Program related investments (PRIs) are like grants in that foundations use them to give money for charitable activities. But there is a BIG difference. When foundations give PRIs, they expect to get the money back by a specified time, usually at below-market interest.
Most U.S. foundations only give grants to 501(c)(3) tax-exempt organizations. PRIs can help foundations make low-cost financing available for other charitable entities such as social enterprises.
Most PRI dollars support affordable housing and community development. They also fund capital projects ranging from preserving historic buildings and repairing churches to providing emergency loans to social service agencies and protecting and preserving open space and wildlife habitats.
PRIs include financing methods commonly associated with banks or other private investors, such as loans and loan guarantees. Sometimes funders even make equity investments in charitable organizations or in commercial ventures for charitable purposes.
Characteristics of PRIs and PRI-making include the following:
- Of the many thousands of grantmaking foundations in the United States, only a small percentage make PRIs. In addition, relatively few PRI funders maintain formal PRI programs or make PRIs on an annual basis (about one out of three).
- Foundations make PRIs to further some aspect of their charitable mission (e.g., in the areas in which they make grants). PRIs are often made to organizations with an established relationship with the grantmaker.
- Foundations commonly make PRIs as a supplement to their existing grant programs when the circumstances of the request suggest an alternative form of financing, when the borrower has the potential for generating income to repay a loan, and as a last resort when an organization -- in most cases a charitable nonprofit, but occasionally a commercial venture -- has been unable to secure financing from traditional sources.
- For the recipient, the primary benefit of PRIs is access to capital at a lower rate than may otherwise be available. For the funder, the principal benefit is that the repayment or return of equity can be recycled for another charitable purpose. PRIs are valued as a means of leveraging philanthropic dollars.
To locate funders that make PRIs:
Use Foundation Directory, our searchable database. Search for "Program-related investments" under the Transaction Type field. Subscribe to search from your own location, or search for free at one of our partner locations.
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