I completely share your enthusiasm about PRIs. It would be great if they were used more broadly. However, the foundations we know have not found that the lack of an IRS ruling as a major barrier to making PRIs—even to for-profit enterprises. The recently expanded IRS examples of qualifying PRIs seems to provide ample assurance for all but the most unusual investments.
Also, I don’t think we should overestimate the amount of PRI money that is on the sideline. Funding for PRIs generally comes from program budgets. We can assume the money is being deployed as grants. I’d argue that in the right circumstance, PRIs are a more efficient way to capitalize enterprises, but grants are still important.
Of course, lots more dollars would be freed up if foundations were expected to deploy more than 5% per year for charitable purposes including PRIs, but that’s an even thornier larger discussion. The greatest potential for unleashing more in capital for social purposes is with endowment funds—the other 95%. With greater incentives, knowledge and support, foundations could put a whole lot more money to work in really constructive ways.
COMMENTS
BY Peter Berliner
ON February 27, 2015 03:01 PM
I completely share your enthusiasm about PRIs. It would be great if they were used more broadly. However, the foundations we know have not found that the lack of an IRS ruling as a major barrier to making PRIs—even to for-profit enterprises. The recently expanded IRS examples of qualifying PRIs seems to provide ample assurance for all but the most unusual investments.
Also, I don’t think we should overestimate the amount of PRI money that is on the sideline. Funding for PRIs generally comes from program budgets. We can assume the money is being deployed as grants. I’d argue that in the right circumstance, PRIs are a more efficient way to capitalize enterprises, but grants are still important.
Of course, lots more dollars would be freed up if foundations were expected to deploy more than 5% per year for charitable purposes including PRIs, but that’s an even thornier larger discussion. The greatest potential for unleashing more in capital for social purposes is with endowment funds—the other 95%. With greater incentives, knowledge and support, foundations could put a whole lot more money to work in really constructive ways.
BY Galen Welsch
ON March 7, 2015 08:38 AM
Fantastic article. Thank you.