Journals Proceedings

Abstract

Financial innovation has transformed and restructured financial services and its impact on economies is becoming increasingly notable. The World Economic Forum (2012) postulated that the advancement in financial innovation is a driving force for broad economic growth. Despite this acknowledgement, the effect of financial innovation on economic growth in developing countries such as Zimbabwe has received little attention. The objective of the study is to explore how innovations that lie within the local financial system improve the flow of funds into the economic system for the benefit of other sectors of the economy. The ultimate goal is to evaluate the impact of financial innovation on economic growth. The study further looks at the causal relationship between financial innovation and economic growth. This was achieved by assessing the impact of increasing financial innovations on financial sector development. The study uses Zimbabwe as a case study. The motivation of the study emanates from the increased rollout of new financial products such as mobile money, real time gross settlements and internet banking in Zimbabwe during the time the economy is experiencing sluggish economic growth. The study drew data from a number of sources including IMF and World Bank Websites; Zimbabwe Statistical Agency and Ministry of Finance study found out that financial innovation has a positive impact on economic growth. The study will provide recommendations that the Government of Zimbabwe should introduce policies that enhance economic growth inter-twined with financial innovation as this will maximise economic development for the country. Tax incentives to encourage more resources to be channelled towards financial innovation are essential as this will positively impact on economic growth.