FINANCIAL INNOVATIONS AND FINANCIAL PERFORMANCE OF MICROFINANCE INSTITUTIONS IN KENYA: A THEORETICAL REVIEW
Charles Odongo Omwanza - PhD Candidate and Part-time Lecturer, Kenyatta University, Nairobi, Kenya
Dr. Ambrose Jagongo - Senior Lecturer, School of Business, Kenyatta University, Nairobi Kenya
ABSTRACT
Innovation is the process by which, firms master and implement design as well as the production of goods and services that are new to them. Innovations generally assume different forms such as product innovations, marketing innovations, micro MF, location innovation, and research and development innovation. Financial innovations include institutional innovation, product innovation, and process innovation. These innovations have eased the way of doing business for financial institutions including microfinance institutions. It remains largely unclear whether Microfinance Institutions are adequately innovative in running their businesses given that they are faced by the challenge of limited growth and expansion. This independent study paper offers a background and theorizes on financial innovation and financial performance. The paper concludes that financial innovation affects financial performance. The paper indicates a need for empirical research to ascertain the nature and extent of relationship between financial innovation and financial performance of Microfinance institutions in Kenya.
