RSF Rate Changes: The Interconnectedness of Economic Relationships

Each quarter the RSF Pricing Committee comes together to determine the rate of return for our Social Investment Fund investors, the interest rate for our borrowers, and the rate that RSF earns as an intermediary and financial partner. For the first quarter of 2020, the RSF Pricing Committee determined that the rate charged to borrowers should be lowered, as well as a reduction in the interest returned to investors. This results in a reduction of return to investors by 0.25%, from the current rate of 1.25% to 1.00%, along with a reduction of the interest rate charged to borrowers by 0.25%, from the current rate of 5.50% to 5.25%. RSF’s revenue share (or spread) will remain the same at 4.25%.

The factors we take into consideration when resetting our interest rates include:

The recommendation from the attendees of our quarterly Community Pricing Gatherings, where individual investors, borrowers, and RSF staff engage in a community-focused conversation that addresses how all stakeholders would be affected by any changes. You can learn more about these Gatherings here.

Throughout the quarter, we are in close contact with both our investor and borrower communities, and their feedback, perspectives, challenges, opinions, and experience inform our view of the landscape.

We complete a careful analysis of current market conditions that inform our decision. In this instance, we acknowledge increased competition from other lenders that have a significantly lower cost of capital and more flexibility to negotiate rates. Our goal is to support social enterprises, and the work they’re doing to solve complex social and environmental problems, by providing affordable rates.

These conversations—dealing with how we, as a community bring our needs forward and meet them through our interest rates—are the heart of our work. Even with its challenges, our pricing process makes visible the real interconnectedness in our economic relationships. We share this decision with our community to engage in a different kind of association among investors, borrowers, and intermediaries that sits in contrast to the opaque and impersonal nature of most interactions in our financial system.

We thank you for your continued commitment and are grateful that you are in community with us. At the core of our work is the desire to create change and to help move our economy from extractive to regenerative by addressing the systems that have created unhealthy conditions for people and the planet.

Should you have any questions on how we came to this decision or about our pricing process, please reach out to Mark Herrera, Senior Manager of Client Engagement at 415.561.6160 or mark.herrera@rsfsocialfinance.org.