Leadership Moderation of the Relationship between Micro-Level Factors and Financial Sustainability among Informal Financial Groups in Kirinyaga County, Kenya
Abstract
Informal financial groups (IFGs) play a significant role in enhancing financial inclusion, especially among underserved rural households. However, their long-term viability hinges on how well the groups navigate micro-level operational challenges. This study investigates leadership moderation on the relationship between micro-factors, specifically loan pricing and recovery mechanisms, and the financial sustainability of IFGs. Drawing on empirical data from 600 IFGs in Kirinyaga County, the research adopts a cross-sectional explanatory survey design to test the strength and direction of these relationships. Primary data collected through questionnaires were analyzed for descriptive and inferential statistics in STATA. The study employs moderation analysis to uncover how leadership practices influence the effectiveness of micro-drivers in sustaining group financial resilience. Results reveal that while effective loan pricing and robust recovery mechanisms are vital drivers of financial sustainability, leadership yielded a differential moderating effect on recovery. Whereas leadership positively and significantly strengthened the relationship between loan recovery mechanisms and financial sustainability, its influence on the relationship between loan pricing and financial sustainability was negative and statistically insignificant. This indicates that leadership enhances financial sustainability primarily through improving the effectiveness of loan recovery processes rather than through loan pricing practices. The findings emphasize the critical role of leadership not only as an administrative function but as a strategic enabler of financial resilience in grassroots financial ecosystems. This study contributes to the growing body of literature on informal finance by highlighting the interplay between micro-level operations and governance dynamics, offering actionable insights for develo