Date Posted: 11/9/2012 3:34:47 AM
Posted By: Viona Membership Level: Silver Total Points: 879
Innovation basically refers to starting something new for the first time. Financial innovation refers to development of new products, processes,institutions and embracing new technology. Many financial institutions have geared towards portraying financial innovation through institutional setting, expanding to new markets and strategic decision making.Financial institutions provide financial services to their clients. Recently, these financial institutions such as banks, insurance companies and investment banks have recorded remarkable profit margins. This is due to the tremendous positive growth witnessed in the banking sector. Financial institutions have adopted new structural framework which encompasses the elements of financial innovation. The following are ways in which these institutions have diversified their operations through financial innovations.1. Agency banking.This is the most modern financial innovation by commercial banks. A bank agent is a retail or trading outlet contracted by a financial institution to process client's transactions. Examples of such outlets include: supermarkets, pharmacies, agrovet stores, petrol stations and many more. Some of the banking transactions carried out in these bank agents include: accepting client''s deposits and withdrawals, inquiring account balances, carrying out transfer funds and paying bills.Common locally established banking agents in the country are Equity agent, Postbank Mashinani, KCB Mtaani and Coop kwa jirani.2. Mobile banking.Banks nowadays are offering banking services through the use of mobile telecommunication devices. Some of the financial services offered include access to loan statements, ordering cheque books, checking account balances, ordering bank mini-statements, stock market transactions and many more.3. Stock brokerage services.Banks are actively involved in stock brokerage services in the new era of financial innovations. These banks trade in securities such as shares in the stock market on behalf of customers.4. Insurance services.Some banks are now offering insurance services on behalf of insurance services. Commercial banks act as pay-points for insurance premiums. In addition, they are sometimes involved in underwriting insurance contracts.5. Islamic banking.These are banks which have been established and guided by the Islamic sharia law. An example of is the First Community bank.
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