Social Finance

Search for Social Enterprise Stars Off to Great Start

October 14, 2014

PrintOur Next 25 Social Enterprise Stars campaign is off to a great start—less than a month after our launch at the SOCAP14 conference, nearly 1,000 social enterprises and their referrers had visited our campaign page to check out borrower criteria and other details.

To recap, we’re looking to add 25 social enterprise stars to our loan portfolio over the next year—and we need the help of everyone in our community to find them. We know there are exciting enterprises across the U.S. and Canada that could grow with our help, but they may not know about us—and we may not know about them.

Please keep spreading the word! The more #SocentStars posts there are on Twitter, Facebook and LinkedIn, the more social enterprises we can reach and assist. Here are a few post ideas:

How much social impact could your #socent have with $800K? @RSFSocFinance has loans for #SocentStars: bit.ly/1tH0ytE

Pass it on: @RSFSocFinance is looking to fund the next 25 #SocentStars. Get details and #loan quals: bit.ly/1tH0ytE

Growing a #socent & need capital? @RSFSocFinance has loans for the next 25 #SocentStars: bit.ly/1tH0ytE

Not sure who would be a good fit? We’re looking for more enterprises like these new RSF borrowers (also see details on the Social Enterprise Stars campaign page).

facebookPACT Apparel

PACT, a Boulder, Colorado–based apparel company, makes supersoft organic cotton essentials that are ethically produced and easy on the environment. Here’s what they say about themselves: “We’re out to change the apparel industry and that change starts with your underwear. At PACT we care about our clothes so much that from seed to shelf, we pretty much follow them everywhere they go.”

RSF is providing a line of credit that allows PACT to build inventory to meet growing demand. It’s a natural fit: “PACT is more than just a sustainable brand,” says Mike Gabriel, RSF Lending Manager. “They are really fostering a community—suppliers, producers, intermediaries, and consumers—to accelerate change in the fashion industry.”

truckHummingbird Wholesale

Hummingbird Wholesale, a bulk food distributor based in Eugene, Oregon, delivers high-quality organic, local, and regional food crops to wholesale customers from Bellingham, Washington, to San Francisco. RSF financing allowed Hummingbird to purchase an environmentally friendly freight truck.

“Hummingbird exemplifies the type of organizations we look to support at RSF. It tries to make a positive impact in every aspect of its work—from ensuring local farmers are connected to markets to employing a zero-waste strategy,” says Kate Danaher, Senior Lending Associate at RSF.

Cocafa1Madécasse

Brooklyn-based Madécasse is the only company making high-quality, hand-wrapped chocolate and vanilla products in Africa from bean to bar. Unlike traditional chocolate manufacturing, which creates only minimal income for cocoa farmers, every process in Madécasse’s chocolate production happens in Madagascar. A line of credit from RSF allows Madécasse to finance inventory purchases and cover cash-flow gaps throughout the year.

“Companies like Madécasse take the concept of fair trade to another level,” says Danaher. “By turning raw materials into finished products in-country, they provide skilled jobs and economic opportunities to people who have few options.”

Know any loan candidates like these? Please send them to Wanted: Social Enterprise Stars.

A History of RSF Social Finance

September 25, 2014

As part of our 30th anniversary we have pulled together a timeline of RSF’s history to celebrate our growth.

Originally published in the Spring 2014 RSF Quarterly

1936 – The Rudolf Steiner Foundation is incorporated as a treasury for the Anthroposophical Society in America. The foundation remains small for nearly 50 years.

1983 – Siegfried Finser (a trustee of the Foundation) begins meeting with colleague, John Alexandra, to look for ways to work with money that are more consistent with the spiritual and social insights of Rudolf Steiner.

1984 – Mark Finser, Ann Stahl, and Philip Mees join S. Finser and Alexandra in the startup. Soon after, RSF receives a request for a loan from the Pine Hill Waldorf School in New Hampshire, which was destroyed by fire the previous year. When the request is made, the Foundation only has $6,000 cash in assets. The founding group reaches out to the community to fundraise, and the Rudolf Steiner Foundation makes its first loan commitment in the amount of $500,000.

RSF_30th_purpleRSF’s first offices are located in John Alexandra’s garage in Spring Valley, New York.

Total assets: $356,000
Loan Portfolio: $88,000
Investor Funds: $315,000
Client Accounts: 17

1985 – RSF begins making grants through its first Donor Advised Fund, made possible by the generosity of Mary T. Richards.

1989 – RSF reaches financial stability, operating income matches operating expenses for the first time.

Total assets: $5,067,000
Loan Portfolio: $2,893,000
Investor Funds: $3,563,000
Client Accounts: 264

1991 – Mark Finser is elected RSF’s first executive president and CEO.

1994 – RSF moves to its first entirely owned property in Harlemville, New York, with a small office still in Spring Valley.

Total assets: $9,022,000
Loan Portfolio: $4,458,000
Investor Funds: $5,060,000
Client Accounts: 445

1998 – RSF moves to the Presidio in San Francisco. This move is symbolic of a major change for the organization. At this point, RSF begins to expand its activities beyond anthroposophical initiatives and becomes more active in the world by standing for change in the way money and resources are viewed and utilized by humanity.

1999

Total assets: $30,608,000
Loan Portfolio: $14,253,000
Investor Funds: $12,568,000
Client Accounts: 535

2002 – RSF launches its first pilot for for-profit lending called the Fair Economy Fund. Early borrowers include Organic Bouquet and Bent Oak Farms.

2004

Total assets: $80,691,000
Loan Portfolio: $34,081,000
Investor Funds: $39,162,000
Client Accounts: 1010

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2005 – RSF rebrands as RSF Social Finance to be clearer about its position and work in the world of finance. RSF adopts “inspired by the work of Rudolf Steiner” to keep the connection transparent.

RSF is among the first in the industry to launch mission-aligned Donor Advised Funds (DAF). With this new format, assets held in DAFs are invested for social and environmental benefit.

2007 – Don Shaffer joins as President & CEO; Mark Finser becomes Chairman of the Board. At that time, RSF’s assets have grown to $120,000,000.

2008 – The RSF Mezzanine Fund is launched. This is the first fund to provide mission-aligned financing (from accredited investors) for early-stage social enterprises.

2009 – RSF breaks from LIBOR as a benchmark for setting interest rates, and launches RSF Prime, a community-based model for determining interest rates. The first Quarterly Pricing Meeting – a community discussion to recommend rates – is held in September at RSF’s offices.

Total assets: $123,005,000
Loan Portfolio: $69,149,000
Investor Funds: $64,785,000
Client Accounts: 1228

2010 – In response to the indirect, opaque, impersonal and volatile nature of the stock market, RSF divests from all public equities and redirects capital to investments more closely aligned with its values.

The RSF Program Related Investing Fund (PRI) is launched. This fund serves the increasing number of private foundations interested in using program related investment to support charitable projects. The Fund focuses on the Food & Agriculture sector.

2011 – The first RSF Shared Gifting meeting is held. Shared Gifting is a new model of grantmaking that gives grantees the power to decide how a pool of funds is allocated among participants. This model encourages collaboration instead of competition and is based on RSF’s Mid-States Shared Gifting Group.

In partnership with Leslie Christian of Portfolio 21 Investments, RSF publishes “A New Foundation for Portfolio Management” a white paper that challenges the traditional notions of portfolio theory and investment management. It is grounded in the understanding that economic growth cannot be infinite on a planet with finite natural resources.

2014 (Q1 2014 estimates)

Total assets: $162,998,000
Loan Portfolio: $74,769,000
Investor Funds: $99,704,000
Client Accounts: 1836

RSF Seeks the Next 25 Social Enterprise Stars

September 2, 2014

Socent logo

Today we’re excited to launch the Next 25 Social Enterprise Stars campaign to attract a new cohort of extraordinary borrowers.

We’re looking to add 25 social enterprise stars to our loan portfolio over the next year—and we need the help of everyone in our community to find them. You’ll be hearing from us about our search and our newest borrowers here on this blog, on social media, at events, in our newsletter—everywhere.

We know there are exciting enterprises across the U.S. and Canada that could grow with our help, but they may not know about us—and we may not know about them. So we’re asking you—our investors, borrowers, advisors, partners and friends—to be our eyes and ears and send compelling candidates our way. You’ll be expanding your impact, and the enterprises you refer will benefit from working with a pioneering funder that has a true commitment to helping social enterprises succeed.

Why are we doing this now? Our assets have grown 39 percent over the last three years, as more and more investors are putting their money to work for social benefit. That means we’re able to lend to more social enterprises than ever.

Here’s what we’re looking for: established businesses and non-profit organizations that are doing groundbreaking work in food and agriculture, education and the arts, or ecological stewardship—and could significantly expand their impact with a loan of about $200,000 to $5 million. (Our average loan is $800,000.)

To receive a loan from RSF, an enterprise should have these qualifications:

  • A social benefit mission in one of RSF’s three focus areas: Food & Agriculture, Education & the Arts, and Ecological Stewardship
  • Incorporation in the U.S. or Canada
  • Strong collateral (which may include pledge or guarantee communities)
  • Excellent history of repayment (both interest and principal) on any existing debt
  • Funding needs ranging from $200,000 to $5 million ($100,000+ for arts organizations)
  • 3 or more years of operating history
  • Operational profit, or a clear path to profitability in 12 months
  • Annual revenue of $1 million or more ($500,000 for arts organizations)

Please send candidates that meet the criteria to our Next 25 Social Enterprise Stars page.

Thank you for helping to build the next economy! And please share news of our search through the social media you use—we’re using the hashtag #SocentStars.

Healing Through Financial Transaction

May 9, 2014

This CEO letter was originally published in the Spring 2014 RSF Quarterly.

Dear Friends,

We’re so happy to be celebrating RSF’s 30th anniversary this year.  It is an honor and a privilege for me to be leading this amazing organization, having been here for just 22% of that time (since 2007).

Since 1984, we have made nearly $300 million in loans to social enterprises.  We have a 100% repayment rate (principal + interest) to our investors, and a 2% cumulative loss rate on our loan portfolio (which is extraordinarily low by any objective measure.)  We now have over 1,500 investors and $100 million in our flagship Social Investment Fund.

Additionally, we have facilitated over $100 million in grants, with the pace increasing to between $10-15 million per year recently.  We currently have a staff of 38 with a $6 million annual operating budget.

We are proud of our growth, but more important is our focus on potency, not scale.  We have worked extraordinarily hard to create a culture in which each relationship is sacred.  We want to shift the conventionally antagonistic power dynamic between provider-of-capital and receiver-of-capital.  This takes time and considerable effort.

I recently visited one of our borrowers in central Florida, called Uncle Matt’s.  As a 4th generation citrus grower, “Uncle Matt” McLean and his family make organic orange juice.   It’s super tasty, and it comes with a twist.

Today, there are over 600,000 acres of citrus groves in Florida—only 3,000 acres are certified organic.  Uncle Matt’s oversees the majority of this organic acreage.  About 15 years ago, they were told by scientists from the University of Florida that their groves would likely be in serious jeopardy due to what’s known as “citrus greening” – a bacteria that is steadily wiping out citrus fruit worldwide.  It turns out that the organic groves are much more resistant to the bacteria than conventional groves.  The scientists were wrong—they thought the genetically-modified, pesticide/herbicide regimes of the conventional growers would be more successful, and had told the McLean’s they were crazy.  Now these same scientists are visiting the McLean’s farms on a weekly basis in order to study exactly how their organic methods are working.  Currently, we are working to help the McLean family to purchase a 170-acre grove that is being threatened by housing development from nearby Orlando.  It’s possible the solution to the global “citrus greening” epidemic lies in the organic methods from this tiny plot of land, and could ultimately save millions of trees worldwide.

This is an example of our focus on potency.  We have been to the McLean groves twice in the short time we’ve had this loan—their previous bankers from Orlando had never visited the farms, only wanting to see the processing facilities.  We are trying to find investors for the land purchase, introducing them to biodynamic growers around the country, and connecting them to other organic food entrepreneurs in the RSF borrower community.

We believe we’re helping to create an energetic field where healing-through-financial-transactions is possible.  Our plan is to steadily expand our trust network over the next 30 years, one relationship at a time.  We look forward to engaging all of you in that process.

Warmly,

Don

Don Shaffer is President & CEO at RSF Social Finance

The Poetry of Transformation

April 29, 2014

RSF_30th_purpleThis article was originally published in the Spring 2014 RSF Quarterly.

by John Bloom

One beautiful aspect of transformation is the evolutionary element of continuity. Nature is alive with these mysterious metamorphic processes, from seed to leaf, from DNA to a human being. If one can accept that even in a world full of intentionally disruptive activities there is an underlying connective thread, then our task is not to react to “revolutionary” events as isolated, but rather to understand them instead as symptoms of this deeper process. In the grand scheme, one could call this the evolution of human consciousness, and there is poetry to its path—though not always an easy one. For example, what if we took the performance of the stock market as a barometric measure of the human spirit? What would that really say about us as individuals, our relationships, and the culture in which this investment marketplace is embedded? Even if I have no shares or investments, am I really separate from the stock market? And, how could I hold that thought if I really believe (and I do) that we are fully interdependent and interconnected?

It is not an accident that I chose the example of Wall Street. At RSF we often cite it as the antithesis of what we are trying to accomplish through our purpose of transforming the way the world works with money. What we call our theory of change—to make every transaction direct, transparent, personal, and based on long-term relationships—is actually our theory of transformation. We know that, no matter how active and thoughtful we are, we are not going to flip the human-institutional-behavior-money-transaction switch over night. We understand that each individual has to take him or herself through a process and practice. And we know there are more people who have come to this realization, and many more working to get there. From this perspective, our clients join us as a community of practice and as transformational activists/participants.

Given the challenge of gathering a thirty year perspective on the evolution of RSF Social Finance (and I have been honored to be part of RSF half that time), the question that arose for me was: How does an organization committed to transformation lead by example? This question, of course, brings one back to origin stories and historical data. This information is important, and RSF’s emergence in 1984 through the loan to the fire-destroyed Pine Hill Waldorf School is well storied. Many more stories have transpired over the last thirty years as a browse through our RSF Quarterly and Annual Report archives would show. Both inwardly and outwardly much has changed. We are now nearly forty staff, our loan portfolio is approximately 50/50 non-profit and for-profit and the character and quality of those loans have grown more complex. Where once Waldorf schools were our anchor borrowers they are now less than half. For an organization founded to further the work of those directly connected to Rudolf Steiner’s work, it could feel to some that we have not only changed, but also left anthroposophy behind. This is not at all the case. Many of our early clients assumed Waldorf schools defined that relationship, but we have now stepped far more fully into supporting the evolution of an associative economy—as Steiner imagined economic life should unfold—through such efforts as our quarterly pricing meetings.

Despite the allure of talking about all that we have accomplished, I find myself drawn to trace what I would consider the more character-based aspects of the organization—not so much what it has done, but rather who it is and what it stands for as an expression of its being. If one follows this thread of core values and practices, the steady evolution of a spiritually inspired financial organization, and specifically the inspiration of Rudolf Steiner’s work, becomes visible in a way that speaks of continuity—a kind of poetry of transformation.

There is a bit of the then and now in how I will approach this exploration. And, there will be some language that seems a bit esoteric as RSF was first and foremost a financial arm of the Anthroposophical Society in America, founded to further Rudolf Steiner’s work. In addition to this founding commitment there was a vision for working in a new way in finance and with money. Here is a selection from “The Foundation’s Ideals ” from the 1985 brochure:

To serve as an objective third party in transactions between donors, lenders [investors in current parlance], and receivers of financial resources. Interest in the intentions of others is its primary focus.

To foster:

  • A threefolding of social life that reflects the threefold organism of the human being
  • Increased understanding of the fundamental social law and its working in society
  • A spirit of determined cooperation in the financing of the work of the anthroposophical movement

[Steiners fundamental social law is, in abridged form: the degree to which we work to meet the needs of others, our needs will be met. Steiner was asking us to recognize the primacy of interest in the other over self-interest]

Fast forward to the present. Here are the first two of RSF’s current operating principles all of which were developed collaboratively by current staff, none of whom would likely have seen the original brochure. All twelve principles can be found on our website along with our purpose and values.

  • Transformation: We are committed to working with those who seek to transform their relationship to money and with those who seek to redefine the core assumptions of our economic and financial systems. We strive to lead by example.
  • Service: We co-create RSF Social Finance with our stakeholders – staff, board, investors, donors, borrowers, grantees, asset managers, partners, and friends. Through listening, we try to discern what is being called for next in a spirit of service. Long-term relationships are of primary importance. We place high value on intention.

I could do a detailed analysis between the earlier brochure statements and our current operating principles, but am hoping that the focus on intention, interest in our clients and the world, determined cooperation/co-creation, and a view of working with money as a tool for cultural change stand out immediately.

In researching this material, I found myself taken aback at how much significant outward change, growth and visibility could happen, and at the same time, how slowly and steadily RSF’s core being has evolved to becoming reflective of founding ideals, yet more linguistically true to those currently doing the work. It has also become accessible to an increasingly broad audience.

So how has RSF, an organization committed to transformation, continually transformed itself in a way that garners trust and engagement for public benefit? Such an organization listens thoughtfully and learns deeply through its interest in others. It holds that wisdom is held in the wider community rather than only by the organization itself. At the same time it reflects on what the world is asking, the opportunities it presents, and, in the spirit of inquiry, asks how its core principles can be practiced and developed through service. As an organization, RSF works at knowing itself while deepening its connections to its spiritual well-spring as a way to best prepare to be of service to the world.

Money and financial transactions are RSF’s tools. So we continue, thirty years later, to benefit from Rudolf Steiner’s insights, from the insights of RSF’s founders, and from the gifts of wisdom and resources from staff and clients, so that personal and organizational change invite and lead the cultural and financial system transformation needed for a regenerative future.

John Bloom is Senior Director of Organizational Culture at RSF Social Finance.

30 Years of RSF Social Finance

April 7, 2014

 hjhj         

RSF_30th_purpleWe are thrilled to kick off our 30th anniversary celebration this month with the latest RSF Quarterly, which reflects on RSF’s transformation since 1984. Read insights from John Bloom, RSF’s Senior Director of Organizational Culture, on what it means to be inspired by the work of Rudolf Steiner and how we remain committed to transformation. Guest essayist and author Charles Eisenstein expounds on investing in the ecological age and how such investment could be rethought of as gift. RSF community members share how they’ve transformed the way they work with money. Also, take a look at how we have grown over the last 30 years in a History of RSF timeline.

We would like to thank all of our clients, partners, and friends who have been a part of reaching this exciting milestone as a leader in the growing field of social finance. Keep an eye out for more 30th celebration news, here, on the Reimagine Money blog.

To download an electronic copy of the Quarterly, click here.

RSF Links Socially-Conscious Borrowers, Investors

December 18, 2013

RSF was recently featured in an article in the The Press-Democrat. Author Cathy Bussewitz interviewed Don Shaffer, President & CEO, and other attendees of the recent Pricing Meeting in Santa Rosa, CA.

It was a strange place for a meeting about interest rates.

On a cold night at the Summerfield Waldorf School in Santa Rosa, while a crowd mingled in the school auditorium munching on locally made hors d’oeuvres under the warm lights of a Christmas tree, a group of borrowers and investors hashed out specifics on the details of their loans.

The event was held by RSF Social Finance, a San Francisco-based nonprofit that provides loans and investment opportunities to socially-conscious enterprises. It was part of RSF’s attempt to make finance more transparent, by bringing borrowers and lenders together in one room.

“Our stated mission is to transform the way the world works with money, and the way we look at it is one relationship at a time,” said Don Shaffer, president and CEO of RSF.

Press-Dem image

Esmerelda Arreola packages tea displays of Guayaki yerba mate at its Sebastopol facility. (John Burgess/ Press Democrat)

“The way I describe our financial system today is as complex, opaque and anonymous, based on short-term outcomes,” Shaffer said. “And what we try to do at RSF is to model financial transactions that are direct, transparent and personal, based on long-term relationships.”

To accomplish that goal, RSF creates an unusual opportunity for the borrowers — companies like Sebastopol beverage maker Guayaki — to meet with investors. In the gatherings, known as “pricing meetings,” the borrowers explain how they’ve been spending their money and how a change to their interest rate would impact their bottom line. Investors have a chance to meet the entities they’re helping to develop, and they also get a chance to chime in on what a change to the interest rate would do for their financial outlook.

“The pricing meetings are so powerful,” said Susanne Karch, owner of Estate Services, based in San Rafael, who has invested about $17,000 in RSF. “After those meetings, I always go home and write another check.”

Read the full article here

 

Serving the Underserved: Marketing to Make a Difference

October 28, 2013

RSF and borrowers, Indigenous and Common Market, were recently featured in Forbes. Author Patrick Hanlon, shares stories of social entrepreneurs across the world using the power of business to address economic and social challenges.

timetothink-300x222The numbers who are underserved is beyond counting. The important news is that the ways we help to support other human beings is evolving, transforming.

The tipping point is gyrating like a mobius strip.

“Structurally it has been a little botched,” says Don Shaffer, president and chief executive officer of RSF Social Finance. “The emergence of impact investing is encouraging.”

Impact investments are made to companies, organizations, and funds with the intention to generate measurable social and environmental impact. This is a flip on typical venture capital investing, where most firms are in search of scalable opportunities.

“We are the opposite,” says Shaffer. “If our financial system today is complex, opaque and anonymous, the world we would like to see is direct, transparent and personal—based on long-term relationships.”

Shaffer cites two more differences. First, RSF Social Finance is funded by individuals and families, not by institutional investors. This means they are not driven by quarter-to-quarter financial results. They can take the longer view.

Second, RSF looks at companies designing new platforms that create wholesale change. That means the funded company itself may remain local, but their concept may be scalable to other communities.

Read the full article here

Moving Social Finance Forward: An Interview with Ted Levinson

September 12, 2013

Ted Levinson, Director of Lending, RSF Social Finance

Ted Levinson, Director of Lending, RSF Social Finance

Originally published on Social Velocity

Interview by Nell Edgington

Nell: RSF Social Finance is really the leader in the social finance market, you’ve been doing this long before anyone started talking about a “social capital marketplace.” Given that long history, how do you view the current state of the social capital market? Are we where we need to be to funnel enough and the right kinds of capital to social change efforts? And if not, how do we get there?

Ted: RSF has a twenty-nine year operating history, but it’s still early days for the field of social finance. The industry is at the same stage of development as natural food stores were thirty years ago – we’re established, we’re growing, we’re doing good work, and yet we’re still considered a fringe movement. I believe we are on the cusp of mainstream acceptance which will mean a much broader audience of impact investors (especially young people and unaccredited investors) and far greater demand for social capital from the growing number of social enterprises that are just now becoming investment-ready.

There’s been a shift in society’s view of natural food stores – we’ve overcome our fear of the bulk bins and now all grocery stores look more like natural food stores. I expect the same thing to happen with our conventional financial institutions which are just now beginning to pay attention to social finance.

What the field really needs is to expand the financial products available to social enterprises and address some of the existing gaps. Frustrated social entrepreneurs may disagree, but I think the angel capital and large-scale venture capital spaces are meeting the needs of for-profits. Incubators, business plan competitions and seed funds are providing modest amounts of funding to emerging non-profits and for-profits. RSF and some of our friends including Nonprofit Finance Fund, Calvert and New Resource Bank are addressing the middle market market.

The big voids in social finance include:

  • True “risk capital” for non-profit social enterprises. We need more foundations willing to place bets on high-potential organizations.
  • Bigger finance players or (better yet) a more robust consortium of social finance organizations that can band together to meet the $5 million + needs of high growth social enterprises such as Evergreen Lodge, Playworks and other organizations that are reaching scale.

I believe the field will get there but we’re playing “catch-up” now and social entrepreneurs are an impatient bunch.

Nell: RSF does something pretty revolutionary in that you combine philanthropic giving with impact investing, whereas these two sides of the social capital marketplace have not yet really found a way to work together in any large scale or significant way. Why do you think that is? And what needs to change in order to encourage foundations and impact investors to work more closely together?

Ted: We call our approach of combining debt and philanthropic dollars “integrated capital,” and we think it’s going to have a profound effect on impact investors, philanthropists and the social enterprises it serves.

Most non-profit social enterprises rely on a combination of earned revenue and gift money. There’s no reason why a single transaction can’t bridge these two forms of capital. With integrated capital we can leverage philanthropic grants or loan guarantees to push high-impact loan prospects from the “just barely declined” category into the “approved” category. In fact, even some for-profit social enterprises are eligible for this. Our loan to EcoScraps – a fast-growing, national, composting business was made possible by a foundation that shared in some of RSF’s risk.

Integrated capital is possible because RSF works with individuals and foundations that have overcome the prevailing view that how you invest your money and how you give are distinct activities. We’re also fortunate to work with an enlightened bunch of people who recognize that philanthropic support for social enterprises isn’t a crutch or a sign of a failed enterprise.

Our work at RSF is driven by a belief that money ought to serve the highest intentions of the human spirit. Conscientiously investing money, giving money and spending money can all further this goal.

Click here to read the full interview

Ted Levinson is Director of Lending at RSF Social Finance

Nell Edgington is President of Social Velocity, a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively.

Off-the-Grid Investing: Perspectives and Voices of a Transforming Financial System

September 6, 2013

Don-ShafferOriginally published in Green Money Journal

by Don Shaffer

When you are looking for the new or emergent, you usually have to look off-the-grid. In many ways as RSF Social Finance has grown, we too have had to go off-the-grid to develop our unique approach to finance.

In 1984, a school burned down in New Hampshire. RSF organized a group of investors to rebuild it. Since then, we have made over $275 million in direct loans to social enterprises. Our track record has been excellent, with just 2 percent in cumulative loan losses over 29 years, and a 100 percent repayment rate to investors.

The key: bringing investors and borrowers closer together. We have found that if the individual investors who are providing capital and the social entrepreneurs who are borrowing capital can be more visible to each other – if they can understand each others’ needs and intentions, and sustain a personal connection whenever possible – then risk decreases and fulfillment increases.

Participants in a transaction become participants in a relationship. We believe this is nothing less than the antidote to modern finance, and can be applied on a substantial scale. It is the opposite of high frequency trading.

Specifically, four years ago RSF adopted a new approach to loan pricing for our $100 million flagship senior-debt fund. Each quarter, we convene representatives from our staff, our investors, and our borrowers to decide what annualized return rate investors will receive the following quarter, and what interest rate borrowers will pay – a radical form of transparency.

We call it community-based pricing. The response from participants has been overwhelmingly positive – and our interest rate, referred to as RSF Prime, has been very stable. We are now off-the-grid of the global financial interest rate system and no longer directly affected by the vagaries of Wall Street.

But of course the vast majority of all 401(k) programs, pension funds, and endowments are tethered to Wall Street, so it is naïve to believe we are fully off-the-grid.

This circumstance leads to questions many of us in the social finance field think about:

  • What is it going to take for the number of socially and environmentally-focused investors to grow substantially?
  • Can it happen fast enough for those of us who acknowledge the urgency of climate change and natural resource depletion?
  • Are there enough sound investment opportunities for investors who want to go off-the-grid?
  • How will we address the perennial issues of risk, return, and liquidity when there are so few established intermediaries in which to place funds?
  • What are the long-term implications for those of us who anticipate needing funds for retirement and who want to embrace off-the-grid investing?

Click here to read the full story

Don Shaffer is President & CEO at RSF Social Finance

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