In this time of financial melt down and lock up, it is only natural to think of the bad side of financial innovation. We are so concerned with the downside right now that policy makers are seriously considering a financial consumer product safety organization (see my earlier posting and a recent story in the Washington Post).
But Melinda Gates, writing in Newsweek – Helping the Poor Save Money, highlights some good financial innovation:
The success of microloans has opened new opportunities for many poor people and has been a crucial factor in reducing poverty. But loans are not enough. Savings accounts could help people in the developing world weather unexpected events, accumulate money to invest in education, increase their productivity and income, and build their financial security. Fortunately, this is a moment of opportunity. Innovation and new policy ideas are uniting in ways that will lower the cost of savings and bring safe financial services to the doorsteps of the poor.
She goes on to specifically cite agent banking and mobile phone cash-transfer services.
We need to keep this in mind as we think about innovation — of all kinds. Remember, innovation is neither good nor bad – nor is it neutral.