RSF Rate Changes: Interest Beyond the Price

Imagine participating in a meeting with investors and borrowers to discuss the interest rate for the upcoming quarter amid social distancing, shelter-in-place, a volatile stock market, and a Fed Rate that had just been dropped earlier that day to near zero. I had the joy of facilitating such a meeting (online) our quarterly Community Pricing Gathering, on the eve of March 18, 2020, attended by RSF’s Social Investment Fund (SIF) borrowers, investors, and RSF staff. I was joined by Jasper van Brakel, RSF’s CEO, who spoke about RSF’s work and role as an intermediary and Stu Fram, social enterprise lending manager, who articulated the unique RSF community-informed pricing setting process.

While learning more about RSF’s work, this meeting was designed to make some space for assessing the economic situation and what the SIF community might expect to happen in the next quarter. As always, it was essential to hear from the investors (why they invested with RSF) and from the borrowers (what the loan from RSF is making possible). After hearing from everyone, we began the pricing setting discussion by asking participants what the impact of a rate change would mean for them. It was evident in the room that there was great concern for how enterprises would weather the economic storm. Several investors made it clear that they chose to invest with RSF because of the values and what we stand for in the world of finance. One investor questioned why a higher return should be expected if there is higher perceived risk. Another stated: If enterprises are subject to more risk because of COVID-19 and the economic consequences, I would take less interest in order to support their ability to thrive. Several others spoke in support of this notion and recognized that RSF is the only financial institution they know where such a dialogue might happen. As facilitator, it felt to me like the whole conversation was exemplary of next economy thinking and practice.

There was also an innovative proposal for pricing put forward that garnered the support of everyone present. Following the Community Pricing Gathering, the internal RSF Pricing Committee discussed the proposal along with additional insights from our broader investor and borrower community and the context of the current crisis. After careful consideration, the committee agreed to the proposal. The following changes were effective April 1, 2020:

• The Social Investment Fund investor rate decreased to 0.50% from 1.00%
• The 0.50% difference has been redirected to support social enterprises in two ways:
  • RSF Prime, the base rate for borrowers, decreased by 0.25% to 5.00% from the previous 5.25%.
  • The other 0.25% will be set aside to help fund a borrower payment relief program, available for qualified borrowers. This program is temporary and will be reassessed next quarter.
• RSF’s revenue share remains unchanged at 4.25%

It was an extraordinary Community Pricing Meeting that in all ways rose to extraordinary times. It is beyond heartening to experience the candor and willingness of the investors and borrowers to place the reality and financial needs of the whole Social Investment Fund Community above any personal needs or expectations. Such a meeting reaffirms that community is the antidote to uncertainty.

Should you have any questions on how we came to this decision or about our pricing process, please reach out to us at sif@rsfsocialfinance.org.