LOPEYOK,NGELAMOE CHRIS2026-09-102026-09-102026-05-15http://hdl.handle.net/20.500.14270/925Financial sustainability remains a key challenge to the survival of local Non-Governmental Organizations (NGOs) in the Karamoja sub-region of Uganda. Therefore, organizational innovation is fundamental for the survival of local non-governmental organizations. The research aimed to determine the level of organizational innovation among local NGOs, assess their financial sustainability status, and analyze how organizational capacity influences the innovation sustainability link. A mixed-methods approach was employed, combining quantitative and qualitative data collection and analysis. Structured questionnaires were administered to 166 respondents from various NGOs operating in the region. Quantitative data were analyzed using descriptive statistics, Pearson correlation, and regression techniques. Qualitative data were gathered through interviews with key informants and analyzed thematically to complement and deepen the quantitative findings. The study revealed that social innovation was the most prominent form of innovation, driven by strong stakeholder engagement and alignment with community needs. Activity innovation followed, reflecting NGOs’ willingness to experiment with new program designs despite institutional challenges. Process innovation was less developed, indicating a gap between recognizing the importance of operational innovation and effectively implementing it. Regarding financial sustainability, NGOs demonstrated moderate to strong performance in funding diversification, efficient resource use, and cash reserve management. All three forms of innovation showed significant positive correlations with financial sustainability, with social and activity innovations being the strongest predictors of improved financial outcomes. Organizational capacity partially mediated this relationship, highlighting that NGOs with robust internal systems are better equipped to convert innovation into financial resilience. The study concludes that fostering organizational innovativeness, especially in social and activity domains, is critical for enhancing financial sustainability in resource-constrained settings like Karamoja. Addressing weaknesses in process innovation and strengthening organizational capacity through staff development and improved systems are essential steps. Donors and development partners should provide flexible funding to support innovation and adaptive programming. These insights are valuable for NGO leaders, policymakers, and development actors seeking to enhance service sustainability in underserved regions.