Abstract
The general objective of this study was to examine the influence of inclusive leadership on performance management in microfinance institutions (MFIs) in Nairobi City County, Kenya. Specifically, the study examined the influence of role modelling and perceived equity and fairness on performance management. The study was guided by Servant Leadership Theory and Social Exchange Theory. A descriptive survey research design was adopted. The target population comprised employees from the 14 licensed microfinance institutions operating in Nairobi City County, Kenya. Using Godden's (2004) sample size determination formula for an unknown population, a sample of 138 respondents was selected, of whom 119 successfully participated in the study. Primary data were collected using structured questionnaires. A pilot study was conducted to establish the validity and reliability of the research instrument. The collected data were coded and analyzed using Statistical Package for the Social Sciences (SPSS) Version 22. Descriptive statistics, including frequencies, percentages, means, and standard deviations, were used to summarize the data, while tables, bar charts, and pie charts were used for presentation. Diagnostic tests comprising normality, multicollinearity, heteroscedasticity, and autocorrelation were conducted to ascertain the suitability of the regression model. Inferential analysis was undertaken using Pearson's correlation and multiple linear regression analysis to determine the relationships between the study variables. The findings established that role modelling (r = 0.689, β = 0.325, p < 0.05) and perceived equity and fairness (r = 0.707, β = 0.327, p < 0.05) each had a positive and statistically significant influence on performance management in the microfinance institutions. The study concludes that inclusive leadership significantly enhances performance management through leaders who consistently demonstrate exemplary behaviour and foster fairness and equity in organizational processes. Such leadership practices strengthen employee trust, commitment, and engagement, thereby improving the effectiveness of performance management systems. The study recommends that microfinance institutions institutionalize ethical leadership practices that promote role modelling and strengthen fair and transparent performance management systems. It further recommends leadership development programmes that enhance leaders' capacity to demonstrate integrity, equity, and fairness while fostering an inclusive work environment that supports employee performance and organizational effectiveness.
Keywords: Inclusive leadership, role modelling, perceived equity and fairness, performance management, microfinance institutions, Servant Leadership Theory, Social Exchange Theory.