These innovations by microfinance have increased efficiency of doing business. It remains largely unclear whether microfinance banks are adequately innovative in their operations given that the number of branches and their clientele base are continuously limited in growth and expansion in Nairobi County. Performance and growth are related in that a firm cannot grow if it fails to post sound performance. The general objective of the study was to determine financial innovation and performance of microfinance banks in Nairobi County. Specific objectives include examining the effect of institutional innovation, product innovation, and process innovation on performance of microfinance banks in Nairobi County. Financial innovations are significant components to microfinance banks performance. This study looks on financial innovations and performance of microfinance’s banks in Nairobi County. The theoretical framework of this research will cover Rodgers’ Innovation, induced institutional innovation and demand supply theory of innovation. Descriptive survey research design was used in this study. The target population comprised of management employees working with microfinance banks and the accessible populations were 100 employees working with MFIs registered with AMF in Nairobi County, Kenya. Samples of 53 respondents were drawn from the study population using stratified random sampling technique. The study population was ten (10) active microfinance banks in Nairobi County as at December, 31, 2017.This study used descriptive research method. A self-administered questionnaire which was semi-structured was used as a data collection tool to be filed by the respondents from the target. Pilot study was first done to establish validity and reliability of data collection instrument. Factor analysis was used to determine the validity of questionnaire. The objective of the study and respondents profile was generated by use of descriptive statistics. Tables and bar charts will be used to present end results of data. .From the findings, the research concluded that there is a supervisory framework that monitors microfinance banks. Some of the innovations observed by MFIs in mobile banking include partnerships, financial trainings, branch networking and opening up new branches. It is was also concluded that innovations can be a source of competitive advantage if a firm understands competitors’ actions, customer needs, and technological development and act accordingly to stay at par with rivals.
