Programme Related Investment

Outline of Programme Related Investment

• Programme Related Investment
• How Programme Related Investment works
• Programme Related Investment in the future
• Further information on Programme Related Investment

Programme Related Investment

Programme Related Investment (PRI) is when charities invest in other charities that share their primary purpose. 

One way in which charities may pursue their charitable purposes is through the provision of loans, loan guarantees or the subscription or purchase of shares or through the letting of land and buildings. This is a form of social investment. Such investments may generate a financial return, but the charity's main objective in making them is to help its beneficiaries and further its aims and mission.

This activity is sometimes called 'Programme Related Investment'. This emphasises the link between the pursuit of charitable purpose and the loan or other investment made. The Charity Commission website includes Useful Guidelines on Charities and Social Investment which explain Programme Related Investment more thoroughly.

How Programme Related Investment Works

This form of social investment is likely to be of greatest interest to Grant-making Trusts and Foundations who are already involved in funding voluntary and community organisations. Any charity that can give grants can undertake programme-related investment unless it is specifically prohibited in the charity's governing document. In such cases loan investment programmes offer a way for grant makers to make their money go further. Rather than making a grant which, once spent, is gone, programme related investment is a way of spending the same amount of money several times over by recycling it around several organisations as loan repayments free up money to be reinvested.

Examples of Programme Related Investment are the Esmée Fairbairn Foundation's Loans Programme and Northern Rock Foundation loans

Large frontline charities can also engage in programme related investment. For example, Help the Aged and Age Concern decided to support the PRIME Loan Fund which was set up to help people aged over 50 set up their own business. This was because the aims and mission of PRIME, to release the untapped potential of 50+ enterprise, is closely related to the mission and aims of these two charities. The investment enables the two charities to further their own aims.

When undertaking Programme Related Investments the usual rules (as set out in the 2000 Trustee Act) obliging trustees to maximise financial return do not apply. Hence the financial return may be at a lower rate than an investment made with only a financial return as its aim.

Programme Related Investment in the future

PRI is not about replacing grants with loans, but about stretching charitable funds further amongst voluntary and community organisations for whom loans are an appropriate source of finance. In the case of grant makers, loan funds usually come from the organisation's reserves, not from their grant fund budget.

PRI is exciting because it opens the door to charitable funds being put to wider use. PRI is currently under-exploited but it could be something we see more of in the future as loan finance becomes a more widely accepted way of financing the voluntary and community sector.

Further information on Programme Related Investment

A guide to programme related investment, The Magic Roundabout: how charities can make their money go further, produced by a group of partners including the Sustainable Funding Project explains how organisations can make charitable resources go further. A summary article, Putting Charity Reserves to Work is also available.