RSF Quarterly Pricing Meeting: Fostering Trust

By Ted Levinson

The Federal Reserve, getting ahead of the battles that will dominate national politics over the next two years, moved Wednesday to jolt the economy into recovery with a bold but risky plan to pump $600 billion into the banking system…The action was the second time in a year that the Fed had ventured into new territory as it struggles to push down long-term interest rates to encourage borrowing and economic growth. – NYT, November 3, 2010

In sharp contrast to national news about “bold but risky plans” for interest rates, twenty-one individuals gathered at the New York Branch of the Anthroposophical Society in America in Manhattan for RSF’s fifth quarterly pricing meeting.  Representatives from amongst the 1,000 investors of our Social Investment Fund and the 75 borrowers of our Core Lending Program met, discussed their motivation for being a part of the RSF community, and considered the potential impact of raising or lowering RSF Prime.

Over a year ago we decided that quantitative easing in Washington DC or rising inflation in China shouldn’t dictate the rates we pay our investors or charge our borrowers.  Instead we decided to have our rates influenced by what really matters – namely the needs and wants of our community.

Reflecting the diversity of borrowers and investors in attendance at the pricing meeting, there was plenty of lively discussion.  Strained by the economy, some borrowers made a pitch for low rates – pointing out that the less they paid in interest the more they would have to further their social mission.  Some investors offered to add to their accounts if the rate increased while others said that yield didn’t matter as long as they knew their investment was secure and having a positive social impact.

The remarkable thing about these pricing meetings is how prominent a role trust plays in our Social Investment Fund.  At its most basic operational level, we operate no differently than a bank that collects money from depositors and lends money to borrowers.  But strip away the branches and the ATMs, the anonymity and enormity of our banking system, and you are left with people, money, and the trust that brings them together.

Mark Herrera and I represented RSF at the pricing meeting.  As RSF’s Manager of Client Development, Mark knows most of our investors and in many instances is responsible for bringing them into our community.  Our investors forego FDIC insurance and in some instances even gift their interest payment to RSF because they trust that we will be good stewards of their money – lending it wisely to non-profits and social enterprises that have deep impact.

Our borrowers in attendance certainly felt and appreciated the trust that girded their loans.  Many expressed their gratitude for their loan and the implicit vote of confidence that it carried at a time when conventional lenders were unwilling to support them.  It was especially gratifying to have representatives from the Threefold Educational Center in attendance since they have been both borrowers and investors over the years – experiencing the same lending community from two different vantage points.  Soon after the meeting one of our newest borrowers opened an account at RSF for her newborn son.

As Senior Lending Manager at RSF it is humbling to meet the individuals whose money you are responsible for managing; I imagine our borrowers feel the same way.  It is inspiring to meet people who are trying to improve the world with their money – they are true pioneers.  They are also a constituency we desperately don’t want to disappoint and meeting them in person makes me appreciate their trust even more.  It is one example of why we believe people are best served by financial transactions that are direct, transparent, and personal, based on long-term relationships. Rudolf Steiner said that “In the long run, credit cannot work healthily unless the giver of credit feels himself responsible for all that is brought about through his giving credit. The receiver of credit…must give him grounds to justify his taking this responsibility.”  RSF, and our pricing meetings in particular, are a tangible effort to bring this humanity back into the world of finance.

Ted Levinson is Senior Lending Manager at RSF Social Finance.