Financial Innovation in the Social Sector: The Promise of Finance in Catalyzing Economic Development was 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 was a unique opportunity to combine MIT’s strengths in financial engineering, quantitative analysis, innovation and strong poverty action programs. It blended a 5 week in-class curriculum with an intensive 2 week hands-on experience with organizations in Cambodia and Indonesia. The course was designed to give students a broad understanding of financial innovations that have helped to transform and catalyze economic development across all social sectors.
During the 5 weeks, the group of 20 students with varied backgrounds in development as well as capital markets, explored 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.
With guest lectures from thought-leaders such as Lant Pritchett, Roberto Rigobon, and Dilip Ratha and practitioners like Christine Eibs Singer, the students examined the theory and realities of the success and failures of finance as well as potential opportunities.
The classwork culiminated in the entire group traveling to Cambodia and Indonesia for 2 weeks over SIP and Spring Break of the Spring 2010 semester. In Cambodia, they met with a variety or organizations working at the intersection of finance and development to get a broad understanding of what was working on the ground. In Indonesia, they worked with companies like Allianz to develop new financial products like weather related microinsurance to protect small hold farmers against the economic shocks that go with floods and droughts.
Read about their learnings and adventures on their Finnovation blog