The effect of financial innovation on financial sustainability:

Abstract

The purpose of the study was to determine the effect of financial innovation on financial sustainability of SMEs, a case study of Pallisa Pallisa district. Financial innovation was viewed as a three dimensional construct made of service, product and technology innovation. Financial sustainability was viewed in terms of liquidity, solvency and operational efficiency. The study findings depicted that there exists a positive and significant relationship between financial innovation and financial sustainability of SMEs in Pallisa district. Basing on the findings, the study recommended that SMEs should constantly improve on their services by creating new service packages, modify existing packages and also improve on the process of service delivery. This will enable the organization to always give the best to their clients. Additionally, products offered by the SMEs should also be innovated constantly to match or beat the competition in the industry where the SME operate. This will allow the SMEs to trigger a positive perceived value in the eyes of the consumers which in turn increase sales and hence financial stability. Lastly, SMEs should invest heavily in technology so as to stay competitive. Creating innovation and incubation centers should be adopted by SMEs in order to avoid obsolescence. This will also reduce on the costs of operation and increase operational efficiency.