RSF Prime: 2017 Rate Change
Jan 24 2017
On January 1, 2017, RSF Social Finance increased its “RSF Prime” base interest rate for borrowers to 5.00%. Other participants in the Social Investment Fund (SIF) are affected as follows: the investor rate is now 0.75%, up from 0.50%, and the RSF revenue share will remain at 4.25%.
The decision to raise rates is a multifaceted one that balances many factors. The SIF Pricing Committee makes the final determination regarding RSF Prime by weighing the following:
- Recommendations from RSF’s quarterly pricing gathering. A convening of investors, borrowers, and select RSF team members, these meetings represent an opportunity for stakeholders to address and hear each other’s needs in a personal way.
- Feedback gained through ongoing client conversations by the lending and client engagement teams.
- Market forces. RSF does not operate in a vacuum. Our team tracks what is happening in the market with the goal of anticipating moves that could influence the needs of our community.
- RSF needs. There are costs associated with lending that range from basics like staffing and financial data security to high-touch efforts in support of promising social enterprises. We hold that these operating needs must balance with those of the whole.
Prime in Context
RSF still offers one of the lowest borrowing costs available to social enterprises on the market today. RSF Prime has changed four times in the past 25 fiscal quarters, marking this only the second increase approved in this era of historically low-interest rates.
We’ve heard from investors that the return they receive from RSF is modest when compared to the rest of their social impact portfolio. With this rise, we hold that RSF returns are competitive with other low-risk, liquid, and high-impact funds.
On the borrower side, many have communicated, at both pricing meetings and in private conversations, that their social enterprise can tolerate a slight increase in their loan rate. Not all borrowers share this perspective. Schools and other non-profit borrowers have expressed understandable concern that their tight operating budgets could not absorb the price change. We advise borrowers with concerns regarding the RSF Prime increase to contact their RSF lending manager.
An Open Dialogue
As financial and economic markets enter a period of increased uncertainty, we anticipate conversations about RSF pricing to grow more challenging. As such, we encourage all our partners to keep engaging us in dialogue about how pricing—and more generally money—is informing their interactions with the RSF community. We are committed to honoring our community pricing approach and need your insights to truly create financial relationships that are direct, transparent, personal, and focused on long-term holistic benefit.