Influence of Transformational Leadership on Risk-Based Pricing Model: A Case of Kenya Commercial Banks within Nairobi County

Abstract

This study investigated the impact of transformational leadership on commercial banks' implementation of the riskbased pricing model in Nairobi County, Kenya. While the Kenyan government, through the Central Bank of Kenya (CBK), has advocated for its usage, many commercial banks are still wary. The study examined the impacts of idealized influence, intellectual stimulation, customized consideration, and inspirational motivation, and was based on transformational leadership and arbitrage pricing theories. Using a cross-sectional descriptive research design, data was collected from 234 credit managers from various commercial bank tiers within Nairobi County, employing a stratified sampling technique. The data collection involved the administration of closed-ended questionnaires, and the collected data was analysed using SPSS version 25.The findings revealed that all the transformational leadership dimensions significantly and positively influenced risk-based pricing model (p<0.05). These results indicated that employing transformational leadership strategies can foster a culture of risk-taking and encourage risk-based pricing in commercial banks.