"In the past two weeks, I had the opportunity to attend two very interesting conferences. The first one was Fortune's Brainstorm Green, followed by the Milken Institute's Global Conference. Both of these conferences attract the who's who in the financial and business world. What struck me at both events was the rallying cry that innovation is key in solving many of the world's problems. I continued to hear that change is needed for people to think and behave differently.
(Credit:
Time Inc.)
The Fortune conference featured the usual suspects who have championed the environment long before it became a cause célèbre. One surprise twist was the number of investors in attendance. I met more financiers who had funds to invest in sustainability-related areas than I thought possible. There were also a large number of CEOs in attendance. Their interest in sustainability largely stemmed from the pressures they felt from their employees and customers. Will there finally be new green products and services that will meet the increasing demand? Will they be adopted by a larger segment of the population? It's clear that there is enough money ready to be spent and corporations ready to commit to finally make a significant impact in green innovation.
From a personal perspective, the best part of the conference was a short speech delivered by a 16-year-old high school sophomore, Avery Hairston. Avery has started a foundation called ReLightNY that raises money from individuals and corporate sponsors. He uses the money to buy low wattage CFL light bulbs that he then distributes to those in need. Everyone is a winner. People use less power and it also saves them money. A double whammy winning strategy. The closing line of Avery's speech was poignant: "Most of you probably will not be here in 2060, but I will, and I need to do something now." Young people like Avery will not let complacency and comfort get in the way of solving problems.
(Credit:
Conferenzablog)
At the Milken conference, the message calling for innovative ideas to solve problems was much the same. Panel topics were diverse and covered the fate of the newspaper and music industries, the environment, world hunger, poverty, mobility and healthcare to name a few. It seems that a conference such as this one, filled with so many powerful people in the financial and business world, would easily embrace and fund innovation as a means of helping to solve many of the issues that were so hotly debated. I talked with several "idea" people and heard consistently that although there was no lack of enthusiasm for great ideas, it had been difficult to move forward and secure commitments.
This lack of definite progress is likely due to one familiar symptom related to innovation: it usually makes people sick to their stomachs. It is unfamiliar, unknown and untested. It is a risk. This thought was echoed in what I felt was the most enjoyable panel of the conference which featured the 2006 winner of the Nobel Peace Prize, Muhammad Yunus, currently Managing Director of Grameen Bank based in Bangladesh. He is recognized worldwide for his successful application for the concept of microcredit, the extension of small loans to entrepreneurs too poor to qualify for traditional bank loans. His hard work has lifted millions of families out of poverty. He was awarded the Nobel Peace Prize "for efforts to create economic and social development from below." His idea was so simple and so humble, yet when people initially heard it, they told him that it would never work. Muhammad used $27 of his own money to fund the first loan. Clearly the naysayers were wrong and his success has changed an entire country. My take-away from his speech was that innovation takes courage.
I hope that a year from now, I can return to both of these conferences and see how the changes that were proposed have been implemented. We need to give innovation a chance to be nurtured and to flourish. To make this happen, we all need to get over our fears and follow our heart."
The focus on the micropreneur, he argues, is "understandably appealing, but thinking that everyone is, and should be, an entrepreneur leads us to underrate the virtues of larger businesses and of the income that a steady job can provide." Indeed, the number of SMEs is disproportionately lower than the number of one-person shops in developing economies, which is precisely the problem to be grappled with. "Businesses that can generate jobs for others are the best hope of any country trying to put a serious dent in its poverty rate," Surowiecki contends, while microfinance "rarely generates new jobs for others."
Because of these shortcomings, the so-called "commercialization" in microfinance aims at creating a new style of microfinance that raises funds from the financial market and operates sustainably on its profits. Furthermore, philanthropic organizations have begun recognizing and filling the market gap between micro-finance and traditional, bank-led SME finance: Google.org, The Soros Economic Development Fund, and the Omidyar Network have announced that they are partnering to create a new $17 million SME investment company for India to create job opportunities and spur greater economic participation for a larger segment of the population.
Yet I wonder if -- aside from these efforts -- one could in fact leverage the "magic" of microcredit to support SMEs. The appeal and power of microloans lies in the immediate personal linkage it creates between creditor and individual borrower -- the smaller the loan, the bigger the perceived impact (and the emotional reward) for the creditor. What if microcredit sites like Kiva.org or Microplace.com added a premium feature that would let users aggregate a select percentage of their microloans towards SMEs or invite them to contribute partially to larger investments in SMEs, on top of their microloans? Or maybe these sites could offer a "Give-to-one-company" option that would mimic the "Give-to-one-person" notion and allowed them to track the impact of their investment in an SME over time?
As if it needed any further proof: These days, the most disruptive innovations are "invisible" and take place in the world of "financial innovation."
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