With fewer dollars to go around due to the economic crisis, philanthropists are increasingly turning to options beyond simply giving money to charities. To help foundations grow their money while doing good, TrustLaw, the free legal service of Thomson Reuters Foundation, has published a guide by law firm Linklaters for non-profit network Mission Investors Exchange, on innovative Program-related investments (PRIs).
Rather than make a one-time gift, PRIs allow philanthropists to lend money, usually with a modest rate of return below prevailing market rates, to a for-profit social entrepreneur in the developing world or to a charity while maintaining their tax exempt status.
PRIs are not new and have been used extensively by larger organisations like the Ford Foundation and the Bank of America Charitable Foundation, but many foundations are still to make full use of them.This may be the result of a lack of knowledge about PRIs, limited demand compared to grants, or questions about legal or tax-related requirements associated with making this type of investment.
"Strategies to maximize your philanthropic capital – a guide to program-related investments" seeks to help overcome barriers to using PRIs by providing a basic reference for private foundations and legal advisors about regulations, processes and documentation requirements. It is the first of a number of guides to impact investing which will be published by Thomson Reuters Foundation, which works to support social innovation worldwide. Forthcoming publications will cover Latin America and Asia.
Find out more about TrustLaw's legal research programmes for NGOs and social enterprises here.
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