errors in these variables need to be accounted for in the

estimation process (Cooper & Schindler, 2008).

Generally speaking, SEM methods are used under a few key assumptions. The first is

the assumption of linearity, which is essential to test the hypotheses in a correlational study.

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The factor analysis stage of SEM is carried out to determine the linear combinations of

variables to calculate the variance in the data as a whole (Cooper & Schindler, 2008). The

second assumption is a bivariate normal distribution; meaning that empirical data is from a

random sample of the population where data are normally distributed (Cooper & Schindler,

2008). In most cases, researchers conduct several assessments of the data before further

SEM analysis. Assessments such as (a) model specification, which is a formal statement of

the model’s parameters, (b) the estimation of the free parameters of the data observed after

the model has been specified, and (c) the evaluation of good fit, in which goodness-of-fits

tests are used to determine whether or not the model should be used (Cooper & Schindler,

2008). If the model shows poor fit, the re-specification of the model will need to be done

(Cooper & Schindler, 2008) before further analysis to generate outcomes.

We decided against mon-linear SEM, although it may offer many benefits compared

to linear SEM, but it is more difficult to conduct and is interfered by methodological

problems and the recently developed estimation procedures are all driven by software

programs, which may ultimately be harder to explain the results in a practical manner since

the robustness of the models cannot be examined meticulously. Another key issue is that

most acceptable estimation approaches assume the multivariate non-normality

unequivocally into account used under the supposition of normally distributed indicator

variables discounting for non-normality. Additionally, in non-linear SEM the correlation

between latent predictor variables is usually greater than the correlation between manifest

indicator variables because of the decrease caused by the unreliability of the indicators. As a

consequence, as the multicollinearity grows, the estimation is more problematic, estimates

are biased, and standard errors can be estimated incorrectly.

This study used a self-administered web-based questionnaire carried out by Mother

Finance. Koenig-Lewis et al. (2010) assembled the instrument used in this study by

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extending TAM model with IDT and adding other constructs to make the model more

comprehensive (see Appendix II). Koenig-Lewis et al. used the same instrument to collect

data in their study on mobile banking adoption among young people in Germany as well as

the US (Engwanda, 2014). The instrument is based on seven constructs, (a) perceived

usefulness, (b) perceived ease of use, (c) perceived compatibility, (d) perceived trust, (e)

perceived credibility, (f) perceived risk and (g) perceived cost. The constructs used in the

survey questionnaire are adapted from prior literature, in which, all items showed internal

reliability, convergent, and discriminant validity (Koenig-Lewis et al., 2010). Koenig-Lewis

et al. (2010) retrieve all the constructs of the instrument from previous peer reviewed

studies on mobile banking adoption. The two main Davis (1989) TAM constructs of

perceived usefulness and ease of use also were included in the instrument. Constructs such

as perceived compatibility, perceived trust, perceived credibility, perceived cost, and

perceived risk taken from multiple previous studies were put together to form a valid

instrument.

Koenig-Lewis et al. (2010) use a confirmatory factor analysis (CFA) to test the

measurement model which must exhibit a satisfactory of validity and reliability test before

usage. All factor loading estimates computing the same constructs for the CFA model were

highly significant (p < 0.001) showing that all indicators effectively measured their

corresponding construct and supported convergent validity (Koenig-Lewis et al., 2010).

Convergent and discriminant validity are also assessed, and the standardized loadings are

all above 0.5 with the majority being above 0.7 (Koenig-Lewis et al., 2010). Koenig-Lewis et

al. (2010) then take on a probabilistic approach to construct the instrument in which

behavioral intention is not considered a latent variable, and was measured on a 5-point

scale from “not very likely “to “very likely”. A 5-point Likert-type scale was applied in

the Koenig-Lewis et al survey instrument in which the questionnaire ranged from 1

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(strongly disagree) to 5 (strongly agree) for all questions about the effect of the TAM factors

except for the items measuring perceived overall risk, which ranged from 1 (not at all risky)

to 5 (very risky). The psychometric properties of the instrument are found to be satisfactory

in terms of convergent validity, reliability, and discriminant validity (Koenig-Lewis et al.,

2010). The instrument of this study was administered electronically through the URL link

made accessible through Mother Finance’s Facebook. The questionnaire contained two

sections: part one described respondents' demographic and part two aimed to identify the

level of correlations between digital lending via mobile application adoption and the seven

TAM constructs.

Jha (2008) states that the findings of a research are not legitimate if the methods

they derived from lack legitimacy. So it is essential in quantitative studies to evaluate how

well the instrument measure what it is supposed to measure, but also, the internal and the

external validity threats of the instrument (Jha, 2008). The internal validity estimates the

extent to which any causal effect of the dependent variable can be attributed to the

independent variable whereas the external validity shows the extent the final findings of a

study can be generalized to other settings (Jha, 2008). A reliability test usually helps assess

whether an instrument produces the same results repetitively under identical conditions

during pilot testing (Fowler, 2009). There is lack of reliability when there is a divergence on

the instrument between observers or when the instrument produces different results under

the identical conditions (Fowler, 2009). A validity test is used to test whether an instrument

measures exactly what it is constructed to measure during pilot testing (Fowler, 2009). One

of the ways to measure validity is to increase the response rate of the survey (Fowler, 2009).

Generally, the instrument used in a study must have a strong measurement validity to

diminish measurement validity threat (Jha, 2008). The Koenig-Lewis, et al. instrument had

been validated in a previous study; thus, there was no need to test the instrument internal

and external measurement validity through a pilot study before the data collection.
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4.4. Descriptive Statistics

In this section, a detailed explanation about the SEM statistical tool that is applied to

analyze data will be further discussed, followed by the survey questionnaire results, the

statistical analysis of the data, and results analysis. This study is designed based on the TAM

extended by IDT. The main objective of this research is to address the following research

questions and related hypotheses are presented in Chapter 1.

The instrument in this study consisted of two sections of a questionnaire. The first

section contained questions on demographics and the second section contained questions

used to measure the independent variables assumed to affect digital lending via mobile

application adoption in Myanmar. In SPSS, the survey responses using a 5-point Likert-type

scale were entered as 1=very unlikely, 2=unlikely, 3=neutral, 4=likely, and 5=very likely for

the digital lending via mobile application usage variable. A 5-point Likert-type scale value of

1=not at all risky, 2= not risky 3=neutral, 4=risky, and 5= very risky for the perceived risk

variable; then, 1=strongly disagree, 2=disagree, 3=neutral, 4=agree, and 5=strongly agree

for all remaining variables. A total of 676 participants completed the survey with a 5.0

percent margin of error. Only surveys that were fully completed were taken into

consideration. From the 676 responses, 16 entries were not fully completed and could not be

included in the analysis. After invalidating the 16 incomplete surveys, 660 complete survey

responses were used as data for this study.

The Koenig-Lewis et al. instrument has a 5-point Likert-type scale with Cronbach’s

alpha scores all above 0.8. The items used to measure the independent variables derived

from the Koenig-Lewis et al. (2010) validated survey instrument used in a previous peer-

reviewed study. The Cronbach’s coefficient has often been used to estimate the internal

reliability of a multi-items instrument and if 0.9 or higher is considered excellent, 0.8 or

higher good, 0.7 or higher acceptable, 0.6 or higher questionable and 0.5 or less

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unacceptable. The items used in the instrument of this study are based on an already

validated instrument; therefore, a pilot study is not needed. However, for the purpose of

this study, a Cronbach’s alpha for the instrument as a whole, is computed to confirm the

validity and reliability of the instrument. The Cronbach’s alpha showed a value of 0.788 and

0.812 on standardized items basis, reflecting α ≥ 0.8. Cronbach’s alpha for the scales were

calculated (Table 4.1) and showed a good or acceptable level of internal consistency for the

instrument used in this study. The last column of Table 4.1 displays the value of Cronbach's

alpha if that particular item were deleted from the scale. As illustrated in Table 4.1, the

removal of any items would not have changed the acceptable reliability of the instrument.

Therefore, the constructs were deemed to have adequate reliability for the next phase of

analysis.

Table 4.1. Reliability Statistics

Variable Scale Mean if Scale Mean if Corrected Squared Cronbach’s

Variable is Deleted Variance is Variable – Total Multiple Alpha if Item
Deleted Correlation Correlation Deleted
PU1 41.9439 24.435 .657 .553 .751
PU2 41.9364 24.576 .671 .572 .750

PE1 42.3091 23.838 .649 .501 .749

PE2 42.1455 24.826 .600 .454 .756

PC1 42.2318 24.609 .540 .415 .761

PC2 42.0409 24.373 .689 .575 .748

T1 41.8864 24.902 .622 .490 .755

T2 43.0258 24.647 .250 .126 .793

C1 41.9924 26.460 .379 .265 .777

C2 42.1712 25.107 .587 .399 .758

Cost 43.3939 27.720 .114 .079 .811

Risk 43.0227 31.348 -.208 .097 .836

Note: Please refer to Appendix II for the definitions of the variables.

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 The basic demographic data of the participants, including gender, age group, marital

status, education level, income level, job position type, etc. are described below.

Table 4.2. Comparison of Demographics – Population vs. Sample

Demographics Sample Population

Gender 42.6% vs. 57.4% 49.3% vs. 50.7%
(Male vs. Female)
Age (Median) 59.5% of respondents are between 25-34 28.2
Unemployed 2.3% 1.6%

Table 4.3. Age Group Distribution

Age Frequency Percent Valid Cumulative

Group Percent Percent
18 to 24 179 27.1 27.1 27.1
25 to 34 393 59.5 59.5 86.7
35 to 44 63 9.5 9.5 96.2
45 to 54 23 3.5 3.5 99.7
55 to 64 2 0.3 0.3 100.0
Total 660 100.0 100.0

Table 4.4. Marital Status Distribution

Age Group Frequency Percent Valid Cumulative

Percent Percent
Single 353 53.5 53.5 53.5
Married 284 43.0 43.0 96.5
Divorced 6 0.9 0.9 97.4
Widowed 12 1.8 1.8 99.2
Living Together 5 0.8 0.8 100.0
Total 660 100.0 100.0

The largest represented age group is between 25 and 34, which is aligned with the

median age of the population being 28.2 years. The participants include those who are

single, married, living with a partner, divorced, and widowed. The marital status of the

respondents is also reflective of cultural norms in the country and the World Bank’s

reported data of the mean age at first marriage in Myanmar was reported at 23.6 years. And

26.1 years for females and males respectively. The participants are also fairly represented

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across all the 14 different states and divisions within Myanmar. The two most populous

regions Yangon and Mandalay are respectively represented by the sample population.

Table 4.5. Regional Breakdown Distribution

Region Frequency Percent Valid Cumulative

Percent Percent
Kachin State 8 1.2 1.2 1.2
Kayah State 1 .2 .2 1.4
Kayin State 5 .8 .8 2.1
Chin State 2 .3 .3 2.4
Sagaing Division 22 3.3 3.3 5.8
Taninthayi Division 10 1.5 1.5 7.3
Bago Division 43 6.5 6.5 13.8
Magway Division 30 4.5 4.5 18.3
Mandalay Division 85 12.9 12.9 31.2
Mon State 16 2.4 2.4 33.6
Rakhine State 9 1.4 1.4 35.0
Yangon Division 341 51.7 51.7 86.7
Shan State 27 4.1 4.1 90.8
Ayeyarwaddy Division 61 9.2 9.2 100.0
Total 660 100.0 100.0

In terms of educational background, income level and job positions, the breakdown

of survey participants are as below. Although the sample population include people of all

education backgrounds, the majority 65.0 percent have a college degree. People of various

social classes also participate in this survey. Among participants, 16.8 percent have a

monthly income below MMK 500,000, 47.1 percent of participants have monthly income

between MMK 500,000 and 1,000,000 and 36.1 percent have above MMK 1,000,000

monthly income. In addition, responses are made from participants from various

professions. Table 4.8 highlights the widely distributed job titles that survey participants

identify with. The most represented are working professionals and self-employed. The

retired, homemaker, and day laborers are the least represented. Those who identify

themselves as unemployed 2.3 percent is also closely aligned with the current

unemployment rates nationally. The 8.6 percent do not identify with any professional job

groups listed in the survey and selected other.

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 Table 4.6. Education Background Distribution

Education Frequency Percent Valid Cumulative

Level Percent Percent
No High School 56 8.5 8.5 8.5
High School 104 15.8 15.8 24.3
Diploma 45 6.8 6.8 31.1
College 429 65.0 65.0 96.1
Master 22 3.3 3.3 99.4
Doctorate 4 0.6 0.6 100.0
Total 660 100.0 100.0

Table 4.7. Income Group Distribution

Income Level Frequency Percent Valid Cumulative

(Monthly) Percent Percent
Below 500,000 kyats 111 16.8 16.8 16.8
Between 500,000 and 311 47.1 47.1 63.9
1,000,000 kyats
Above 1,000,000 kyats 238 36.1 36.1 100.0
Total 660 100.0 100.0

Table 4.8. Job Position Distribution

Job Title Frequency Percent Valid Cumulative

Percent Percent
Clerk 105 15.9 15.9 15.9
Homemaker 17 2.6 2.6 18.5
Manager 80 12.1 12.1 30.6
Other 57 8.6 8.6 39.2
Professional 191 28.9 28.9 68.2
Retired 1 0.2 0.2 68.3
Self-employed 132 20.0 20.0 88.3
Student 48 7.3 7.3 95.6
Unemployed 15 2.3 2.3 97.9
Wager 14 2.1 2.1 100.0
Total 660 100.0 100.0

In addition, questions are asked in the survey to assess the current mobile

technology, awareness, competency and usage for digital lending via mobile application.

According to Statistica’s 2019 report, Android held a share of over 92.0 percent of the

mobile operating system market in Myanmar.12 In the sample population, there are nearly

12
https://www.statista.com/statistics/528379/mobile-operating-system-share-in-myanmar/

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82.0 percent android users. 58.o percent reported to have used Mother Finance digital

lending mobile app and 19.1% indicated that they have also used other digital lending apps.

37.4 percent have answered that they have applied for and 28.3 percent have borrowed

digital loans via Mother Finance mobile app. Survey participants also responded that 20.6

percent have applied for and 33.9 percent have received other digital loans.

4.5. Statistical Model and Results

The SEM structure includes two parts, the measurement model, which measures

variables to latent variables, and then the structural model that relates latent variables

among one another by using a combination of multiple regression and factor analysis

(Bacon & Bacon, 1997). The SEM can estimate multiple and interrelated relationships

simultaneously, and can represent latent variables in these relationships (Cooper &

Schindler, 2008). The SEM statistical technique is applied to conduct inferential statistical

data analysis, test hypotheses, and answer the research questions. The relationships

between a set of observed variables and a set of latent variables are represented in the

measurement model. Although, there is no missing data in this study, as a multivariate

analysis tool, the SEM tool can help analyze variables with the ability to handle missing data

(Cooper & Schindler, 2008).

A model estimation is conducted using the Maximum likelihood estimation (MLE)

tool. To assess the adequacy of the model, researchers can initially use either exploratory

factor analysis (EFA), or principal components analysis (PCA) (Lynd, 1997). EFA is carried

out as the first step of the SEM analysis. In order to estimate the adequacy of the model the

following assessments were conducted, Kaiser-Meyer-Olkin Measure of Sampling Adequacy

(KMO), Comparative Fit Index (CFI), Goodness of Fit Index (GFI), Incremental Fit Index

(IFI), and the Root Mean Squared Error of Approximation (RMSEA). The most common

estimation method for SEMs is the maximum likelihood (ML) estimation. A key assumption

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for this method is multivariate normality for the exogenous variables (Lynd, 1997). Kaiser-

Meyer-Olkin Measure (KMO) and Bartlett's Test. KMO and Bartlett's Test is also conducted

to assess Kaiser-Meyer-Olkin (KMO) Measure of Sampling Adequacy. KMO values between

0.8 and 1.0 indicate the sampling is adequate. The Kaiser-Meyer-Olkin Measure (KMO) of

Sampling Adequacy in the KMO and Bartlett’s Test was 0.901 with significance < 0.5, which

demonstrated that the dataset is appropriate for factor analysis.

The goodness of fit describes how well the model fits a set of observations. The

output of the Chi- Square test for the sample is significance 0 and Chi-Square value of

545.803 means that the model was fit for the data. In order to reduce or eliminate multi-

collinearity among variables, three methods can be used, (a) ignore multi-collinearity, (b)

remove multi-collinearity by using data reduction methods like principal components

analysis, or (c) use the model multi-collinearity anyway (Lynd, 1997). Using the principal

component analysis method, Table 4.9 illustrates the overall increase in factor loading

coefficients of the remaining parameters after extracting three. The seven factors are (1)

perceived usefulness, (2) perceived credibility, (3) ease of use, (4) cost, (5) compatibility, (6)

trust, and (7) risk and PU1, PU2, PE1, PE2, PC1, PC2, C1, C2, T1, T2, Cost and risk are the 14

parameters used to measure the factors affecting digital lending via mobile application

adoption within Myanmar. Table 4.10 shows communalities which explain the common

variance shared by factors with given variables. Higher communality indicated that larger

amount of the variance in the variable has been extracted by the factor solution. For better

measurement of factor analysis communalities should be 0.4 or greater.

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 Table 4.9. Component Matrix

Component
1 2 3
PU1 0.776 -0.135 0.075
PU2 0.788 -0.116 0.119
PC1 0.661 0.100 0.093
PC2 0.799 -0.057 0.200
PE1 0.761 0.041 -0.056
PE2 0.733 -0.015 -0.125
Cost 0.104 0.811 0.181
C1 0.542 -0.312 -0.327
C2 0.688 0.096 0.067
T1 0.737 -0.019 0.263
T2 0.306 0.621 -0.370
risk -0.255 0.008 0.811
Note: Please refer to Appendix II for the definitions of the variables.

Table 4.10. Communalities of Variables

Initial Extraction
PU1 0.553 0.700
PU2 0.572 0.679
PC1 0.415 0.575
PC2 0.575 0.774
PE1 0.501 0.661
PE2 0.454 0.587
Cost 0.079 0.296
C1 0.265 0.367
C2 0.399 0.541
T1 0.490 0.659
T2 0.126 0.303
risk 0.097 0.261
Note: Please refer to Appendix II for the definitions of the variables

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 Table 4.11. Factor Correlation Matrix

Factor 1 2 3 4 5 6 7

1 1.000 0.049 -0.217 -0.544 -0.516 0.767 0.111

2 0.049 1.000 -0.043 -0.180 -0.188 0.208 0.036

3 -0.217 -0.043 1.000 0.156 0.035 -0.315 -0.303

4 -0.544 -0.180 0.156 1.000 0.489 -0.683 0.081

5 -0.516 -0.188 0.035 0.489 1.000 -0.421 -0.141

6 0.767 0.208 -0.315 -0.683 -0.421 1.000 0.148

7 0.111 0.036 -0.303 0.081 -0.141 0.148 1.000

Upon further analysis of these parameters using the Principal Axis Factoring

extraction method and the Oblimin with Kaiser Normalization rotation method where the

results are displayed in Table 4.11, addition data reduction is needed since more than one

parameter belong to multiple factors as shown in Table 4.12. After data reduction, the same

type of parameters belongs clearly similar factors. Small coefficients below 0.1 are

suppressed in the display. The rotation converges in 22 iterations. A structural model of this

study is recursive. The final result of data reduction can be seen in Table 4.13.

Table 4.12. Pattern Matrix before Data Reduction

Factor
1 2 3 4 5 6 7
PU1 0.789
PU2 0.602 0.105 -0.220 0.105
PC1 -0.126 -0.714
PC2 0.212 -0.648 0.199 0.201
PE1 0.216 0.127 -0.119 0.141 0.570 -0.115
PE2 0.731
Cost 0.534
C1 0.467 -0.107 -0.212
C2 0.171 0.106 -0.484 0.110
T1 0.108 -0.392 -0.399 -0.224
T2 0.413 -0.177 0.165
risk 0.468
Note: Please refer to Appendix II for the definitions of the variables.

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 Table 4.13. Pattern Matrix after Data Reduction

Factor
1 2 3 4 5 6 7
PU1 0.789
PU2 0.601
PC1 -0.712 0.211
PC2 -0.650 0.202
PE1 0.215 0.572
PE2 0.731
Cost 0.535
C1 -0.212 -0.466
C2 -0.485
T1 -0.390 -0.401
T2 0.413 -0.223
risk 0.468
Note: Please refer to Appendix II for the definitions of the variables.

A model fit display is generated. Costs and Overall risk variables both had one

parameter each, there were not part of the model used in structural equation model. Only

composite variables were used to estimate the model fit (see Figure 4.1). Standardized

estimate: Number of distinct sample moments: 55, number of distinct parameters to be

estimated: 45, Chi-square = 67.658, and Degrees of freedom = 34. The Root Mean Square

Error of Approximation (RMSEA) provide information to evaluate a model. The Root Mean

Square Error of Approximation (RMSEA) fit statistic for the model of this study was 0.06,

which was good because values of 0.08 or smaller indicate acceptable fits. The

measurement model fit showed that the Goodness-of-Fit Index (GFI) had a value of 0.774,

and Adjusted Goodness-of-Fit Index (AGFI) was 0.740. Based on the metrics SPSS

produced, the measurement model demonstrated an acceptable fit with the data collected

for this study. Furthermore, the Comparative Fit Index (CFI) had a value of 0.79, and IFI

value of 0.81, NFI value of 0.93 were all above 0.9 and the RMSEA value was below 0.08

indicating an acceptable fit (Steiger, 1990).

The SEM hypotheses and results are most commonly represented in a form of path

analysis (Cooper & Schindler, 2008). In Path analysis, the coefficients describing how

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dependent variables depend on independent variables are called path coefficients (Lynd,

1997). In SEM path analysis, the observed endogenous variable was usage (digital lending

via mobile application adoption). The observed exogenous variables were, (a) Usefulness

(perceived usefulness), (b) Ease (perceived ease of use), (c) Credibility (perceived

credibility), (d) Compatibility (perceived compatibility), (e) Trust (perceived trust), (f) Risk

(perceived risk), and (g) Cost (perceived cost) (see Figure 4.2). Overall, the SEM results

showed that perceived compatibility, perceived credibility, perceived trust, perceived

usefulness, and perceived ease of use variables had a positive correlation with digital

lending via mobile application adoption in Myanmar. However, only perceived

compatibility and credibility correlations are significant. Conversely, perceived risk and

perceived cost had a negative relationship with digital lending via mobile application

adoption in Myanmar. Between both variables, only perceived cost negative relationship is

significant. Figure 4.2 presented a visual display of the SEM Path Analysis of the digital

lending via mobile application adoption in Myanmar based on the seven TAM variables.

Perceived compatibility with a coefficient estimate of 0.44, perceived credibility with

0.23, perceived usefulness with .08, perceived ease of use with 0.09, and perceived trust

with 0.05 has a positive correlation with digital lending via mobile application adoption in

Myanmar. Conversely, perceive risk with an estimate of -0.02 and perceived cost with -0.04

were negatively related with digital lending adoption in Myanmar as show in Table 4.14.

The Regression Weights Table 20 displayed also the different p values of each correlation.

As illustrated, perceived compatibility, perceived credibility, perceived usefulness, perceived

ease of use, and perceived trust had positive correlation with digital lending adoption in

Myanmar. However, only perceived compatibility and credibility positive correlation with

digital lending adoption in Myanmar was significant with p value < .05. Conversely,

perceived risk and perceived cost were negatively related to digital lending adoption in

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Myanmar. Comparing both, only perceived cost with p value < .05 had a significant negative

correlation with digital lending adoption in Myanmar in Table 4.15.

Figure 4.1. Model Fit based on Composite Variables

Table 4.14. Standardized Regression Weights from SEM Path Analysis

Usage Estimate
 Usefulness 0.08
 Ease of Use 0.09
 Credibility 0.23
 Compatibility 0.44
 Trust 0.05
 Cost -0.04
 Risk -0.02

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 Figure 4.2. Model with Standardized Regression Estimates

Table 4.15. Standardized Regression Weights from Regression in SPSS AMOS

Usage Estimate S.E C.R P

 Usefulness 0.063 0.031 1.905 0.062
 Ease of Use 0.078 0.034 1.271 0.078
 Credibility 0.227 0.025 3.463 ***
 Compatibility 0.385 0.026 10.412 ***
 Trust 0.044 0.022 0.574 0.451
 Cost -0.036 0.018 -1.056 0.044
 Risk -0.019 0.088 -0.787 0.653
Note: *** indicates 0.000.

The linear regression table created using SPSS AMOS contains approximately similar

results (Standardized Coefficients and p values) with Table 4.15 generated using SEM path

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analysis. In both tables, it was apparent that perceived compatibility, and perceived

credibility, have the strongest effect on the digital lending via mobile application in

Myanmar. Perceived cost is also significant, but its effect is weak for digital lending. Using

Usage as dependent variable and Usefulness, Ease of Use, Compatibility, Trust, Credibility,

Risk, and Cost as predictors, the following results are obtained as shown in Table 4.16: R-

Squared (R²) = 0.715, Adjusted R-Squared = 0.712, F-Value = 189.506, with F-significance

equaling zero. Based on this, it can be inferred that 71.5 percent of the digital lending via

mobile application adoption in Myanmar is explained by the three strong TAM predictors.

Table 4.16. Summary of Linear Regression Analysis

R R- Adjusted R- F df1 df2 Sig. F

squared R-squared squared Change
Change
0.735 0.715 0.712 0.715 189.506 7 660 .000

Model Unstandardized Standardized t Sig.

Coefficients Coefficients
B Std. Error
Beta
(Constant) -0.396 0.238 -1.124 0.237
Usefulness 0.063 0.031 1.872 0.059
0.101
Ease of Use 0.078 0.034 1.116 0.075
0.082
Credibility 0.227 0.025 3.545 0.000
0.217
Compatibility 0.385 0.026 10.223 0.000
0.520
Trust 0.044 0.022 0.514 0.424
0.033
Cost -0.036 0.018 -1.117 0.042
-0.044
Risk -0.019 0.088 -0.698 0.633
-0.015

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4.6. Response to Research Questions and Hypothesis Testing

The research question and hypothesis testing were based on the SEM (path analysis

and regression analysis) results using SPSS AMOS and SPSS. A p-value is the probability of

observing a sample value as extreme as, or more extreme than the value actually observed,

given the null hypothesis is true (Cooper & Schindler, 2008). Thus, p-value is compared to

the significant level (α), if p value < α, null is rejected for consideration of the alternate; and

if p > α null hypothesis is not rejected. The null hypothesis is rejected when the p-value is

less than the predetermined significance level of 0.05. The following are the results of the

research questions and hypotheses explained by R² and based on the SEM analysis using

the IBM SPSS AMOS.

 Q1: How much does perceived usefulness relate to digital lending via mobile
application adoption among Myanmar consumers?
o H10: Perceived usefulness is not strongly related to digital lending via mobile
application adoption in Myanmar.
o H1a: Perceived usefulness is strongly related to digital lending via mobile
application adoption in Myanmar.
 Perceived usefulness is positively related to digital lending via mobile
application adoption in Myanmar based on the standardized regression
coefficient estimate β = 0.101 and explained by R² = 0.715. However
the relationship is NOT significant based on the p = 0.059 > 0.05,
therefore H10 is not rejected, while H1a is rejected.

 Q2: How much does perceived ease of use relate to digital lending via mobile
application adoption among Myanmar consumers?
o H20: Perceived ease of use is not strongly related to digital lending via mobile
application adoption in Myanmar.
o H2a: Perceived ease of use is strongly related to digital lending via mobile
application adoption in Myanmar.
 Perceived ease of use is positively related to digital lending via mobile
application adoption in Myanmar based on the standardized regression

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 coefficient estimate β = 0.082 and explained by R² = 0.715. However
the relationship is NOT significant based on its p = 0.075 > 0.05,
therefore, H20 is not rejected, while H2a is rejected.

 Q3: How much does perceived compatibility relate to digital lending via mobile
application adoption among Myanmar consumers?
o H30: Perceived compatibility is not strongly related to digital lending via
mobile application adoption in Myanmar.
o H3a: Perceived compatibility is strongly related to digital lending via mobile
application adoption in Myanmar.
 Perceived compatibility is positively related to digital lending via
mobile application adoption in Myanmar based on the standardized
regression coefficient estimate β = 0.520 and explained by R² = 0.715.
The correlation is significant with p = 0 < .05, therefore, H3 0 is rejected
digital lending via mobile application adoption in Myanmar H3 a is
accepted.

 Q4: How much does perceived trust relate to digital lending via mobile application
adoption among Myanmar consumers?
o H40: Perceived trust is not strongly related to digital lending via mobile
application adoption in Myanmar.
o H4a: Perceived trust is strongly related to digital lending via mobile
application adoption in Myanmar.
 Perceived trust is positively related to digital lending via mobile
application adoption in Myanmar with a standardized regression
estimate β = 0.033 and explained by R² = 0.715. However, the
relationship is NOT significant based on p = 0.424 > .05, therefore, H4 0
is not rejected, while H4a is rejected.

 Q5: How much does perceived risk relate to digital lending via mobile application
adoption among Myanmar consumers?
o H50: Perceived risk is not strongly related to digital lending via mobile
application adoption in Myanmar.

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 o H5a: Perceived risk is strongly related to digital lending via mobile application
adoption in Myanmar.
 Perceived risk is negatively related to digital lending via mobile
application adoption in Myanmar based on standardized regression
estimate β = -0.015 and explained by R² = 0.715. The relationship is
NOT significant based on p = 0.633 > 0.05, therefore, H50 is not
rejected, while H5a is rejected.

 Q6: How much does perceived credibility relate to digital lending via mobile
application adoption among Myanmar consumers?
o H60: Perceived credibility is not strongly related to digital lending via mobile
application adoption in Myanmar.
o H6a: Perceived credibility is strongly related to digital lending via mobile
application adoption in Myanmar.
 Perceived credibility is positively related to digital lending via mobile
application adoption in Myanmar based on the standardized regression
estimate β = 0.217 and explained by R² = 0.715. The relationship is
significant with a p = 0 < .05, therefore, H60 is rejected while H6a is
accepted.

 Q7: How much does perceived cost relate digital lending via mobile application
adoption among Myanmar consumers?
o H70: Perceived cost is not strongly related to digital lending via mobile
application adoption in Myanmar.
o H7a: Perceived cost is strongly related to digital lending via mobile application
adoption in Myanmar.
 Perceived cost is negatively related to digital lending via mobile
application adoption in Myanmar based on the standardized regression
estimate β = -0.044 and explained by R² = 0.715. The relationship is
significant with p = 0.042 < .05, therefore, H70 is rejected while H7a is
accepted.

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 Q8: Which constructs of perceived usefulness, ease of use, compatibility, trust,
credibility, risk, and cost have stronger relationships with digital lending via mobile
application adoption in Myanmar?
o H80: None of the extended TAM constructs of perceived usefulness, ease of
use, compatibility, trust, credibility, risk, and cost are all strongly related to
digital lending via mobile application adoption in Myanmar.
o H8a: One or more of the extended TAM constructs of perceived usefulness,
ease of use, compatibility, trust, credibility, risk, and cost are all strongly
related to digital lending via mobile application adoption in Myanmar.
 Based on the standardized regression estimates β, R², and the p values,
only three of the seven extended TAM constructs, (a) perceived
compatibility (β = 0.520, p < .05), (b) perceived credibility (β = 0.217, p <
.05), and (c) perceived cost (β = -0.044, p = .042 < .05) are only strongly
related to digital lending via mobile application adoption in Myanmar,
therefore, H80 was rejected while H8a is accepted.

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 CHAPTER 5
FINDINGS AND POLICY IMPLICATIONS

5.1. Summary of Findings

This dissertation is undertaken to study the features affecting digital lending via

mobile application adoption in Myanmar, and consequently to fill the gap in the technology

adoption literature, particularly for emerging countries. The quantitative correlational

model describes the relationships between the factors influencing digital lending via mobile

application adoption in Myanmar (independent variables) and the decision or action to

adopt (dependent variable). The extended TAM and IDT constructs of (a) perceived

usefulness, (b) perceived ease of use, (c) perceived compatibility, (d) perceived trust, (e)

perceived credibility, (f) perceived risk, and (g) perceived cost are the independent

variables. Chapter 4 highlights the results of the statistical model outcomes generated from

the survey data collected from the questionnaire carried out specifically for this research.

Data is collected from the general public of 18 years of age and older living in Myanmar with

access to Facebook irrespective their (a) gender, (b) age, (c) education level, (d) residence,

(e) marital status, (e) job function, (f) employment status, (g) mobile device type, etc. A total

of 660 valid responses are empirically analyzed for the SEM analysis using SPSS and SPSS

Amos.

In summary, the results indicate that perceived compatibility (β = 0.520), perceived

credibility (β = 0.217), perceived usefulness (β = 0.101), perceived ease of use (β = 0.082),

and perceived trust (β= 0.033) variables are all positively related to digital lending via

mobile application adoption in Myanmar. Only perceived compatibility (β = 0.520, p <

0.050) and perceived credibility (β = 0.217, p < 0.050) are found to be significant to

positively affect digital lending via mobile application adoption. The relationships of both

constructs to digital lending via mobile application are equally significant. On the other

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hand, perceived risk (β = -0.015) and perceived cost (β = -0.044) are both negatively related

to digital lending via mobile application adoption in Myanmar but only the former has (β = -

0.036, p = 0.042 < .05) a significant negative relationship to digital lending via mobile

application adoption in Myanmar. In terms of the extent of the correlations of all TAM

constructs, perceived compatibility and perceived credibility are the strongest predictors to

digital lending via mobile application adoption in Myanmar, followed by perceived cost. The

three strongest predictors generally explain 71.5 percent of variance of digital lending via

mobile application adoption in Myanmar.

The hypothesis testing generates the following outcomes: H1 0 (β = 0.101, p = 0.059

> 0.050), H20 (β = 0.082, p = 0.075 > 0.050), H40 (β = 0.033, p = 0.424 > 0.050), and

H50 (β = -0.015, p = 0.633 > 0.050) are not rejected; H30 (β = 0.520, p < 0.050), H6 0 (β

= 0.217, p < 0.050), H70 (β = -0.044, p = 0.042 < 0.050), and H8 o are rejected in favor of

alternate hypotheses, H3a, H6a, H7a, and H8a. The overall results indicate that perceived

compatibility (β = 0.520, p < 0.050), perceived credibility (β= 0.217, p < 0.050),

perceived usefulness (β = 0.101, p = 0.059 > 0.050), perceived ease of use (β = 0.082, p=

0.075 > 0.050), and perceived trust (β = 0.033, p = 0.424 > 0.050) variables are all

positively related to digital lending via mobile application adoption in Myanmar. But only

perceived compatibility (β = 0.520, p < 0.050) and perceived credibility (β = 0.217, p <

0.050) are statistically significant and thus strong predictors to digital lending via mobile

application adoption in Myanmar. On the other hand, perceived risk (β = -0.019, p =

0.633 > 0.050) and perceived cost (β= -0.036, p = 0.042 < 0.050) are both negatively

related to digital lending via mobile application adoption in Myanmar. However, only

perceived cost (β = -0.036, p = 0.042< 0.050) negative correlation to digital lending via

mobile application adoption in Myanmar is significant.

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 Table 5.1. Summary of Hypothesis Testing Results

Null Hypothesis Statements Outcome

H10 Perceived usefulness is not strongly related to digital lending via mobile Not Rejected
application adoption in Myanmar.
H20 Perceived ease of use is not strongly related to digital lending via mobile Not Rejected
application adoption in Myanmar.
H30 Perceived compatibility is not strongly related to digital lending via mobile Rejected
application adoption in Myanmar.
H40 Perceived trust is not strongly related to digital lending via mobile application Not Rejected
adoption in Myanmar.
H50 Perceived risk is not strongly related to digital lending via mobile application Not Rejected
adoption in Myanmar.
H60 Perceived credibility is not strongly related to digital lending via mobile Rejected
application adoption in Myanmar.
H70 Perceived cost is not strongly related to digital lending via mobile application Rejected
adoption in Myanmar.
H80 None of the extended TAM constructs of perceived usefulness, ease of use, Rejected
compatibility, trust, credibility, risk, and cost are all strongly related to digital
lending via mobile application adoption in Myanmar.

In summary, perceived compatibility, perceived credibility, and perceived cost had a

significant effect on digital lending via mobile application adoption in Myanmar. Daud et al.

(2011) describes perceived credibility as users’ belief that their personal info and

transactions will be secured and will remain private to an extent that new technology is

perceived to be more or less consistent with existing sociocultural values and beliefs, past

and present experiences. Wang et al. (2006) assumes perceived cost to be financial concerns

before adopting digital lending via mobile application, including cost of handsets, phone

bill, data connectivity and other service charges, which might influence the adoption and

usage of technology.

In a 2013 study by the U.S. Federal Reserve Board of Governors13, it is reported that

perceived compatibility and perceived credibility as well as perceived usefulness were all

significant factors to mobile banking adoption. According the survey, nearly 50.0 percent

13
United States Federal Reserve, “Consumers and mobile financial services 2013,” March 2013. Available at
https://www.federalreserve.gov/econresdata/mobile-devices/files/consumers-and-mobile-financial-services-report-
201303.pdf

147
U.S. consumers do not engage on mobile banking activities due to concerns over security

and data privacy. Other studies (Al-Jabri & Sohail, 2012; Amin et al., 2012; Cruz et al.,

2010; Giovanis et al., 2012; Koenig-Lewis et al., 2010; Wessels & Drennan, 2010; Yu, 2012)

on mobile banking technology adoption also validate this finding consistently. However,

there are also studies with opposite outcomes; Amin et al. (2012) finds that, for mobile

banking technology adoption in Malaysia, perceived usefulness and perceived ease of use

had no significant influence impact. Additionally, perceived credibility, enjoyment and self-

efficacy are more significant to predicting mobile banking technology adoption in the

context of Malaysia.

With respect to Romania, Malaysia and Taiwan, Dasgupta et al. (2011), Daud et al.

(2011) and Yu (2012) all respectively deduce that, the perceived credibility is one of the key

factors that significantly affect mobile banking adoption, similar to the results of this study.

Al-Jabri and Sohail (2012), Koenig-Lewis et al (2010), and Wessels and Drennan (2010)

also report on mobile banking technology adoption among Australian, young German, and

Saudi users respectively that perceived compatibility is one the strongest predictors to

adoption, which supports our other finding perceived compatibility is one of the critical

factors for digital lending adoption in Myanmar.

Cruz et al. (2010) conducts research on mobile banking adoption in Brazil which also

confirms this study partly that, the perception of cost was one of the main reasons behind

the reluctance of Brazilians towards technology adoption. Likewise, Chong (2013a) reports

that perceived cost is one of the most determinants to mobile commerce. This endorses the

findings of this study that the perceived cost is a strong predictor to digital lending via

mobile application in Myanmar. Ha, Canedoli, Baur, and Bick (2012) conduct a

comprehensive meta-analysis of technology adoption studies conducted between 2008 and

2011 in which TAM was the main theoretical framework. Ha et al. (2012) discover that

perceived usefulness, perceived risk, perceived compatibility and perceived cost were the

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most common factors influencing mobile banking technology adoption, all of which are

similar to this study’s findings, except for perceived risk and perceived usefulness. More

recently, Zhongqing et al (2019) state the potential reasons for the adoption and use of

Fintech services by bank and found that perceived usefulness, and perceived trust to be

positive influences for the adoption of Fintech services.

5.2. Possible Limitations of the Study

Like all other research studies, this paper has some limitations that should be

overcome in future related work. First, although the investigation of digital lending

adoption examines seven factors that contributes to adoption, the way the survey was

distributed inadvertently captured early adopters mostly, which maybe a departure from the

original theoretical frameworks which are supposed to measure behavioral intention to use

and accept the technology. Here the study would focus on early adopters who have already

used or are familiar with the technology. Considering that the utilization of this technology

allows them to receive a digital loan may also affect their responses; in particular, those who

try out the mobile application but find it difficult to proceed to the end as well as those who

try out, apply for the loan, and not qualify for credit approval may respond negatively vs.

others who are already successful borrowers. It should be well-noted that this monetary

reward nature of digital lending would unavoidably create bias into the data collected.

This research focus on a group of consumers that are already customers of Mother

Finance or those who are keenly interested in becoming consumers. Some may have applied

for loans at least once; others multiple times. A few might have tried the mobile application

but did not qualify for the loan eventually. Several may be waiting and learning to gain more

trust and credibility of the service provider itself. While the most valid sampling is not

deployed to be able to attain generalizable conclusions, in the study we are establishing

correlational outputs for potential adopters who have been made aware and/or have utilized

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this technology. We have shown in Chapter 4 that the model constructs all have internal

reliability, convergent and discriminant validity. The lack of complete 100.0 percent

external validity may be justifiable when restricting to such early adopters vs. the entire

population. The overall survey respondents are young adopters in Myanmar; thus, the

questionnaire was translated into Burmese; and then back translated. To validate the

instrument, it was pretested after the translation for comprehension, clarity, and coverage

to make sure that the respondents clearly understood the meaning. Additionally, the

knowledge of being anonymous in the study could supposedly increase the reliability as the

participants might feel more comfortable sharing truthful answers in the questionnaire.

After in any innovation diffusion process, these early adopters’ acceptance to the new

technology will further drive the laggards to follow through.

This study provides a meaningful piece of evidence that digital technology can help a

laggard country to leapfrog on development and provide unprecedented solution on what to

look out for in delivering fintech services to the masses to adopt and counter more thorny

problems such as poverty and digital literacy backwardness in other developing countries

like Myanmar. Despite the careful attention to research methodology, improvements can be

certainly made in future studies in terms of data sampling and collection. Firstly, although

the findings provided meaningful insights for the use of digital lending within Myanmar

context, there may be a potential research bias in the sampling method due to the selection

of a sample of willing respondents. The convenience sampling, which is consistently

deployed in other studies on technology adoption (Chen et al, 2009; Featherman & Pavlou,

2002; Wu & Wang, 2005) may have also produced a sample which is not at all

representative of the entire population. To compensate for this drawback, future research

should be conducted to test the proposed model using a random sampling approach.

Furthermore, the study data were collected from the self-reported instrument. In fact, there

could be a difference between what the participants responded to and what they actually did

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in terms of actual use of digital lending technology. Hence, other methods of data collection

such as in-person interviews and focus groups and appropriate qualitative analyses should

be conducted to provide a holistic understanding of the results of the current study. Next,

this study was cross-sectional and not longitudinal. Therefore, it was uncertain whether the

digital lending acceptance and usage behaviors were influenced by the individuals’ actual

experience and outcomes. Additionally, an individual’s perceptions change over time when

they gain more experience (Venkatesh & Davis, 2000; Venkatesh et al, 2003). Therefore,

longitudinal research should be conducted to evaluate the validity of the model and our

research findings.

As with many studies that is based on theoretical frameworks, there are several

limitations in this study. Studying the technology adoption phenomenon is a complicated

and past literature has shown time and again that a single model or framework may be

insufficient to explain all the facets of the technology adoption process. One of the primary

limitations is inherited coming from having chosen the extended TAM as the conceptual

foundation. Despite the addition of various new constructs to the original version, it may

still not be comprehensive enough to cover and test all the possible factors affecting digital

lending via mobile application adoption. However, practically speaking, any other

theoretical framework may or may not be equally effective to conduct this research. Many

unknown confounding factors still lurk around in reality that cannot to put into a testable

construct. Psychological factors, such as social capital, peer pressure, socioeconomic

backgrounds, etc. are not explicitly considered. At the same time, perceived risks from

multiple dimensions, such as financial, data, personal privacy, and cyber security risks

should be broken down further for a more thorough analysis.

Another limitation stems from the choice of the SEM methods used for data analysis.

In fact, SEM only examines a linear model, thereby oversimplifying the complexities

involved when users are deciding about technology adoption (Chong, 2013a). Of course,

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other measurement instruments for the constructs could have been tested to check for

different outcomes, rather than the ones utilized in the study. For example, in a few studies

of TAM, it has been widely confirmed that users’ attitude has significantly positive

correlation with their adoption intentions (Shaikh et al, 2015; Hsu et al, 2011; Aboelmaged

et al, 2013). Grabner et al (2011) use the following as a proxy for attitude “I believe using

Fintech services is a good idea. Using Fintech services is a pleasant experience.” Since some

of the participants of the survey are already familiar or have used digital lending via mobile

application, it might have been useful to address their attitude towards digital loans. It

would also be interesting to understand the adoption or further usage intention amongst

those who have used the technology versus those who are contemplating to use the

technology.

In their research on mobile payment adoption in South Korea, Kim et al. (2010)

shows that, since most people have insufficient professional knowledge of a wide range of

mobile services, their individual’s take on innovation plays an important positive role in

their intention of use. If an individual is highly innovative, the high degree of uncertainty is

considered acceptable and has a more positive intention to use the innovation. In other

words, they may be less resistant to perceived risks and more receptive to technological

innovation. This measurement of attitude attribute has been made use by Zhang et al (2018)

as “When I hear about a new product, I look for ways to try it. Among my peers, I am

usually the first one to try a new product.” In distributing the survey through Facebook page

of Mother Finance and shared across other pages, it may have inadvertently seek out

participants that are already rather savvy with digital lending via mobile application, i.e.

those who are generally early adopters, quite comfortable in adopting new technology. The

sample participants’ profile may not reflect the actual population profile within Myanmar.

One other measurement construct that can be added for improvement is brand

image, which is somewhat closely associated with perceived trust or credibility but it takes

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into account the intangible value of the technology provider thereby, producing a positive

halo effect on users. The brand effect of service providers has an important influence on the

provision of reliable services to users, and it plays a positive role in promoting users’

achievements of their intended purposes (Park et al, 2015). For fintech startups compared

to incumbents, offering digital loans, they may have a stronger uphill battle to convince

potential users. Sang et al. (2010) finds that one of the main reasons for fast adoption of the

government administration information system (GAIS) is that it is managed by the

government of South Korea. Other studies on Fintech adoption show that brand has a

significant influence on users’ perceptions of technology quality (Riyadh et al 2010), value

(Shapiro et al, 2018), and their satisfaction (Saleem et al, 2014).

In the context of Fintech adoption, users’ perceptions of the brand can be viewed as a

precondition for organizational trust (Chandra et al, 2010). Semuel et al. (2014) proposes

that a good brand image can improve user trust because it effectively reduces perceived risk.

According to psychological research, a good brand image can generate trust among users

(Lee et al, 2009). Therefore, brand image can somewhat guarantee the adoption of new

products and services, enabling users to infer from the existing orientation of the enterprise

and its value proposition, and ultimately reinforces customer recognition and builds trust

(Siamagka et all, 2015). In the process of receiving digital loans, users need to provide much

private personal information before they can actually receive the disbursement. It may be

an important criteria to consider building up a brand image prior to or while rolling out the

new technology.

Many past studies have used several competing theoretical frameworks to study

consumers’ adoption of fintech and other new technology. However, there is little

consistency in competing theories and models which identify distinct factors affecting

technology adoption. Although this study utilize extended TAM framework, if more time

and resources permit, further studies could be conducted to compare various theoretical

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frameworks on digital lending via mobile application adoption in Myanmar. Theories and

conceptual models presented in Chapter 3: (a) Bass diffusion model, (b) theory of planned

behavior, (c) decomposed theory of planned behavior, (d) innovation diffusion theory, (e)

task technology fit, (f) Rasch measurement model, (g) theory of reasoned action, (h) uses

gratifications theory, (i) privacy calculus theory, (j) DeLone and McLean 1992 and 2003 IS

models, (k) UTAUT, and (l) various TAM extensions can be used as a basis to conduct

similar studies on digital lending via mobile application adoption in Myanmar. Hence, in

future, further studies can be conducted to compare different theoretical models and their

outcomes to examine which ones have the strongest predictions on digital lending via

mobile application adoption in Myanmar.

In addition to theoretical framework, as briefly mentioned earlier, the choice of

statistical methodology may also present limitations to the outcomes of this study. SEM is a

statistical technique cannot be simply compared with the more familiar ordinary least

squares regression or logistic regression log-linear modeling. It is a generalized modeling

framework that assimilates a number of different disciplines such as factor analysis and

measurement theory from psychology, path dependency from epidemiology and biology,

regression modeling from statistics, and simultaneous equations from econometrics. All

these different multivariate techniques are integrated to form a dynamic structural equation

modeling environment. In particular, SEM is highly suitable for modeling situations where

the key constructs and concepts that are being questioned are complex and multifaceted

and when relating to psychological and social concepts that can be quite difficult to measure

quantitatively. One of the advantages of SEM is the to make corrections for measurement

errors that are common with quantitative research questions which specify systems of

relationships rather than fitting regression models where we have one dependent variable

and a set of multiple predictors or independent variables.

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 Structural equation models can represent different outcomes or dependent variables

each of which is affecting other dependent variables in a more complex system. Thus if the

research questions require modeling a causal system with complexity, then structural

equation models are particularly suitable. In addition, indirect or mediated effects may also

be present in many research questions such that if the research context is the effect of

variable X on variable Y that would be thought of as the direct effect of X on Y and the first

variable X perhaps influences a second variable Z which then has a second effect on Y that

would be seen as an indirect effect, then SEMs are able to address those kinds of mediated

research questions settings.

The main concepts investigated in this study such as credibility, trust, usefulness, etc.

are common in social science research; these constructs are not directly observable and are

impossible to place a measurement instrument to get a direct reading of the levels which

makes them hypothetical or latent which in turn drive users’ attitudes and behavior. SEM

approach, fortunately, allows to quantify these latent variables using observable indicators

using variables that can be measured directly which are believed to be caused by the

underlying latent constructs. Thus, the questions in the survey administered to a sample of

people generates an observable indicator of a latent construct. Many different kinds of

latent variable models can be theoretically constructed, after which principal components

analysis or factor analysis is applied to latent class models depending on the metrics of the

observed indicators in the data set to obtain a summary score for a reduced set of factors or

components relative to the full initial set while correcting for the error in each individual

indicator. This in turn gives a better measure of the true score of the concept that is

represented with a common factor model.

The empirical estimates of these key quantities are obtained are referred to as factor

loadings which indicate correlation between the factor and each of the X variables. High

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correlations in the model, with the value closer to one, suggest a good indicator of the latent

construct. In reality, it is often difficult to concisely come up with a single or a set of

questions which cover all aspects of perceived usefulness or credibility. Thus multiple

indicators to get a good coverage of the concept are needed to enable removal or reduction

of random error in the construct that is being measured. More formally it is demonstrated

that these errors may be less precisely measured if the random error is in a dependent

variable, although leaving the estimates in a model unbiased. There will be a measurement

for noise indicated with wider confidence intervals if the random error is in independent

variables; then regression coefficients that are estimated using those independent variables

will be attenuated, i.e. they will be smaller than they are in the population and

systematically smaller tending towards zero so results will be underestimated and the null

hypothesis tends to be falsely accepted.

A standard feature of path analysis and one that makes it rather flattering as part of

structural equation modeling for social scientists is that the model fitting to the data is

represented diagrammatically rather than in the form of equations. This visual aspect is

very appealing for those who perhaps are less comfortable and intuitive in their equations

which are often standardized notations and the path analysis portrays regression equations

between our measured variables and the systems of relationships between multiple

observed variables. Another key aspect of path analysis is its focus not just on direct effects

but also on indirect as well as total effects so for research questions where a simple linear

model is insufficient to estimate the effects of some set of predictor variables on a

dependent variable but a set of pathways between multiple independent variables and

possibly multiple dependent variables.

The main feature of SEM is to compare the model fir to empirical data and this so-

called fit-statistics assessing the matching of model and data is acceptable, the assumed

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relationships between latent and observed variables (measurement models) as well as the

assumed dependencies between the various latent variables (structural model) are regarded

as being validated the data. Strictly speaking, the hypothesis of the assumed model is not

rejected. Sometimes, only the fit of a measurement model is of interest, then SEM serves as

a confirmatory factor analysis model (CFA). At other times, the parameters of the structural

model may be of interest where the regression coefficients are generally not predetermined

but estimated and tested with a SEM program. Although under specific circumstances, SEM

can represent causal relationships, a well-fitting SEM does not necessarily have to contain

any information on causal dependencies at all. Hence, the key takeaway would be testing

the fit of a SEM is not a test of causality.

Today, programs like SPSS AMOS provide an easy to use and learn graphical user-

interface which allows the user to configure path diagrams, calculate model fit, and estimate

parameters with a few mouse clicks. Thus, SEM software can run a multitude of models

without requiring a lot of statistical knowledge is needed upfront. The fundamental

advantage of SEM is the ability to represent the theories as diagrams rather than using

mathematical notation which many social scientists are less comfortable with. Another

unusual feature is also that in the conventional practice, the actual raw data observed is not

analyzed but the variances and covariances of the observed variables. A simpler model is

specified for the underlying structure using the variance-covariance matrix. Although a

larger sample size is always desired for SEM, for applicability, there is an adequate sample

size required for the data to meet distributional assumptions. The sample size, as a rule of

thumb, is recommended to be more than 25 times the number of parameters to be

estimated, the minimum being a subject-parameter-ratio of 10:1. The lower bound of total

sample size should be at least 200 (Kline, 1998).

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 Unlike standard regression modeling, in SEM maximum likelihood method (ML) is

commonly employed for estimation of parameters and computing model fit, instead of

ordinary least squares, which estimates the unknown parameter or the coefficients by

maximizing the likelihood of a particular sample of the data which is a mathematical

function based on joint probability of normally distributed continuous set of observations

via an iterative process. In general, the accuracy and stability of SEM results declines with

smaller sample sizes as well as with larger sets of variables. As an alternative to ML, the

Weighted Least Squares (WLS) method offers an alternative, asymptotically distribution-

free (ADF) approach, but the sample size needs to be exceptionally large, which is often not

available in practical research (Muthén & Kaplan, 1985, 1992). Simulation studies by Yung

and Bentler (1994) propose a minimum sample size of 2000 to obtain satisfactory results.

Other analytical tools include bootstrap algorithms to evaluate the interdependence of the

model, test the accuracy of parameter estimation and statistical inference (Bollen & Stine,

1993; Yung & Bentler, 1994). For this study, further investigations and data analysis can be

carried out using bootstrapping which a technique of drawing many pseudo-replicate

samples out of a given dataset. This kind of multiple resampling simulations can help

calculate standard errors even if distributional assumptions are violated (Efron &

Tibshirani, 1985).

Although SEM enables the analysis of latent variables and their relationships,

offering the opportunity to analyze the dependencies of unobservable psychological

constructs without measurement errors, some research contexts may demand the actual

values of latent variables (i.e. the factor scores) for individual subjects. While they can also

be estimated in SEM, these estimations often have severe issues, as factor scores, having

derived in several ways, are ambiguous; they should not be heavily relied upon.

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 In SPSS, if different researchers use same data and apply the same statistical

method, their results are same. In AMOS SEM, given same data and same research

methods, various models can be deployed by different researchers. For example, by using

observed variables without latent variables, path analysis model can be chosen instead of

SEM. Also, by putting in or getting out latent variables in model, or by adding or deleting

paths, various modified model can be created. In a discussion of tests of SEM, Joreskog and

Sorbom (1993) distinguished among the following research situations:

 SC (Strictly Confirmatory) means that a single model has been formulated and

empirical data is obtained to test the model in a strictly confirmatory situation.

The model should be accepted or rejected.

 AM (Alternative Models) means that several alternative models or competing

models have been specified and will be tested on the basis of a single set of

empirical data; only one of them should be accepted.

 MG (Model Generating) means that a tentative initial model has been identified.

If the initial model does not fit the given data, the model should be modified and

tested again using the same data. The goal is to find a model which not only fits

the data well, but every parameter of the model should have a substantively

meaningful interpretation. The specification of each model may be theory-driven

or data-driven. Although the model may be tested in each revision round, the

actual whole approach is model generating, not model testing.

Among them, MG situation is most common. There may be many rounds of revisions

and adjustments by adding new variables and dropping significant ones until the most

preferred model is specified. SEM is also criticized as a probably poor tool in explanatory

situations with many variables and weak or non-existing substantive theory. This critique

could be applicable to this study as well. In addition, within SEM, multiple statistical

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methods such as confirmatory factor analysis, path analysis, and correlation analysis are

applied in one model and estimated simultaneously. This is an advantage and disadvantage

of SEM at the same time because errors may all occur at once in results. For example, the

positive relationship between two variables in correlation analysis may be shown as

negative relationship in the result of SEM analysis. By modifying model or by deleting a

variable, the problems can be eliminated step-wise, but those are not that familiar with SEM

may wrongly interpret the results.

There is a problem of generalization of findings from SEM because results from SEM

are subject to sampling or selection effects with respect to at least three aspects: individuals,

measures, and occasions. First, there is sampling effect with respect to individuals in most

cases of research, which cause the limitation in generalizing the results. Second, selection

effects are in the choice of measured variables in a given study. Especially, in SEM, this

issue is prominent with regards to the choice of indicators to construct the latent variables.

The nature of the latent variables depends on the choice of indicators, which may influence

results and interpretation. Valid results and interpretation rely on having appropriate latent

variables. Third, selection effects involves occasions of measurement. In any study where

effects that operate over a certain period time are investigated, they may vary with the

length of the time interval, thus affecting the initial models and related results.

In most cases, once an explanatory model that fits the empirical data is identified,

there is no motivation left to consider alternative models since there is always limited time

and resources. Ruling out their existence of alternative models that could also explain the

data may strengthen the support of a favored model. Directional effects in SEM can be

considered as causal effects wherein a change in one variable results in a change in another

variable, and there are three properties of such effects: (a) these effects take some finite

amount of time to operate; (b) a variable may be influenced by the same variable at an

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earlier point in time (autoregressive effect); and (c) the magnitude of an effect may vary as a

function of the time lag. This is especially true in this study where given a certain time lag,

the potential adopters may become adopters which would ultimately skew the observed

constructs. Also, the autoregressive effect for longitudinal designs should be explored

further. Unfortunately, however, many studies show inadequate consideration of time issue

in design.

Last but not least, a finding of good fit does not imply that the model is correct or

perfect or that effects hypothesized in the model are strong, but only plausible. The actual

relationship may be very weak, even close to zero, because the relationship can be made by

residual variance from endogenous variables. Good model fit also does not imply at all that

such residual variances are small. Overall, the use of SEM allows analysis of complex

research problems based on an analysis of cause-effect phenomena. Before the construction

process of SEM models starts, it should be remembered that all theoretical assumptions in

the SEM analysis must be maintained and covariance of the observable variables with the

use of a simplified model structure should be tested on the basis of the theory’s formalized

elements. SEM model should not be used to find out something about the empirical data

but conversely, to verify the theory from the given set of through the application of the SEM

model. At the same time, the fact that a given theory was confirmed by the SEM model does

not yet mean that the theoretical assumptions should be considered as unquestionable, i.e.,

these assumptions only become more reliable and valid in light of the obtained results. They

receive confirmation in the context of the conducted statistical analyses, on the basis of the

adopted criteria in these analyses and of the levels of the theoretical assessment of the

phenomena.

Therefore, the existence of a positive verification of the hypothetical relationships in

the SEM model does not yet mean the end of the analyses, as we allow for the probability of

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building another theoretical model which can be far better than the previous one. What is

more, for a given set of variables, SEM can determine many models representing completely

different theoretical consequences but having a good fit to the empirical data. Therefore, the

theory of the examined process is whether a psychological, sociological, economic, or

marketing background is a key criterion in choosing the model.

SEM has on two sources, namely, theoretical and technical. The most important

sources are the theoretical premises from which we derive both the hypothesis about the

measurement and the structural part of the SEM model. The hypotheses specify which

parameters can obtain a given value, and how should be estimated on the basis of empirical

data. The second source, in turn, does not result from the theoretical assumption of the

examined phenomenon which the model should describe but from strictly technical reasons

which, in most cases, focus on a description of parameter quality and model fit to the

empirical data or on the description of relationships between measurement errors which

occur naturally (or at least do not contradict the theory of the modeled phenomenon).

However, in the end the basis for the evaluation and acceptance of the theoretical model, in

which we assume certain hypothetical directions, is the positive result of the conducted

procedure, which verifies the research hypothesis.

Without a strong theoretical background or initial research conducted in the given

field there is no way of being able to distinguish between many available ways to determine

relationships between variables. In other words, it should be clear that SEM should not be

used to convey such expression as “let the data speak for themselves”, because they do not;

if the covariance matrix contains only 7 variables, theses variables into 5,040 can be sorted

into different causal orders and therefore one can also obtain 5,040 perfectly fitting

saturated structural models and find many more alternative fitting models. That is why

SEM should only be used given pre-specified assumptions about the order of the variables

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and the specific possible causal effects. Simply put, SEM is an analytical strategy used to test

if these assumptions are in agreement with the empirical data obtained.

5.3. Policy Implications

Mobile phones and the internet have created new opportunities for provision of

financial services through alternative channels. Smartphone technology allows the use of

mobile money accounts and offers a convenient way for people to make transactions

between each other via their financial institutions’ accounts, mobile wallets and vice versa.

But people’s ability to use digital financial services like these depends on having access to

the necessary technology as well as knowledge and awareness. Having access to the internet

as well as a mobile phone brings a wider range of financial services within reach even in

developing countries like Myanmar. Although research literature reveal that many studies

that are conducted in various countries (e.g., Amin et al., 2012; Khraim et al., 2011; Koenig-

Lewis et al., 2010; Wessels & Drennan, 2010; Yung-Cheng et al., 2010), none have focused

on the factors affecting digital lending via mobile application adoption among Myanmar

consumers. Prior to this study, there was no empirical research on technology adoption for

financial services in Myanmar. This lack of scholarly research indicates the need for

empirical studies to examine factors affecting digital lending via mobile application

adoption in Myanmar and fills the necessary gap in the literature.

The results of this study have implications for researchers and practitioners. A better

understanding of digital lending acceptance in Myanmar is captured to regulators,

policymakers, financial institutions, and other players in the digital ecosystem.

Furthermore, this study provided a basis for further strategies to expand digital lending via

mobile application to more people by helping to identify the predicting factors to digital

lending via mobile application adoption. The research findings show that perceived

compatibility, perceived credibility, and perceived cost are the predicting factors of digital

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lending via mobile application in Myanmar which consequently offer insight for combating

financial exclusion against the unbanked and under-banked populations. The knowledge

gain from this study can be used to formulate more effective strategies and policies for

Myanmar to expand digital lending via mobile application and other related technology

driven financial services to create more economic opportunities to underserved segments of

Myanmar and to help combatting financial exclusion against the unbanked and under-

banked populations. Every player in the digital financial ecosystem could use the findings to

increase participation in the formal financial sector through the use of their smart phones.

The empirical results of this study conclude that three extended TAM variables

namely perceived compatibility, perceived credibility and perceived costs are the significant

factors influencing digital lending via mobile application adoption in Myanmar. Perceived

compatibility and perceived credibility were equally the strongest predictors of digital

lending adoption, followed by perceived cost. Perceived compatibility and perceived

credibility predictors had a positive correlation with digital lending adoption whereas,

perceived cost predictor correlation with digital lending was negative. In addition, there was

no significant correlation between the two main TAM constructs of perceived usefulness

and perceive ease of use with digital lending. Furthermore, perceived trust and perceived

risk correlations are weak and did not have much influence on digital lending adoption in

Myanmar.

Digital lending and mobile application technologies offer great opportunities in

Myanmar. Local incumbent financial institutions can increase their market share;

policymakers to improve financial inclusion targets for unbanked and under banked to

actively participate in the formal financial system; and fintech companies to disrupt the

ecosystem. It has been repeatedly evident from other countries that shifting payments from

cash into digital wallets can add benefits beyond expanding account ownership and

increasing formal transaction volume. Digitizing payments can improve their efficiency by

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increasing the speed of payments and reducing the cost of money transfers. It can also

enhance the security of payments and thus lower the incidence of associated crime.

Lowering cash-based transactions has been shown to increase transparency and reduce

corruption. Last but not least, by providing an important first entry point into the formal

financial system, shifting to digital payments can lead to establishing digital credit profile

and history which in turn will allow them to get access to finance.

For businesses and governments alike, however, the challenge is to ensure that

digital financial services can provide better offers the cash-based alternatives in terms of

cost, speed of delivery, safety, efficiency and transparency. Today, technology advances have

enabled that simply having a smart phone and internet can actually access for digital

finance and other mobile application based financial services. The 2017 Global Findex

database by the World Bank suggests that mobile phones and the internet can profoundly

impact the economy as a whole, in overcoming some of the barriers that prevent unbanked

adults to reach reliable financial services. For example, digital financial services might

narrow the distance between financial institutions and their customers by lowering the cost

of providing financial services via digital technology.

In the next chapter, based on the results of this study, digital lenders, policymakers,

and other FSPs could learn to improve their business pricing strategies (perceived cost a

strong correlation), build better products and services with emphasis on security and

privacy (perceived credibility a strong predictor), and easy to assimilate (perceived

compatibility a strong predictor). As an extension of digital lending via mobile application

technology, overall fintech adoption policies to improve financial inclusion and access to

credit will be framed and addressed for different ecosystem’s players’ perspectives.

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 CHAPTER 6

POLICY RECOMMENDATIONS AND CONCLUSION

6.1. Introduction

Digital lending via mobile application technology can be an influential force for

financial inclusion, especially true in economies where bank account ownership is less than

mobile penetration. Advances in technology and novel fintech inventions are allowing FSPs

to customize their offerings better suited to potential clients quicker, and cheaper. Across

the whole world, governments of many countries taking notice of all the changes that were

brought out about the smart phone revolution and advocating more for complete

digitization for financial sector. This include machine learning and artificial intelligence

models that are coming to the forefront of digital lending as a tool to utilize for greater

access to credit and other high quality and value-added services. As discussed in the

previous chapter, digital lending and related policies, if correctly executed, will support

FSPs to start, grow, advance, scale, and progress in a fast evolving financial sector

landscape. With the constant bombardment of signals from social media platforms and

mobile apps, customers’ needs and wants are constantly shifting but as a result, their

expectations for fully digital financial services. However, there is often a lag for incumbent

players to quickly respond to such shifts without carrying organizational restructuring and

sometimes complete institutional transformation. It is equally important for policymakers

should keep abreast with the latest developments, raise awareness and synthesizes best

practices from market leading players into a policy agenda that all stakeholders can use to

strategically implement and to steer the right direction for the overall financial sector.

Based on this study’s results, perceived credibility and perceived compatibility are

key predictors to this particular fintech adoption whereas perceived cost is negatively

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related to adoption of digital lending via mobile application. According to E&Y’s 2019

survey14, fintech is definitely becoming more and more mainstream as global adoption

reaching almost 64.0 percent. This suggests that organic growth in awareness over time

which will improve perceived credibility and perceived compatibility which will in turn

increase adoption rates of fintech, including digital lending. Within fintech, digital

payments and money transfers are the one of most recognized and utilized services; others

include lending, savings and investments, budgeting and financial planning and insurance.

Though awareness and usage are growing, 60.0 percent of all reported adopters of fintech

indicate their preference to access such a wide range of financial services through a

consolidated online platform or mobile app, and a touchless approach is not always favored

as most customers still favor to have the fallback option of communicating with customer

service for any problems or issues. However, engagement via social media is the chosen

channel compared to the traditional choice of face-to-face exchange at a physical office

location.

As this study shows, perceived trust is not a significant factor in adoption of digital

lending via mobile application, i.e. low adoption may not be completely boiled down to the

lack of trust; Perhaps it is just a matter of reaching a certain stage of digital literacy and

awareness which is rather common for initial innovation-adoption phase. As the first ever

digital lending platform in Myanmar, the consumers may not be fully aware of the

availability of the technology and service. The survey respondents, the early adopters,

mostly the young and the educated, are not entirely synonymous in terms of their

knowledge and exposure to technology, with the rest of the population. With limited

marketing spent on promotion, it is also difficult to reach the entire country in a period of

less than nine months and the digitally less-literate customer segments may be totally

14
https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/financial-services/ey-global-fintech-adoption-
index-2019.pdf?download

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clueless as to how to get onboard. As such, they are not even able to make the decision to

trust. Because e-wallets have just come into the market in 2016, digital fintech services are

still a relatively new phenomenon. Although in many other markets, digital financial

services is synonymous with low fees, in Myanmar, due to the small volume of digital

transactions taking place, it is still very hard for digital financial service providers to take

advantage of economy of scale; thus the fees tend to be on par or higher than physical

service providers. The range of functionality and features of existing fintech platforms are

also limited. Poor existing banking infrastructure and compatibility restricts 24/7

availability of services, especially real-time settlements, cash in and cash out operations.

Regardless of current environment conditions, there is no doubt that fintech

companies will carry on broadening their products and services, drawing in more users onto

their technology enabled platforms, and leveraging on the “seamless, easy, convenient, fast,

and affordable” value proposition. Policymakers must introduce, develop, tighten, adapt

and clarify regulations and policies which are previously non-existent or undefined, to

create an ecosystem for all stakeholders to partake fairly and equally. Governments around

the world are increasingly fostering the financial inclusion of their poorest citizens, striving

to increase the adoption and use of financial technologies (Demirgüç-Kunt et al., 2018). The

benefits that consumers reap from fintech such as digital lending or mobile money depend

on adoption of the corresponding technology on the other side of the market. Policies that

create large shocks to adoption on one side of the market can spur dynamic adoption on

both sides of the market, benefiting both consumers and fintech service providers.

6.2. Recommendations for FSPs

The two factors found to be significant, perceived credibility and perceived

compatibility can be effectively improved by the governments in collaborating and

committing to initiate and implement public policies that support fintech to drive

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harmonization and equivalence of fintech standards and financial sector regulations. At the

same time, the current and potential fintech service providers, including start-ups and

incumbents local banking institutions, can engage with governments to nationwide

integration, and development of talents for further adoption and industry growth. First,

based on the case study of Mother Finance and related data investigated in this research,

the Digital Lending Readiness Assessment Framework as well as valuable policy insights in

Myanmar is presented to help FSPs in Myanmar choose which procedures to hone in first

depending on their existing and targeted level of digitization.

The recommendations presented in this chapter are to guide all the key players in the

financial sectors to start thinking about putting in place the right processes and tools to

prepare for the future industry landscape. Whether a FSP embarks on building its own

digital lending know-how or teams up with other complementary organizations, the

appropriate level of digitization may be completely different. As financial services is a

heavily regulated industry, it is equally important to be mindful about country-specific

policies and the context for general digital capacity and financial literacy stage of the

targeted user segment. The framework outlined can be applied to better understand the role

that digital lending plays in a particular ecosystem; on the macro level – the stage of

development of the country and its financial inclusion policy goals and on the micro level –

FSP’s own business growth objectives and digital readiness level; and move forward with

the right policies and business models. If everyone follows suit, customers’ expectations can

be better met, coordination with each other to adapt to industry trends and changes, and

collaborate to strategically resolve issues that may come up to create a more financially

inclusive world.

In this study, data and access from a fintech startup, Mother Finance, was used to get

a glimpse of the first ever digital lending platform in Myanmar where demand for credit far

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outweighs the supply. However, smaller fintech players are met with significant funding,

regulatory licensing and reporting challenges which can potentially that restrict their

product offerings, value proposition and growth. With regulatory environment always influx

in Myanmar, any FSP must construct its digital product and service suite that offer a better

customer experience than what is available out there in order to stay relevant. Whichever

digital channel selected for delivery and distribution of the product and service, customer

advocacy, education and support must be provided, especially if the target segment is

traditionally underserved, at the key milestones in the digital onboarding journey such as

initial engagement, technical troubleshooting, addressing and resolving any complaints.

Depending on the target customer segment, their response and take up will vary due to the

degree of comfort, knowledge and awareness, they already have towards the technology or

digital channel. A nuanced approach is critical to offer customized digital lending, in terms

of design and delivery, for each segment of users; in fact, it may even be more effective to

simultaneously combine high and low touch for onboarding clients if you are the first mover

to go digital in an early market.

The general consensus in Myanmar when Mother Finance first offered its digital

loans in the market was that digital lending will not work for customers in Myanmar due to

extremely limited digital and financial literacy; customers lack awareness, understanding

and comfort with digital experience, struggle with erratic data connectivity issues, and they

trust in person discussions and interactions with loan officers in an “office” settings which

provide another layer of credibility. Despite all the initial hesitations regarding market

readiness, Mother Finance was able to build up a strong customer following and offer easy-

to-understand product, supplemented with a differentiated advocacy approach through

Facebook. Through its official Facebook page, Mother Finance regularly introduces

advocacy on financial literacy and lending and frequently highlights the importance of early

adopter challenges, and risk mitigation with regards to digital credit, including featured
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articles for customer awareness after adopting digital lending via mobile application such as

the following:

 Over-indebtedness: Carrying on multiple loans simultaneously due to ease of

access, but without credit bureau and centralized identification database system,

there is little sensible evaluation of repayment capacity; lack of understanding for

fundamental concept of a loan, and interest rate calculations; While digital lenders

rely on credit scoring algorithms, based on alternative data, that strengthen and

improve over time, in the short term initially there must be take on risky customers

that may not repay.

 Aggressive (digital) collections: Debt collection efforts are also part of the

digital lending operations; there may be frequent reminders via calls, SMS and in-

app notifications, which may add more stress and anxiety for the customer. In some

extreme instances, certain digital lenders may use contractual terms and conditions

that caters for the public shaming and blacklisting of non-repaying customers to the

newspapers or social media walls of defaulting customers.

 Financial exclusion: In certain rare cases, digital lending can actually

inadvertently promote financial exclusion, particularly when borrowers are

uninformed or do not know the consequences of default. Without realizing it, they

lose access to any additional financial services and perhaps do not even know that

they have been in such lists or what needs to be done to get out of this credit

exclusion list.

The move towards digital lending will expose customers with new and unfamiliar

risks as well, especially related to privacy and security. FSPs that will offer digital lending

may need to consider designing their backend technology and customer facing interface to

focus their attention on preventing or mitigating such risks. The downside of being fast and

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easy is that the whole digital premise becomes susceptible to clickbaits, malware, privacy

breaches, identify theft and fraud. For example, Mother Finance deliberately gives

customers time to force re-think their decision to borrow after submission of loan

application is made by making them the loan offer with 48 hours and sign loan contract

thereafter. Careful customer segmentation and clear communication with borrowers can

signal differentiation between imposters and legitimate lenders as well as improve customer

conversion and prevent churn. All related pricing, contract terms and conditions should be

referenced at an easily accessible location on the digital platform. The use and sharing of

customer data and security should be asked upfront. Any escalations of problems and

complaints should be addressed by customer service personnel rather than automation.

All FSPs should make sure that the product features are easily understood; at the

same time, the contractual obligations of borrowers, penalties, late fees and the potential

complications for non-repayment must also be clearly articulated. Data driven FSPs should

always closely track customers’ in-app or web link clicks and behaviors to collect reviews,

comments, feedback, and responses on various features and processes, particularly during

the early stages of adoption. The main goal is to provide the right product and service to the

customer with the right level of digital readiness, accessibility to a particular digital channel

as well as ease and willingness to use digital products; thus the optimal balance of tech and

touch strategy that melds both digital and human elements, needs to be crafted and tested

before a full launch campaign. In Table 6.1, the key considerations to design the most

appropriate digital lending channel strategy are summarized.

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 Table 6.1. Key Considerations in Designing Digital Lending Channel Strategy

The Digital Lending Readiness Assessment Framework would be useful in helping

FSPs identify the digitization level they are at based on existing activities, operating

procedures, local market regulations, and their overall goals. Only the current capabilities

and capacities for digital lending processes are recognized, the next step of what should be

done to move forward can be explored. For Myanmar, three stages of digital readiness

should be distinguished: (1) Early Stage, (2) Base Stage, and (3) Advanced Stage,

characterized by which processes have been digitized, and to what extent. It can be inferred

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that each stage would require a different set of strategy to achieve desired objective of

digital lending.

Table 6.2. Three Stages of Digital Readiness

The next step is for the FSPs self-diagnose and work out a plan. This is where the

framework outlined below with specific actions which would be carried out at every step of

the digital lending process. The gray areas show the bare minimum capabilities needed to

have considered moving onto the next stage. Not all lenders will find themselves fitting

squarely into one specific level of digital readiness; there may possibly be a wide variety that

matches with one capability from one level and another from a higher one, since different

lenders may have priorities over which processes to transform and/or focus depending on

their organizational objectives and market expectations. In addition, cultural predilections

and regulatory necessities to conduct physical KYC checks, in particular in rural settings

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may even force a more digitally ready lender, although rather capable to be fully digital, to

follow the route of implementing high touch digital lending business delivery. To illustrate

with an example, “Early Stage Digital” lenders can probably utilize some analytics to build

basic score cards, these lenders at the very least should target incorporating digital channels

for acquisition, disbursement, repayment, and account management. In a country like

Myanmar, few lenders will be at Early Stage and therefore, their primary focus should be on

building digital ready infrastructure and pushing towards education and advocacy activities.

Given some market and industry trends, there is a real threat to lenders' profitability

if they do not adopt some form of digital lending. Traditional lenders should at the very

least aim to cultivate their digital readiness for "Base Stage" – with an emphasis on tailoring

financial services – to offer an improved customer experience and satisfactory while making

sure that they stay remain competitive. The Digital Lending Readiness Assessment

Framework can benefit FSPs in choosing which processes to prioritize based on their

current and desired level of digital readiness. The FSP must understand its own existing

lending methodology, and check against the criteria that best characterize its current

operations today, bearing in mind that all the digital readiness stages are incremental and

cumulative, i.e., Base Stage tasks should include and build upon Early-Stage practices, and

so on.

Even for the case of Mother Finance, the first digital lending platform, it cannot be

qualified as being in one clear digital readiness stage or the other. While customer

acquisition is fully digitized as the “Advanced Stage”, there are nuances in disbursement

and repayments which are in Base or Advanced Stage. There is no cash handling but most of

the external partners, whether they are e-wallets or banks, have no capability to integrate

real time settlement with Mother Finance mobile application. Customer engagement is also

fully digital but digital literacy of average user is probably “Early” or “Base Stage”. Without

any credit bureau or external data from ecosystem players, it is also difficult for Mother
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Finance to progress beyond “Base Stage Digital” for collections. As for credit approval and

analytics, Mother Finance has to rely on its own internal data and processes for the time

being.

Naturally, the next natural question considered is whether the end goal of all FSPs

should be to become fully digital lenders, and eventually achieve “Advanced Stage Digital”

readiness? Native digital lenders such as fintech startups clearly start out differently from

traditional FSPs, which quite often have physical network infrastructure, branding, scale,

knowledge of the market and credibility. Ultimately, any FSP's mission is to automate and

streamline financial intermediation (moving funds from lenders to borrowers efficiently)

across several aspects, including customer experience, risk mitigation, regulatory prospects,

and responsible data security management. The above-mentioned digital lending models all

target this end game from different angles. The correct digitalization level for an FSP varies

based on institutional objectives, customer segments, market competition, workforce skills,

existing technology assets, and culture.

In the context of Myanmar, traditional lenders should embrace some form of

digitization and build up their technology core to meet the requirements for ‘Base Stage

Digital’. They should keep their eye of coming up with customized products and services

that would work well locally. Acknowledging that creating awareness is the most important

first step for adoption and advancing financial inclusion, FSPs will continue to compete in

the market, nurture customer satisfaction and loyalties and ultimately drive profitability

over time through innovative product and product design. By offering access to credit to

underserved communities, FSPs can help strengthen a financial system that can be

beneficial for all, supplemented with relevant financial tools that families and small

businesses need to build improved livelihoods.

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Early Stage
Base Stage
Advanced Stage Table 6.3. Digital Lending Readiness Assessment Framework

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6.3. Digital Lending Technology Adoption for FSPs

Due to the broad spectrum of digital lending technologies, it can be tough for interested FSPs

to figure out where to start the digital transforming journey. There is always organization

resistance to any form of change and coming up with a convincing proposal for customer value

proposition that aligns well with business goals and intention warrants a deep understanding of

the real needs of the customer; otherwise a lot of poorly designed products or lousy customer

experience will follow. Organizations cannot change overnight; that includes digital technology

transformations. However, there are logical steps to consider if any FSP – independent of market

context or digital readiness –to move forward and be part of the fintech revolution. The next phase

after checking against the Digital Lending Readiness Framework for the FSPs is to follow through

with the following steps to plan their digital lending adoption or transformation journey: (1) Build

up digital readiness; (2) Set digital lending technology objectives; (3) Define digital channel

strategy; (4) Partner up to supplement digital offering; and (5) Prioritize and execute roadmap.

6.3.1 Step 1 – Build up Digital Readiness

For FSPs to successfully implementing digital lending, they will need to build a solid

structural in terms of technical system architecture and cultural foundation. Initially, all core IT

processes, frontend and backend system set up, security, standard service levels, etc must be in

place to support smooth digital transformation and accommodate various parts of the digital

lending protocols. Data will be the primary competitive edge for FSPs in future, activities that

helps standardize data collection, analytics and visualization will play an important role; hence the

concrete groundwork must be laid to cater for scaling and operational efficiencies going forward. A

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solid technology knowledge base will help alleviate the complexities of digital lending. Digital

readiness can be put into three main categories – people, processes, and systems. To determine

the current state of digital readiness, FSPs’ key stakeholders should raise themselves the following

questions below.

Does it indicate unpreparedness if the answer to every question is a no? There is no need to

worry if FSPs do not have any necessary readiness requirements at the start; nonetheless it is

critical to have at least considered all these questions, identified current standpoint and views, and

be weary of potential pitfalls that may arise with implementation. One should go with caution,

start on a small scale and be ready to deal with underlying issues as soon as they emerge. Digital

preparedness can spell disaster for FSPs that often try, without proper planning, resources,

systems or capacity, to jump towards the implementation of a digital product or channel. These

summary list of questions can be used to recognize potential snares and plan for risk mitigation

proactively. FSPs should take the time to analyze their current operations carefully and keep

abreast to be well-informed on their goals while carrying out digital readiness preparations.

 People: Ensuring the business is ready for scaling from the perspective of an

organizational culture and internal capacity, including review of skill sets, incentives and

structure, commitment of human resources at all levels of the organization.

o Is there strong support and commitment from the senior management? Are they

willing to devote and allocate sufficient resources to make digital lending work?

o Do employees possess the right skills and tools needed to execute the

transformation work processes? Will they be able to manage and cope with the

system changes required to support and scale up various digital initiatives?

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 o Does the organization overall have the capacity to run the operations fully in-

house for new digital products and services? How stretched in the current team?

o Does company culture encourage innovation and new business models? Is the

organization structure conducive to embracing technology-enabled large scale

operations turnaround?

 Processes: Ensuring the business is ready for scaling from the perspective of an

organizational culture and internal capacity, including review of skill sets, incentives and

structure, commitment of human resources at all levels of the organization.

o Are the business processes clearly defined and strategies well-mapped out?

o Are physical documentations and forms easily and quickly digitizable? What

percentage of existing support systems automated to increase efficiency?

o Does the organization have a deep understanding of your current and potential

customer segments, including their needs, preferences, priorities, level of digital

literacy and expectations?

o Have the assumptions about customers been validated with research? What

specific features of digital product and/or services would be included to create

additional value? Which digital channel would you offer to provider customer

support, including operational and fraud issue?

 Systems: Ensuring core technology stack infrastructure and enterprise architecture are in

place to scale the business such that information flows smoothly and all the data collected is

used effectively across the organization. This may include an institutional core banking

system, electronic document management system, date warehouse, middleware, report

generating dashboards, etc. In aggregate, the technology and systems needed to offer digital

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 lending could be comparable to a customer relationship management system in which the

institution has the capability to disaggregate customer-level information from the lending

process and ultimately build up a comprehensive digital view of individual customers.

o Does the organization have systems and database in place to support accurate and

accessible internal data reporting and management?

o Are the existing systems built to support scalability? Does the core system

platform connect to other sub-stacks in a way that permits a holistic view of

operations across different departments or is reporting fragmented across

separate modules? Is the overall design of the enterprise architecture consistent

and coherent? Do you have an API strategy for third parties?

o Does the business have any strategy to implement digital electronic data

management and workflow to digitize and centralize credit underwriting for

digital lending?

6.3.2 Step 2 – Set Digital Lending Technology Objectives

Before embarking on or revamping their digital lending journey, FSPs should take the time

to define their overall objective for digital lending. Digital lending failures usually comes from

making simple assumptions that everyone is going digital so it will be better than the status quo

and falling behind others. Some insightful questions to consider when you are contemplating

about the real objectives of digital lending include:

 What is the expected end goal will be – for your institution and for your customers? Is it for

higher profitability from increased operational efficiency, scaling the business faster,

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 driving more value out of existing customers, and acquiring new customers by offering

seamless customer experience?

 How does this digital lending offering align with your overall organization’s mission and

strategic objectives?

 What state of digital readiness do you think is appropriate for your organization and your

target customers? Are ultimately aiming to one-up your competition?

It may be fairly obvious, but FSPs’ desire to adopt digital lending technology and value

proposition offer also need to work for customers. Some FSPs may decide to embark on digital

lending journey to increase loan book and maximize operational efficiencies from digital channel

but they did not think of customers’ stickiness to original distribution channel or the switching

cost from existing competition. During pilot or promotional phase with lots of giveaways, the

results may get skewed as the goal of this phase is to drive customer adoption as supposed to long

term profitability and reducing operational friction. Promotional period focus on figuring out the

why’s and how’s of customer engagement and subsequent feedback and learning and adapting the

digital product offering as needed. Over time, the business model should be adjusted for

sustainability unlike the initial phase. In setting objectives for digitization, the distinction between

digital readiness preparation and end-to-end product business proposition needs to be

appreciated. Depending on the target customer segment and the development status of the

country, there may be significant time required to build up digital readiness first, often planning

for multi-year projects and capabilities to promote the delivery of digital technology before actual

customer facing digital products are launched and operationalized.

Even when FSPs decide to go for fully digital, only up until a point, chatbots, automated

responses and robo calls, etc. can be implemented. The key is for customer engagement to remain

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high touch, although at a higher cost, at the beginning and only reducing the physical touch points

over time. In Myanmar, digital lending is still rather early stage and digital credit is often frowned

upon as unsavory or predatory, risky, low touch and high-interest loans. The FSP will consider

how the digital loan program is relevant to its goal and target market, ensure its strategy is in

accordance with its strategic objectives and connect to all stakeholders accordingly. Regulations

governing digital lending is evolving as authorities are not completely cognizant of the full

potential impact and risks. Continuous engagement with governing bodies and policymakers is

important, for both pre and post piloting stages, in markets where there is no fixed charter for

digital lending products and services and such kind of collaboration can nurture a more market-

friendly approach to policy development for FSPs as regulators feel that they are kept involved and

can stay abreast of industry progress.

6.3.3 Step 3 – Define Digital Channel Strategy

When borrowers move along an automated loan application, appraisal, disbursement and

repayment process, physical interactions with lenders are increasingly lowered, but in the rare

chance that human intervention is necessary, it needs to be enhancing customer experience that

maximizes satisfaction, increase loyalty and reduces churn. It can also help the digital lender to

make more informed credit decisions, and customer feedback, at the early stages of piloting and

scaling up, would be better handled and resolved physically. There are three main areas that

lenders should deliberate when designing their ‘tech and touch’ channel strategy.

 What is the target customer segment? Not every one of them will need the same amount of

time and attention. If you have opted over one digital channel over options, for example,

web-based vs. mobile app based, what is your typical customer’s access, willingness and

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 comfort towards that channel? Digital lending is particularly popular in developing markets

where telecom infrastructure is much more penetrated than banking network; however,

there may be issues with poor connectivity, payment network, and digital literacy. Certain

markets and culture may have extremely limited awareness and understanding of both the

digital lending product and the chosen channel of delivery with a strong preference to deal

physically. Knowing your target customer is essential; a well-time face-to-face customer

engagement can help with adoption decision and that is face-to-face interactions at the

right times in the customer journey can go a long way toward increasing adoption for a new

technology. Agent-enabled programs can be particularly helpful in targeting unbanked,

rural customers.

 What type of digital loan will be on offer through what digital channel? FSPs may want to

do physical on-site verification and evaluation for larger loans or asset-backed loans to

mitigate risk. Shorter tenor smaller loans must be scalable faster to be profitable, on-site

verification may not economical; thus low touch digital channel may be more appropriate

 How will the current or planned distribution network be utilized? Those FSPs with a strong

physical branch network should leverage the branch infrastructure which will act as

competitive advantage in customer acquisition in non-urban locations whom require a

higher-touch engagement. Those without branch network or agency tie-ups, it may be more

suitable to do quick and fast small loans and make the digital lending technology very

straight forward with fewer steps to overcome to get the loan.

Ultimately, it is crucial, particularly in emerging markets, to retain a human touch, and

traditional lenders who can offer a hybrid customer channel approach may be the best choice for

conventional borrowers. Although digital infrastructure and financial literacy continue to grow

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and consumers become more aware, the ease of use of digital lending will go up. Eventually, there

is no need to seek help or customer service to get a loan through a digital lending platform. In the

meantime, cash is still the most preferred payment method in emerging markets. The FSPs that

want to go digital, they will need to build up a cash-in and cash-out through external agency or

make use of existing infrastructure to convert cash into digital currency and vice versa. This cash

handling burden can be rather costly and it can perhaps create returns to the FSP if the digital

currency network is a first mover in a country and can definitely become top 3 mobile wallets.

Otherwise, FSPs will be paying for this up-front cost for several years since it must force industry

wide changes through expensive marketing and educational campaigns.

Figure 6.1. Balancing Tech and Touch in Digital Lending Customer Journey
(Example – Mother Finance)

A customer journey map (See Figure 6.1 above) is a useful tool for designing a product-level

integrated development and touchpoint strategy. It can be used to define every stage in which the

consumer deals with the FSP, i.e. how the new digital loan offer is notified, whether loan

application is straightforward, where they would touch base to find out more information, what

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types of support is available, whether a loyalty system exists, etc. A detailed customer journey map

for digital lending allows the FSPs to envision any point (both physical and remote, with internal

staff or with partners) at each level, and can help identify gaps or places of potential

implementation so that problems can be identified and human resources and contact can be

reshuffled where appropriate. In the short term, FSPs should take advantage of their current

distribution networks to provide strong comparative advantage and ensure the quality and

operational practicability. Nevertheless, as the use of digital channels is becoming increasingly

common in the coming years, more awareness and familiarity with digital lending will reduce the

need to provide high touch customer service. FSPs, therefore, needs have a balanced long-term

strategy in considering to make investments into branch, call center, and alternative digital

lending channels.

Digital lending adoption should not be approached as one size fits all. The FSPs must

determine the willingness and ability of their target customers to easily adopt the digital products.

As mentioned before, digital data drives the growth of digital lending and mitigates risk in

subsequent management of the digital loan portfolio. If at all possible, FSPs must strategically

study what additional data is available in their markets, either through purchase or revenue

sharing partnerships, which can help through customer origination, assessment of credit

worthiness, risk profiling and segmentation, etc. The external data from various sources can

supplement the existing internal data to support more informed decision-making. FSPs can begin

manually incorporating alternative data into credit scoring system while cross-referencing with

supplementary, if any, such national identification database, tax records, property ownership, etc.,

all of which may require APIs to communicate and access. Any potential user can be converted

into an adopter, if an FSP employs an effective digital marketing approach that combines both

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digital and human components, placing focus on the three facets of digital lending to be facilitated,

i.e. connectivity, ease and checking for existing digital footprint to bring on board as early

adopters.

6.3.4 Step 4 – Partner to Supplement Digital Offering

Digital lending implementation often requires getting new and different competencies,

which traditional FSPs may initially lack. Collaborative Partnerships are an effective way to add

special skills and a deeper understanding of a particular aspect of the lending process. They can

help the FSPs gain access to new segments of the market, acquire alternative data source to

improve credit assessment models, create new services for existing customers, improve the

competitive position and quality of their products. These quick wins can drastically reduce time to

market and increase adoption rates. Table 6.2 describes the most common types of partnerships

FSPs could pursue to support core functionalities at specific stages of the lending process.

Some collaborations are crucial for fast-tracking digital readiness operational

transformation, including for online document and data storage facilities, technology

infrastructure and network management, mobile and web design and development, etc., and they

can aid FSPs’ planning efforts for digital lending transformation. FSPs should objectively evaluate

and recognize business critical areas of strength vs. capability deficiencies or tasks which might be

outsourced to a partner or fintech to expedite execution of their digital lending processes, precisely

the appropriate technologies and capacities. FSPs that have a good understanding of its customer

segments, strong brand image, access to low cost capital, licensing, high-touch end physical

distribution network, can leverage all these advantages can win in the business of digital lending in

the context of emerging markets.

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 Finding the right partner to collaborate with challenging. FSPs should identify potential

partners by asking: Could the digital readiness would be fast-tracked by working with an external

party? What kind of service providers are available with the experience in specific market, with

other similar FSPs, or with similar digital lending models? It may be a time consuming process to

find and choose a partner with the right technical and regional experience that clearly appreciates

FSPs’ needs and is willing to work to make the partnership successful; yet it is even harder to price

the value of the partnership which always involve commercial, cultural, infrastructural, and legal

considerations, and can suffer from mismatched expectations, insufficient internal resources, loss

of control, or lack of commercial clarity. The best way forward is to write down a clear outline of

FSPs’ requirements, expectations and budget and then go through an internal rigorous selection

and evaluation process to weed out the partners. Balance must be struck in assessing

compatibility, competence, and competitive edge.

A few examples of challenges that FSPs may come across in matching up with potential

partners are mentioned below:

 Lack of partnerships options in emerging markets – particularly for M&A. Few have the

appropriate market knowledge and local context. Often, available partners such as MNOs

and large conglomerates have monopolies, which can make partnership agreements one-

sided and expensive.

 Stiff competition – as regulators continue to introduce new banking or lending licenses,

there is considerable concerns that the partners may start extending credit – especially if

the partner is the main acquirer and interface with the customer. Customers sometimes end

up being confused as to who the actual loan provider is.

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 Loss of control – Once the partner is allowed with run or take over certain parts of digital

lending process, over time, FSPs risk losing the understanding of core functions that are

outsourced to the partner which in turn FSPs’ ability to make changes and stop fostering

dependency on the partner.

 Unclear roles – Financial sector is highly regulated, but partnerships arrangement can be

confusing if there is no clear way to limit accountability, and split responsibilities especially

for complaint resolution and regulatory compliance.

 Operational challenges – Staff management, monthly reporting and reconciliation issues

between the two partners’ IT systems, can further complicate the process.

 Reputation issues – if the partner’s engagement with customers is of non-performing

standards, then this type of repeated behavior can damage the FSP’s brand.

 Cultural challenges – FSPs and fintech companies often vary in terms of work culture, with

many FSPs emphasizing well-defined standard operational processes that have been

developed and validated over time, in contrast to the test-and-learn approach common to

early-stage lean startups.

Table 6.4. Potential Partners for Digital Lending Capabilities

Partnerships
Potential
Advantages

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 As listed above, clearly segmenting roles and developing comprehensive yet concise

commercial agreements that incentivize both parties will be critical in overcoming these

challenges. FSPs should also apply a collaborative approach to build internal capacity and ensure

they do not lose touch with core aspects of the business, regardless of partnerships.

6.3.5 Step 5 – Prioritize and Execute Roadmap

At all levels of an enterprise, digital lending reflects a substantial cultural and

organizational transition that calls for deliberate, thorough change management. This demands

clear support from the C-suite, adequate resources and direct and regular contact with all

interested parties. Once the FSPs have built a solid digital readiness baseline, they must set the

digital lending goals, and define potential partners, if any, while taking steps specific steps to

strengthen its data access at every point of the digital lending initiative. A clear plan to

digitalization must follow a staggered strategy, i.e. develop core competencies, operationalize

according to well-defined business requirements, and take account of our consumer needs at every

junction or milestone. A long-term organization-wide transformation strategy that is beyond the

usual annual budget and departmental constraints to align each and every stakeholder to achieve

optimistic digital lending targets. Again, the goal is not to arrive at “Advanced Stage” digital

readiness in the shortest time possible; every FSP's digital lending transformation roadmap will

differ, depending on their individual customer segments and organizational goals.

One effective tactic can be used is to devote a separate unit within the FSPs, which as an

independent vertical enterprise is solely responsible for the planning, piloting, and deployment of

digital lending technology, with the goal of merging the unit with the rest of the team later. This

approach tackles two specific tasks: (1) employees become over-burdened across different

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projects, finding it different to effectively operate at both functions simultaneously, whereas a

single-minded approach is needed to design and implement a digital loan product; and (2) a

digital lending solution needs a different approach to "business as usual". A highly technical team

that consists of industry, business and IT services experts should be assembled to focus on this

enormous task at hand to produce an effective and workable digital product. The skills required

for this team can include cross-functional domain knowledge, and multidisciplinary project

management experience, with creative problem solving and analytical abilities. A different

independent unit should be formed to create business vertical KPIs and cost thresholds so that

employee incentives are aligned to foster innovation and quality output. While this type of

temporary project management set up within the organization can lead to faster digital

transformation, it may struggle when it is time to incorporate back into the main business in the

future and needs to be handled carefully. Every time the FSPs move up in digital readiness

capacities, they should reflect on the digital lending transformation goals and do some

modification or optimization since the objectives when they first start the digital transformation

journey is evolving and may not be the same where they are at today. Pilot programs are essential

to test and revise processes and products with focus groups to adjust digital product design and

delivery appropriately before the full-fledged roll out.

Today, nano and micro digital loans credit assessment mainly relies on borrowers’

willingness to pay, rather than ability to pay back, i.e. if the borrower is financially able to commit

to repayment due to the lack of digital data from credible sources to verify the capacity to repay.

Over time, as more and more transactions become digitized, data sources to assess aggregated

cash flows, either from mobile wallets or e-commerce platforms, become abundant, these could be

used as a reliable proxy for repayment capacity. For thin file borrowers in the developing countries

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with non-existent traditional transaction data and limited alternative data, the full value and

effectiveness of machine learning/artificial intelligence based algorithm driven credit scoring from

mobile and telco data is still premature. However, with the daily volume and variety of data

sources forever mounting, what is considered alternative data may become standard and

customary in the near future for credit scores. For the time being, the ability to get access to

alternative data to effectively evaluate capacity to repay for non-traditional underserved or

unbanked customers is the competitive edge for FSPs for long-term success of their digital

offering.

6.4. Recommendations for Policymakers

Now that the supply side enabling strategies for digital lending adoption from FSPs’

standpoint is addressed, policy recommendations to improved demand side adoption for digital

lending via mobile application will be discussed, in particular how governments and policymakers

should manage these new and emerging fintech business models. Digital lending technology

symbolizes a powerful new solution for building a more financially inclusive world and one where

the financial system operates fairly for everyone who wishes to utilize it. Digital lending

technologies are dynamic and fluid; they are quickly evolving in unforeseen ways, bringing upon

broader changes to regulations and economics, and shaping how people and businesses view

financial services as a whole. In reality, implementing digital lending technology – the right level

and to what extent – is extremely challenging and the pattern and pace of adoption is also rather

difficult to predict. Although policymakers may not be fully aware on a daily basis, they need to

keep up with these trials and experiments, share knowledge and adapt the best practices out there

whenever possible for the industry to thrive and create benefit for all.

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 Going forward, digital lending technology is here to stay. FSPs cannot avoid this forever;

they would need to transform their organizations and digitize as fast and appropriately as possible

to compete with fintech companies in creating suitable financial products. Another angle to

explore is what does this mean for society as a whole, from a purely sociological perspective? From

a sociological perspective, based on recent studies and literature, innovation can be taken to mean

novel forms of technology, products and even new patterns of organization in society. Although

the initial diffusion of innovations model, popularized by Rogers (1995), initially examined how

innovations are adopted by members in a social system in the context of agricultural extension, in

the case of fintech, digital lending technology is supposed to be something that has a lower social

and/or economic cost than its predecessors and fit well with global financial inclusion objectives.

In the specific case of fintech, it reduces the “cost” of going through formal institutional means,

and to physical financial service providers.

The next important factor in the innovation diffusion model is the choice of the

communication distribution channel, i.e. how the chosen information distribution channel can

effectively make sure that the innovation technology usage spreads and how fast it catches on by

population as a whole. Fintech companies have easily carved a niche for themselves using the

internet, and their sudden popularity has got every talking about them. Social networks connect

different individuals or bridging a gap between them- implying that there is a gap in the first place.

Sociologists argue that by filling these gaps and facilitating ties between different parties or

individuals, the brokers of middlemen benefit. (Obstfeld, 2005). This is exactly what Fintech does

– it uses the gap between customers and traditional financial institutions, gaps created by lack of

access to traditional financial services, to create access to such services.

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 The implications of the technology diffusion can be looked at as appealing vs. unnecessary,

planned vs. unexpected and intended vs. unintended. Some of the consequences of the adoption of

Fintech are the shift towards a more cashless economy, the disruption of traditional financial

services, and the realization by governments about the need for regulation of transactions outside

the formal institutional financial sector. The classification of these consequences as per the model

entire avenue for discussion by itself, and which category these consequences fall under is

extremely relative and subjective, depending on whose perspective we look at it from. Connecting

with the results of this study, the factors that aid digital lending via mobile application perceived

credibility and perceived compatibility are areas that the regulators can influence in terms of

actual policymaking. Marakarkandy et al. (2017) show that the adoption of fintech services is

improved by government support of favorable legislation and regulations for fintech through

integration of applicable precursors into the TAM model. In reality, Myanmar government

opening up telecom sector allows for infrastructure of telecom network, proliferation of smart

phone and improved access to internet which in turn has a positive role in promoting fintech.

According to Tan et al. (2010), having the government support is one of Fintech's biggest

engines for adoption. If government shows public advocacy, it adds credibility, reliability and trust

for fintech services and they become more acceptable to new users to adopt. Kiwanuka et al.

(2015) finds evidence that governmental support can have a positive effect on technological

adoption and subsequent usage. Designing the right guidelines and policy tools can create a safe

and thriving environment for fintech users and at the same time, establish favorable and efficient

regulatory settings for fintech companies to operate and flourish.

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 Incumbent FSPs are increasingly obliged, either through new partnerships and/or M&A or

procuring new digital capacities, to accept the innovations brought by fintech, either through

building new digital capabilities. A greater penetration of fintech services greatly improves

customers’ choice, value and empowerment. The financial sector authorities also need to keep

pace with new technologies and business models and advocate for the possible advantages and

disadvantages. As fintech actively drives its value proposition and contribution towards economic

development, calls are made for regulation to catch up with fintech growth to encourage further

innovation and consumer protection. A sustainable financial services system should be built for

individuals and businesses so that they can engage in daily life and business in an equal and

complete manner. In Myanmar, majority of population often has accessibility issues in terms of

internet/mobile infrastructure and connectivity, limited know-how to utilize the technology and

lack of digital and financial literacy to comfortably figure out their financial needs. Although the

collateral requirements have been relaxed, most FSPs still focus on personal guarantees, asset

pledges, and related party affiliations to offer credit and the regular retail customers and micro-

SME often face difficulties in getting funding from them without giving sufficient collateral. Even

with new technologies coming up, trust still remains one of the most important pillars for the

financial services industry. As such, policymakers and regulators must ascertain that

disadvantaged citizens and micro enterprises can trust these financial institutions and feel

confident that they are not being exploited by consistently keeping up with the latest trends and

providing revisions and guidelines for better understanding and transparency.

In summary, it is now generally recognized that fintech companies are following a

remarkable growth trajectory in recent years world-wide, and garnering increasing importance for

the economy of every country, including Myanmar. In fact, fintech is shaping an evolutionary

195
phase in the financial services sector and it will affect every individual and company that come

across revolutionary fintech products and services and completely change the way they engage

with FSPs. Government and regulators in Myanmar should therefore create a single policy vision

for fintech to coordinate open standards, enhance regional commitment, encourage talent

development and cement and reinforce laws that promote fintech adoption and greater access to

capital for such businesses. Once everything is thought out and planned carefully, financial and

related businesses can continue to spearhead and shape the new industry standards by

accelerating financial integration, improving customer experience and increasing transparency,

compliance and security in the provision of products and services effectively to consumers. In

Table 6.3, the key outlines that can be potentially implemented by the regulators are presented.

Table 6.5. Lists of Potential Policy/Regulatory Actions

196
197
6.5. Conclusion and Recommendations for Further Research

Technology adoption is a complex, inherently social, development process (Straub,

2009). This study explores the factors that determine whether a consumer will adopt digital

lending technology via mobile application. Eight hypotheses are tested but the empirical

evidence of this study concluded that three extended TAM and IDT variables namely perceived

compatibility, perceived credibility and perceived costs were the significant factors influencing

digital lending via mobile application early adoption in Myanmar. This study also outlines

potential steps for financial service providers to introduce digital lending technology as well as

policy recommendations for regulators to govern, manage and promote fintech companies in

198
combatting financial exclusion affecting underserved populations through digital lending

technologies in Myanmar.

As detailed in Chapter 3, there are different views and interpretations in discussions,

concepts, applications and development of models and theories for technology adoption.

Literature reviews express different conceptual ideas, research concerns, relevant parameters

& measurement models of technology adoption and theories. Understanding the nuances of

technology adoption models is paramount to be able relate both theoretically and practically.

The research and development of the new theoretical framework also depends, but not only on,

a number of factors: the research problem and the aim and contribution of the

direction/outcome; analysis of gaps in previous literature; the target market (users or

developers, etc), plus the goals of the organization. This study has given future researchers

some highlights and possible ideas for technology adoption model to further explore, conceive,

differentiate and understand new theories and frameworks which may influence the past,

present and future application of technology use. In terms of further research, it may be

interesting to combine more than one theoretical model to achieve a more comprehensive

understanding of the technology adoption phenomenon, while accounting for the level of

digital and financial literacy of target population. Perhaps an extension of this research

examining digital lending technology across multi-country settings can provide more insights

on the behavioral intention and adoption.

The main drawback of this research was the sample size relevant to the population size

and sampling frame. It should be expanded to include a wider variety of customers with

various backgrounds from non-urban areas to reaffirm the model and results. If the survey

data is collected over a longer period of time for a longitudinal study approach, rather than

199
measured respondents’ perceptions, intentions and usage at a single point in time, it may also

provide better perspective and insights. Another limitation is that the conclusions drawn from

the study is based on data collected when digital lending via mobile application technology and

outreach was still at a very early stage of inception and as such it may not have fully reflected

the true potential of the digital lending impact for adoption decisions and the opportunities

that are possible for consumers using the technology. At the very least, the findings of this

current study can certainly be added to the body of literature for technology adoption which

will be very helpful for the financial sector and also beneficial for the government authorities to

draw examples and draft rules and regulations to attract more users towards digital lending

technology to promote financial inclusion. In summary, the results can undoubtedly be used as

a solid starting point for future research studies about digital lending technology adoption, and

the first ever in the context of Myanmar.

200
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 APPENDIX I – SURVEY QUESTIONAIRE

You are consenting to participate in an online research survey investigating the factors
affecting digital lending adoption in Myanmar. Please respond to all questions without
exception otherwise you will not be able to submit your answers. You may need to spend
roughly 15 -20 minutes to complete the questionnaire. This survey is voluntary and your
decision to complete the survey will not impact the loan approval decision by Mother Finance.
If you decide to participate, you can still change your mind later or stop answering the
questionnaire at any time. There will be a winner chosen randomly to receive an Apple 27"
LED Cinema Display Monitor and the winner will be announced on June 16, 2019.

Any information you provide will be kept confidential and will not be used for any purposes
outside this survey. If you have any question regarding the survey, you may contact
bd@motherfinance.com.mm. Your participation would be greatly appreciated!

Part 1. Demographic Information

1. Your current state/division of residence is:

 Ayeyarwaddy  Kayah  Mon  Taninthayi
 Bago  Kayin  Rakhine  Yangon
 Chin  Magway  Shan  Naypyitaw
 Kachin  Mandalay  Sagaing

2. Your gender is:  Male  Female

3. Your age is:

 18 to 24  25 to 34  35 to 44
 45 to 54  55 to 64  65 or older

4. Your marital status is:

 Never Married  Divorced  Separated
 Married  Widowed  Unmarried but living together

5. Your highest level of education completed is:

 Did not finish 10th Standard/High School  Finished High School
 College Degree  Diploma but No Degree
 Master’s Degree  Doctorate/PhD

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6. Your approximate household monthly income is:
 Below 5 lakhs  Between 5 and 10 lakhs  Above 10 lakhs

7. Your current job title is:

 Day-wage laborer  Clerk  Manager
 Professional  Self-employed  Student
 Homemaker  Retired  Unemployed
 Other

8. How do you access Mother Finance App?  iPhone  Android Phone

9. Have you registered for an account with Mother Finance App?

 Yes  No

10. Have you applied for a loan using Mother Finance App?
 Yes  No

11. Have you ever received a loan from Mother Finance?

 Yes  No

12. How many times have you borrowed from Mother Finance?
 None 1  2  3  More than 3 times

13. Have you also used other digital lending platforms?

 Yes  No

14. Were you able to get a loan from other digital lending platforms?
 Yes  No

15. How many times have you borrowed from other digital lending platforms?
 None 1  2  3  More than 3 times

Part 2. Questions on Digital Lending

16. I believe my mobile phone is compatible with digital lending technology.

 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

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17. I believe it would cost a lot to use digital lending (i.e. if you need to buy a new phone
that can use and access mobile applications).
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

18. Using digital lending via mobile application would make it easier for me to borrow
money when I need.
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

19. I would find digital lending via mobile application useful and convenient for me to
borrow money when I need.
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

20. Learning to use digital lending via mobile application the first time is easy for me.
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

21. It would be easy for me to become quite skillful at digital lending via mobile application.
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

22. Using digital lending via mobile application would not divulge any of my personal
information.

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  Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

23. I would find digital lending via mobile application in receiving and repaying a loan to be
secured.
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

24. I would trust Mother Finance to offer secured digital loans via mobile application.
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

25. I would trust other digital lenders to offer secured digital lending loans.
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

26. I believe that using digital lending via mobile application fit my lifestyle and suitable for
me.
 Strongly Disagree
 Disagree
 Neutral
 Agree
 Strongly Agree

27. On the whole, considering all sorts of risks combined, about how risky would you say it
would be to sign up for and use digital lending via mobile application?
 Not Risky At All
 Not Risky
 Neutral

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  Risky
 Very Risky

28. Assuming that you have access to digital lending via mobile application, how likely is it
that you will use it?
 Very Unlikely
 Unlikely
 Neutral
 Likely
 Very Likely

29. What would be the most important factor in not using digital lending via mobile
application?
 Not trustworthy
 No Interaction with People
 Too difficult to Use
 My Phone is too old
 Security
 Other ______________

30. What would be the most important factor in using digital lending via mobile
application?
 Reliability
 Fast Processing
 Ease of Use
 Convenience (can use anytime anywhere)
 Security
 Other _______________

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APPENDIX II – SURVEY INSTRUMENT

234