Working Paper Series: Special Edition of 2016 to 2018 Interns

opportunities for risk sharing. Additionally, innovations address inherent concerns and information asymmetries. Information asymmetries have led to numerous innovations.

In Southern Africa, financial innovation is seen as the driving mechanism for growth in the developing countries. Oruo (2013) examined the relationship between financial inclusion and GDP growth in Kenya. The study established that GDP growth over the study period was increasing as well as number of automated teller machines, number of mobile money users/accounts and branch networks. Similarly, Mwinzi (2014) studied the impact of financial innovation on Economic growth in Kenya using the Ordinary Least Squared (OLS) method. He concluded that financial innovation in payment system resulted in improvement in economic growth. The study showed that the demand for traditional payment systems has decrease as customers are leading towards more effective payment systems. Additionally, Bara et al (2016) examined the role of financial innovation on economic growth in SADC. The results showed that there was a positive relationship between financial innovation and economic growth in the long run for SADC. The findings support the idea of increasing financial innovation in the SADC counties to enhance growth. Laeven et al (2012) noted that economies without financial innovation will stagnate, irrespective of the initial level of financial development. They highlighted that for centuries, financial innovation has always been a driving force for economic development. The paper used the joint model of endogenous evolution of financial and technological innovation. The model utilized the Schumpeterian endogenous growth model. They recommend that analysis should stress adaptability and innovation as key elements for sustain growth. Additionally, they noted that, “laws, regulation, institutions and policies that impedes financial innovation slows technological change and economic growth.” Unquestionably, not all financial innovation contributes to economic growth. Number of researchers argue that the financial crisis was associated with financial innovation. Researchers have found that financial innovation is associated with higher growth volatility among industries that are rely heavily on external financing and on innovation (Beck et al 2014). Paul Volcker, former chairman of the Federal Reserve and an advisor to President Obama, claim that financial innovation in recent years has done anything to enhance the economy. And, Henderson and

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