Financial innovation is one of the major forces that has made firms in the financial services industry survive or be successful despite the rigorous changes in the industry. Innovation is usually confused with invention, yet these two words mean completely different things though they are related. A number of theories have been advanced in an effort to explain why financial innovation occurs. In the Schumpeterian view, though Schumpeter himself did not explicitly consider financial innovations as an integral part of general economic evolution, financial innovation can be thought to be a reaction to impulses coming from the real sector. The major work on constraint-induced innovation was done by William L. Silber. A number of empirical studies have indicated that financial innovation is constraint induced. The financial system in Zambia has followed the traditional path of financially repressed systems throughout the 60s, 70s, and the 80s.