Key Term

What is Program-Related Investment?

Definition

A Program-Related Investment (PRI) is a financial tool used by private foundations where investments are made primarily to accomplish charitable purposes rather than to generate financial returns. These investments can take various forms, including loans, loan guarantees, equity investments, or other financial instruments, and must significantly further the foundation's charitable mission while generating returns below market rates.

Significance

PRIs are significant because they allow foundations to leverage their assets beyond traditional grantmaking, effectively multiplying their philanthropic impact. They provide a way for foundations to recover their investment capital, which can then be recycled into other charitable activities, creating a sustainable cycle of social impact. PRIs also help bridge the gap between pure philanthropy and commercial investment, supporting organizations that might not qualify for traditional financing while building their capacity to eventually attract conventional funding sources. This innovative financing mechanism has become increasingly important in the philanthropic sector as foundations seek more strategic ways to achieve their charitable objectives.