Development Finance and Economic Security

Ford Foundation marks 40th year of Program-Related Investments

Innovative tool boosts the work of grantees, steers $395 million to social investment

NEW YORK, February 8, 2007—Almost forty years ago, the Ford Foundation added a new tool to the arsenal of creative grant makers everywhere by pioneering the use of low-cost loans, loan guarantees and equity investments as a strategic way to strengthen the work of its grantees.

Since 1968, the foundation has committed some $400 million for such investments, known in the foundation sector as “program-related investments” (PRIs). PRIs help advance the foundation’s mission and are financed from its endowment. Ford-funded PRIs have helped finance the work of over 360 organizations in the United States and around the world. PRIs can help organizations establish a loan repayment history, generate earned income and gain access to new funding from mainstream banks and other funders. They have also helped grantees set long-term strategic plans and develop new financial management skills.

“Program-related investments offer foundations an alternative to the traditional grant. They provide a tool that can help bring long-term financial stability to organizations that are addressing critical social needs,” said Pablo J. Farias, vice president of the foundation’s Asset Building and Community Development program. “They allow us to provide ‘risk capital’ for cutting-edge initiatives from a portion of our endowment.”

Examples of Ford Foundation program-related investments include:

Public Radio Capital ($1.5 million)

• In 2006, the foundation approved an investment to help capitalize a $13 million loan fund that was created to preserve and expand public radio broadcasting around the country. The fund allows communities to acquire radio broadcast licenses so that they can launch new public broadcasting stations. It also helps them preserve existing stations should sponsoring institutions, such as universities, decide to sell the licenses on the open market. The stations will utilize capital campaigns, commercial capital and tax-exempt bonds to pay back the money they have received through the fund. Public Radio Capital will then reimburse the foundation for its commitment at the end of its loan term.

New York City Affordable Housing Acquisition Fund ($4 million)

• In 2005, the foundation joined forces with the City of New York, leading financial institutions and other national foundations to launch a $200 million collaborative fund to boost affordable housing in New York City. The fund now provides local nonprofit and for-profit developers with financing to acquire private property for the construction and preservation of affordable housing units throughout the city. As the developers pay back their loans, the fund is reimbursed. At the end of its loan term, the fund will repay the foundation for its investment.

Focus: HOPE, Detroit, Michigan ($3 million)

• In 2001, the foundation helped capitalize a $13 million student loan fund to support students enrolled in job training classes at Focus: HOPE, a leading community organization in Detroit. The fund has allowed Focus: HOPE to extend critical financial aid to students who are unable to qualify for traditional student loans. Students repay Focus: HOPE from their employment earnings, and Focus: HOPE will reimburse the foundation for its investment at the end of its loan term.

The Ford Foundation currently sets aside $25 million a year for use in new PRIs, and has already committed $10 million in new investments for the current fiscal year.

Money that is loaned and later paid back to the foundation through PRIs can be redistributed to other groups in need.

Foundations of all types and sizes are now using program-related investments as an important tool to advance philanthropic work. A guide for new funders, supported by the foundation and available at no charge, can be downloaded by clicking here.

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The Ford Foundation is an independent, nonprofit grant-making organization. For more than half a century it has been a resource for innovative people and institutions worldwide, guided by its goals of strengthening democratic values, reducing poverty and injustice, promoting international cooperation and advancing human achievement. With headquarters in New York, the foundation has offices in Africa, the Middle East, Asia, Latin America, and Russia.