The Chronicle of Philanthropy reported today on the Obama administration’s attempt to update the laws surrounding program-related investments, a form of impact investing that allows foundations to invest in their charitable missions in ways beyond giving grants. Jonathan Greenblatt, the White House’s Director of the Office of Social Innovation and Civic Participation, notes that this update is the first since PRIs were implemented in 1972.
One element of the Administration’s proposal caught my eye—it seems to expand philanthropies’ ability to work more flexibly in rural communities. The Chronicle reports that, for example, the new law should support a foundation’s ability to offer “a low-interest loan to a business in a rural area that has been damaged by a natural disaster.” Apparently the original PRI rules were created in a way that focused more investments on “deteriorated urban areas.”
While new rules are still in the proposal phase and the government is accepting feedback, the focus on rural areas in particular strikes me as apt. A recent report by my colleagues Alex Neuhoff and Andrew Dunckelman, “Small but Tough: Nonprofits in Rural America,” illustrates the steep challenge many rural communities face in attracting funding. Despite accounting for 22% of the nation’s poor, rural communities receive only 8% of total nonprofit spending. In addition, in rural America there is only one nonprofit organization for every 50 square miles—compared to one in every half square mile in urban areas. The report calls for more financial support from private and government funding alike. The potential update to PRI laws seem to open up a new avenue for private funders to fund businesses in rural areas. Given the report’s note on the paucity of nonprofits in rural areas, it seems like an extremely interesting opportunity for funders concerned with rural poverty to support and pursue.
Others have reported on the challenge rural communities face in attracting funding, for example, the National Committee for Responsive Philanthropy’s "Rural Philanthropy: Building Dialogue from Within," Rick Cohen of the Nonprofit Quarterly’s “No Surprises, Rural Philanthropy Still Lags Behind” and the Council on Foundations’ issue paper, “Rural Philanthropy Growth Act.”
If you are interested in more thoughts on impact investing, stay tuned for our “Impact Investing FAQ,” which we will publish next week on GiveSmart.org.