Three keynote speakers set the tone for the 2011 Exploring Innovation conference—Federal Reserve Gov. Elizabeth Duke; Jessica Jackley, co-founder of Kiva and co-founder and CEO of ProFounder; and Ray Boshara, senior advisor in the Community Development department at the St. Louis Fed. These speakers shared their unique experiences and personal insight, encouraging continued dialogue and focusing participants on the conference goals—to be open, ready to share and learn, and then act on the information gleaned.
In her opening keynote, Duke spoke about the Federal Reserve System's efforts to help alleviate some of our nation's biggest problems, including the housing crisis and diminishing credit availability for small businesses, by promoting collaborative activities among community development finance industry experts.
Duke said the Fed's response to the housing crisis was to participate with national and regional partners in a multifaceted effort involving guidance for banks, updated regulations, monetary policy changes, strategies to enhance foreclosure mitigation and prevention, neighborhood stabilization, online Foreclosure Resource Centers, and resources for managing vacant properties.
Credit availability is another area in which the Fed leveraged relationships with lending institutions, small-business owners and community groups to deepen understanding of the dynamics of supply and demand for small-business credit, identify credit gaps, and learn of promising ideas for improvement. The Small Business Jobs Act was passed to improve access for CDFI (Community Development Financial Institutions) loan funds and expand access to low-cost, long-term capital. Going forward, the Fed will coordinate a series of regional forums on the use and deployment of small-business programs authorized under the Act.
Duke pointed out that "the Federal Reserve has a long history of using anecdotal information…to better understand regional economies and economic conditions," and is working to use this data to identify early warning signs of future economic challenges. The Fed's Community Data Initiative will provide a systematic approach to gathering and disseminating grassroots intelligence on current conditions and emerging challenges facing low- and moderate-income communities.
Jessica Jackley expanded on Duke's discussion of collaborative innovation with a moving description of what microfinance is and how she became one of its strongest advocates. Recounting life-long teachings about helping the poor and equally lifelong feelings of guilt and frustration about her inability to reach them in any meaningful way, Jackley reported that she found herself giving not out of a genuine sense of hope and generosity, but in a more transactional mode. "Truth be told," she said, "I was buying my right to go on with my day and not be bothered by this bad news."
Then she attended a presentation by Dr. Muhammad Yunus, who won the Nobel Peace Prize for his work in pioneering modern microfinance. Suddenly, Jackley saw the opportunity for a "new method of change in the world, a way to interact with someone and to give, to share a resource in a way that wasn't weird and didn't make me feel bad." As Dr. Yunus explained that microfinance could be understood as financial services for the poor, Jackley realized that far from being the stereotypical "poor people" she had imagined since childhood, the people Dr. Yunus was helping were strong, smart, hardworking entrepreneurs who needed only a small amount of capital to make their lives, their families' lives, and the communities in which they lived just a little bit better.
From this insight grew a project now known as Kiva. After a visit to East Africa, Jackley returned to the U.S. and co-created a web site featuring seven East African entrepreneurs; visitors to the site loaned small amounts of money to provide the help these people needed to grow a business. From this start-up, Kiva grew to more than a million lenders and entrepreneurs in 200 countries around the world. Jackley's latest venture is ProFounder, a crowdfunding platform for small businesses to raise what they need through investments—not donations or loans—from friends, families and investors. These organizations began with the power of individual stories and continue because of the stories' power to move the mind and heart to act in new and unique ways.
In the final keynote, Ray Boshara suggested a way for America to harness the power of innovative collaboration to move forward into the "next Progressive Era." He pointed out that the Industrial Revolution in America was a time of stunning change, much like today. The social contract that was forged during the first decades of the 20th century is the one we are still living with—and it no longer reflects our globalized, information-rich, flexible and mobile world.
Right now, said Boshara, we have a once-in-a-century opportunity—to negotiate a new social contract that will transform our world. While we don't know which idea or innovation will form the basis of a new public policy, one lesson we have learned is that the health of low-income persons and communities is tied to the health of the broader economy. Boshara noted that when we think about the future of community development, we need to think of low-income communities not as pockets of poverty and renewal, but as epicenters of innovation and growth whose success will help drive the success of the broader economy.
Boshara said that a new paradigm must replace the belief that the American consumer is the ultimate engine of economic growth. This model no longer works. Instead, emerging markets will stimulate global demand and reduce America's trade deficit in the process. The green economy will also stimulate economic growth. A new public consensus about global climate change, coupled with the national security risk that comes from relying on imported oil, will create an investment boom in new energy sources and technologies. And finally, a new government commitment to higher wages and increased public investment—including health care, education and public infrastructure—will help restore consumer purchasing power and make U.S. consumerism more sustainable and socially healthy.
Each of these speakers identified collaboration and teamwork as essential to getting things done. As Duke concluded, it will take all of us, working together, to solve the changing nature of the problems now being encountered in our country and the world.
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Fed in Print: An index of the economic research conducted by the Fed.