Our Journey Begins
By Karan Singh
Financial Innovation in the Social Sector: The Promise of Finance in Catalyzing Economic Development is part of a series of groundbreaking student-initiated courses at MIT Sloan for the spring 2010 semester.This 3.0 unit H1 course and 2.0 unit SIP course is a unique opportunity to combine MIT’s strengths in financial engineering, quantitative analysis, innovation and strong poverty action programs. It blends a 5 week in-class curriculum with an intensive 2 week hands-on experience with organizations in Cambodia and Indonesia. The course is designed to give students a broad understanding of financial innovations that have helped to transform and catalyze economic development across all social sectors.
And so, our journey begins. Today marks our first class. We are fortunate to have Lant Pritchett, Professor of the Practice of International Development and Faculty Chair of the MPA/ID program at the Harvard Kennedy school, share his insights in the space.
We will be sharing our learnings from this class in subsequent posts, but first, a bit more background on the challenge ahead…
THE “BOTTOM OF THE PYRAMID”
The 6.2 billion people on the planet can be divided into socio-economic groups that would form a pyramid. In this analogy, the “bottom of the pyramid”, or BOP as it is commonly known, is the largest and economically poorest section of the world population. These 4 billion people live on less than $2-$4 per day. This seminar is particularly about the role of financial innovations in catalyzing economic development for this population.
Success, or progress, in the BOP sector requires coordination and cooperation among four major stakeholders: the consumers, the organizations that provide them with goods and services, the government institutions that provide support and create a business environment, and the markets that enable efficient valuations and smooth transactions.
CLASS STRUCTURE
During the next 5 weeks, we will explore four key areas of financial innovations: risk management, capital access, development finance, and market creation.
- Risk Management is the application of financial tools to minimize the economic impact of unpredictable events.
- Development finance is about the tools available at a macro level to increase economic resources available for countries and global initiatives.
- Market creation is about aligning the regulations and incentives via market mechanisms to promote responsible and sustainable development.
- Capital access is the development of efficient sources of funding for operations, growth, and investment.
There is significant activity and unmet need for every stakeholder in each of these areas. Due to time constraints, however, we will focus on the involvement of one particular stakeholder in each of the 4 financial areas. There are additional readings available for those of you who are interested in a deep dive.
DOCUMENTING OUR JOURNEY
Blog: finnovation.tumblr.com to post comments
Twitter: #finnovation to share your thoughts before, during, and after class
GETTING IN TOUCH WITH US
Student Organizers
- David Auerbach (dswa@mit.edu)
- Priya Parker (p_parker@mit.edu)
- Karan Singh (kvsingh@mit.edu)
- Ani Vallabhaneni (aniv@mit.edu)
- Jeff Zira (jeffzira@mit.edu)
Faculty / Staff Organizers
- Faculty Ambassador: Virginia Healy-Tangney (vtangney@mit.edu)
- Staff Ambassador: Catherine Gamon (cgamon@mit.edu)
- Instructor: Andrew Wolk (awolk@rootcause.org)
- Course Sponsor: Rick Locke (rlocke@mit.edu)
