Leadership Practices on Performance of Micro Finance Institutions in Rwanda.
Authors: Ngendahimana Venuste , Iravo Mike A. , Namusonge Gregory , Celestin Rwigema Pierre 
Published: November 2024

This study investigates the influence of leadership practices on the performance of microfinance institutions (MFIs) in Rwanda, a sector crucial for economic development and poverty alleviation. Recognizing that effective leadership is essential for fostering organizational resilience and sustainability, the research aims to identify key leadership styles and their correlation with performance metrics such as profitability, outreach, and client satisfaction. The target population of the study comprised of 200 respondents from 22 MFIs registered as public limited companies and 18 MFIs are registered as non-Umurenge Saccos in Rwanda. Both qualitative and quantitative data was collected through structured questionnaires. The questionnaire was pretested before data collection for validation and reliability. The collected data was coded and analyzed using both quantitative and qualitative methods with the help of descriptive and inferential statistics. The Statistical Package for Social Sciences version 21 was used. Testing of hypotheses was done using analysis of variance. Variance Inflation Factor was used to illustrate the significance of the association between strategic alignments on performance of MFIs in Rwanda. Analyzed data was presented using tables and percentages. The results of the regression analysis indicate a significant positive relationship between leadership practices and the performance of microfinance institutions (MFIs) in Rwanda. The model demonstrated a strong correlation, with an R value of 0.672, suggesting that approximately 67.2% of the variability in MFI performance can be explained by leadership practices, as indicated by the R-squared value of 0.467. This means that leadership practices account for 46.7% of the variance in performance outcomes. The analysis yielded a significant F-statistic of 293.042 (p < 0.001), indicating that the regression model is statistically significant. The unstandardized coefficient for leadership practices (B = 0.620) reveals that for every one-unit increase in leadership practices, performance increases by 0.620 units. The standardized coefficient (Beta = 0.811) further confirms the strong influence of leadership practices on performance, with a t-value of 17.118 (p < 0.001), emphasizing the critical role of effective leadership in enhancing the operational success of MFIs in the region. In conclusion, this study highlights the significant impact of leadership practices on the performance of microfinance institutions in Rwanda, emphasizing that effective leadership can enhance organizational effectiveness and contribute to financial inclusion efforts. It is recommended that MFIs invest in leadership development programs that cultivate transformational and participative leadership styles to improve overall performance. Future research should explore the long-term effects of specific leadership practices on performance outcomes across different contexts and investigate the role of external factors, such as regulatory frameworks and community engagement, in shaping leadership effectiveness within the microfinance sector.