PRIs Popular But Not Widely Understood, Study Finds

Although program-related investments are becoming more popular with foundations looking to advance their charitable purposes while generating financial returns, their use remains limited, a new study by the finds.

Based on IRS data and funded in part by , a Michigan-based L3C, the report, (52 pages, PDF), found that between 1990 and 2009 the total dollar amount invested in PRIs rose from $139 million to $701 million, while from 2000 to 2009 the average dollar amount of a PRI increased from more than $666,000 to over $1.5 million. At the same time, the number of foundations making PRIs and the number of PRIs made each year declined between 2004 and 2009, with the number of foundations making at least one PRI falling from 137 in 2004 to 97 in 2009, according to , while the number of PRIs made annually during that period declined from 421 to 114.

The report also found that housing, community development, and education were the program areas receiving both the highest total dollar amount and largest number of PRIs between 2000 and 2010, and that more than half of all the PRIs awarded were loans — although foundations steadily increased their use of equity investments and debt other than loans.

Despite a consistent level of interest in PRIs, however, obstacles to their use remain. According to the report, those obstacles include a lack of information or knowledge, a lack of expertise in managing PRIs, potential transaction costs associated with their use, and a lack of appropriate opportunities.

"There is a growing perception in the foundation community that foundation resources are scarce relative to society's needs and that PRIs could offer new strategies to aid in meeting these needs," said Una Osili, director of research of at the Lilly School of Philanthropy. "Currently, PRIs are an important tool used by a small segment of the grantmaking community. More education and information-sharing among grantmakers will be needed if PRIs are to gain more widespread use and achieve their full potential."

"." Indiana University Lilly Family School of Philanthropy Press Release 05/21/2013.