Local Initiatives Fund: Integrating Capital for Impact
September 26, 2013
This article was originally published in the 2012 Annual Report.
By Kelley Buhles
How does innovation happen at RSF? Where do great new ideas come from? In 2012, an extraordinary thing happened that reminded us all how innovation is truly a co-creative process.
Working in collaboration with donors, the RSF philanthropic services and lending teams launched the Local Initiatives Fund. With a focus on building socially and ecologically sustainable regional food systems, this fund utilizes an integrated approach to investment through the deployment of philanthropic dollars allowing us to leverage our expertise across two disciplines, grantmaking and lending.
One of the exciting things about this fund is how it was created. A donor approached us early in the year expressing their admiration for our work and their trust in our values. They asked us, “How can you put our philanthropic money to work to build local, resilient economies?” What was special was not the question, but rather the donor’s willingness to release the gift – we were freed to think creatively about how we could best use these philanthropic funds to create more impact. The spirit of the free gift created the space for innovation.
We recognized that our lending team needed philanthropic funds to better leverage their work financing local sustainable food systems. In the past few years, the social finance field has seen that social entrepreneurs, those trying to make positive social and environmental impact, need different types of financing than those offered in the traditional financial market. Because most social entrepreneurs work carefully to preserve or restore natural resources and provide fair working conditions for their employees, they often do not see the high level of returns that are expected in the traditional marketplace. As a mission aligned partner, we are able to provide the different types of capital needed by these organization to support their growth in a way that most lenders cannot.
Using the philanthropic funds as guarantees, the lending team is now able to make loans to younger and slightly higher risk organizations that have the potential for great impact, but do not yet meet the financial requirements of our Social Enterprise Lending program. The lending team is also able to recommend charitable grants to non-profit borrowers who need extra support for infrastructure or capacity building. Using these different forms of capital, we’re able to deploy the right form of money, for the right purpose, at the right time for an organization.
A portion of the Local Initiatives Fund has also been designated for the Shared Gifting program. In this model, RSF facilitates a process in which grantees work together to allocate grants to each other. The goal is to move the decision making power of philanthropic funds into the community. The process encourages grantees to collaborate and share resources to meet their collective goals. In 2013, we will lead a Shared Gifting circle in Skagit County, WA.
At this stage, the Local Initiatives Fund is a pilot. We look forward to evaluating and sharing what we have accomplished over the next year.
As we look to the future, we now see more possibilities than ever before for how we can use money in new ways and work with our clients in different capacities to create more impact in the world.
Kelley Buhles is Senior Program Manager of Philanthropic Services at RSF Social Finance.