Effect of Financial Innovation Strategies on Growth of Microfinance Institutions in Kirinyaga County

Abstract

Financial innovation involves designing, creating, and implementing novel financial tools and procedures that aid in financial services delivery. This research sought to investigate the effect of financial innovation on growth of Microfinance Institutions in Kirinyaga County. Particularly, the study aimed at determining the effects of Institutional innovation, Process innovation and Product innovation on the growth of microfinance institutions. The study was anchored on the theory of institutional innovation, the economic value-added theory and theory of innovation diffusion. The study adopted descriptive survey research design and used questionnaires to collect primary data. Both descriptive and inferential statistical analysis was used to analyze the collected data. The study found that Institutional innovation, Process innovation and product innovation had a positive and significant effect on growth of microfinance institutions in Kirinyaga County. Based on these findings, the study concluded that financial innovation strategies were a critical ingredient in ensuring meaningful growth in the Microfinance sector. The study therefore concluded that Microfinance institutions should embrace financial innovation as a means for realizing consistent growth and ensuring efficiency in service delivery.