INTRODUCTION
Development Finance and Regional Economic Development (pdf format, 23 pages)
Increasingly, regions are emerging as the principal unit of economic competition and strategy in America. The real economy is not bounded by conventional government jurisdictions; production, consumption, communication and commerce flow across city, county and state lines. Healthy sub state regional economies trade with other economies beyond their boundaries, and city and county governance structures do not line up easily with regional concerns or the geography of sub state economies. State policymakers have the fiscal resources and often the right perspective on what's needed to make a difference, but state capitols are often too far from the action at the grassroots level to have the local economic intelligence needed to craft the best policy solutions. Regional and local development practitioners and institutions have an important role to play in framing the economic futures of their regions and ensuring that economic benefits are truly inclusive.
This paper shares current and promising practices that link innovation in development finance to the promotion of regional economic development that aims to raise incomes and wealth for low-income people. It includes promising strategies underway to promote regional economic development through development financial institutions, as well as leading innovations in workforce development. While this paper describes a strong role for development finance institutions in regional development efforts, it presumes that development finance is just one component of a complex nexus of services and resources that lead to economic growth. Capital is rarely the first need of a region, and the effectiveness of any one development financial institution, program or initiative depends on complementary investments in workforce and entrepreneurship skills, infrastructure, education and other social services.1
The paper is organized into three sections. It begins by framing the connection between development finance and financial innovation that expands access to economic opportunity for low income individuals and communities. Second, it describes the current state of regional economic development practice, the challenges to successful initiatives, and current efforts that involve development finance. Finally, it examines a number of options for the development finance field to facilitate and lead regional economic development strategies.2
1 For more on this issue, see: Julie Ann Parzen and Michael Hall Kieschnick. (1984). Credit Where It's Due: Development
Banking for Communities. (Philadelphia, PA: Temple University Press); Lawrence Litvak and Belden Daniels. (1979). Innovations in Development Finance. (Washington, DC: Council of State Planning Agencies); and Karl Seidman. (2005). Introduction to Development Finance. (Thousand Oaks, CA: Sage Publications).
2 This paper draws on discussion by development finance experts at a meeting held in Washington, DC on October 27 28, 2005. Appendix A contains a summary of the recommendations made by the group.