Abstract:
Transformation leadership is presented through the ability of the leader to articulate a compelling vision for followers. A leader is trusted mainly because of his own level of determination and commitment to the vision. In Kenya, microfinance is a key sector in economic growth mainly because it targets the unbanked and marginalized people especially in the rural areas and thus has direct impact on poverty eradication. As a concept, microfinance has been accepted across the globe as a forum within which poverty can be eradicated and financial inclusion extended. However various challenges define microfinance today and present a leadership challenge that needs to be tackled for the sector to improve and deliver its mandate. The study specifically looked at effect of trust outcome on transformational leadership on staff performance in the Micro finance Institutions in Kenya. This research is key to Kenyan government as it supports to come up with a clear framework for regulation of microfinance sector and offer leadership in the entire financial sector. The study targeted institutions that were engaged in retail microfinance and that are members of Kenyan Firm of Microfinance Institutions (AMFI). Primary data was gathered from the respondents whereas secondary data was gotten from AMFI on performance of institutions. Analysis of unit was staff in microfinance institutions that were categorized in to three: the senior management with whom an in-depth interview was conducted, middle level manager and the other staff who participated in daily activities of microfinance who were involved in a self-administered questionnaire. Performance was assessed through the load that microfinance officers carry in terms of the outstanding loan balance, the number of customers that individuals in the organization have as well as the portfolio quality and turnover rates within the organizations. Stratified sampling technique was used to obtain sample and sample size determined using the Cochran’s formula to be 385 which was large enough to allow generalization. Descriptive approach used the pragmatic approach. A pilot study was carried out in Embu County to test data reliability of the data gathering tools. Data analysis was done using SPSS. A simple linear regression model that shows the relationship between variables was estimated. The findings revealed that trust has a positive and significant relationship with staff performance in microfinance institution. The study rejected the null hypothesis and concluded that trust influenced their performance in micro-finance institutions in Kenya. The study recommends that transformative leadership in micro-finance institutions should enhance trust that yields integrity, love, hope and faith which shall assure performance among the staff of the institution. The trust built should accord staff some level of goodwill that they can associate with leadership thereby making them more competitive.