While true, that is one component of grantmaking, it’s crucial to explain in these conversations that work at a foundation is much more complex than that. When explaining that we have at our disposal various creative tools we can use to deploy our funding, the conversation usually becomes the most interesting one of the night. As such, in light of the holiday season and accompanying parties in full swing, we felt it was imperative to provide our readers with the IDP Foundation Holiday Conversation Guide to explaining the greatness of one such tool – the Program Related Investment (PRI).

The Answer: “We use other creative tools like PRI’s to create the biggest social impact possible!”

Program Related Investments, or PRIs, are a type of lending instrument that is often used by foundations as an addition to the traditional grantmaking process. They have been around since the ‘70s and hold “incredible potential for the social enterprise arena” and are something to be excited about if you are interested in tackling tough social issues.[1] Inclusive in the annual 5% distribution requirement, PRIs must further “some aspect of the foundations charitable mission, cannot be used to support any political campaigns, and the production of income or the appreciation of property is not a significant purpose of the investment as it should be structured to produce lower financial returns.”[2] PRIs can take on many forms, but are usually defined as loans, loan guarantees, and equity investments that can range anywhere from $1,000 to several million dollars with below market interest rates.

The decision to pursue the path of a PRI in lieu of making a grant is that with PRI’s there is a potential to provide a return of philanthropic capital either through repayment or a return on equity. This is the great part about the PRI, because as the funds are repaid, they can then be redistributed to other high-impact organizations in the form of PRI’s or grants. Additionally, PRIs can allow foundations more involvement, increased accountability from the organization, and even potential ownership. Meanwhile, borrowers gain secure financing for projects that could be considered too risky by traditional commercial lenders, gain access to larger pools of funds at a lower return cost, and help foster a more bankable organization over time by helping to establish a credit history.[3]

Despite heightened interest and clear value in the PRI model, many foundations are still slow to integrate them into their financial portfolio. Labeled too risky by some members of the financial community, some of the most well-known foundations have been engaging with the PRI model for over 40 years with no complaints. Thus, the IDP Foundation, Inc. (IDPF) was comfortable and excited about using a “new” lending instrument. IDPF made its first program related investment to Sinapi Aba Trust. This relationship originally started with a grant to help create and pilot the IDP Rising Schools Program (IDPRSP).

This year, IDPF also used a PRI, to support the “Maya Angelou: The People’s Poet” documentary. This is the first documentary to be made about the life of the late Dr. Maya Angelou. Maya Angelou has lived not one life, but half a dozen: from her hardscrabble roots in the Depression-era South to supper club chanteuse, performer in Porgy & Bess, coordinator for Martin Luther King’s SCLC, journalist in Egypt and Ghana, comrade of Malcolm X, eyewitness to the Watts riots and best-selling author of “I Know Why the Caged Bird Sings,” her life has uncannily intersected with some of the most profound moments in modern American history and culture. IDPF believes that Dr. Angelou’s contributions to the educational landscape are monumental and a PRI provides a perfect vehicle to offer support for this project.[4]

So what about you fellow readers? What kind of program related investments would you find exciting? Or if you have experience with them, what PRI’s are you proud of?