Transformational Leadership and Performance of Savings and Credit Cooperative Societies in Nakuru County, Kenya

Savings and Credit Cooperative Societies (SACCOs) are central to financial inclusion in Kenya, yet many continue to face rising non-performing loans, declining profitability and governance weaknesses that point to gaps in leadership and strategy implementation. This study examined the influence of transformational leadership on the performance of SACCOs in Nakuru County, Kenya, focusing on idealized influence, inspirational motivation, intellectual stimulation and individualized consideration. The study was anchored on the Transformational Leadership Theory and supported by the Path-Goal Theory. A descriptive and explanatory research design was adopted. Of the 160 registered SACCOs in the County, the 21 large and medium-sized (Tier 1 and Tier 2) SACCOs were studied through a census, and four senior managers were purposively selected from each, giving 84 respondents. Data were collected using a structured five-point Likert-scale questionnaire whose validity (KMO = 0.694) and reliability (overall Cronbach's α = 0.981) were confirmed through a pilot study, and were supplemented with secondary data on profitability and membership for 2019–2025. A total of 71 questionnaires were returned (84.5%) and analysed using descriptive statistics, Pearson correlation and multiple linear regression. All four dimensions were positively and significantly correlated with performance, and jointly they explained 74.0% of its variation (R² = 0.740; F = 46.993; p < 0.001). However, only intellectual stimulation (β = 0.527, p < 0.001) and individualized consideration (β = 0.355, p = 0.002) had significant independent effects, so H0₃ and H0₄ were rejected, while idealized influence (β = 0.118, p = 0.144) and inspirational motivation (β = −0.062, p = 0.452) were not significant once the other dimensions were controlled, so H0₁ and H0₂ were not rejected. Descriptively, vision sharing was the strongest leadership practice, while enthusiastic communication, shared optimism and team cohesion were the weakest. The study concludes that SACCO performance is driven most strongly by leadership that stimulates creativity, learning and independent problem-solving and that attends to individual employees, with vision- and value-based leadership acting as a supporting foundation. It recommends institutionalized innovation and continuous learning, structured mentorship and coaching, and the integration of ethical and motivational leadership with employee empowerment.