Program-related investments (PRIs) — a concept from US philanthropy that's increasingly practised in Australia, New Zealand, and globally — allow foundations to deploy capital in forms beyond grants: below-market loans, loan guarantees, equity investments, and other instruments that advance the foundation's charitable mission while expecting some financial return.
A program-related investment is a financial instrument that:
1. Has a primary purpose of advancing charitable mission (not maximising financial return)
2. Generates a financial return (though below-market rate)
3. Deploys capital that can eventually be returned and redeployed
PRIs sit between pure grants (no financial return) and market-rate investment (no charitable subsidy). Common forms:
Below-market loans
Loans at interest rates below what the borrower could access commercially — subsidising organisations (charities, social enterprises, community housing providers) that need affordable capital but can service some debt.
Loan guarantees
Foundation guarantees a portion of a loan made by a commercial lender — reducing the lender's risk and enabling lending to organisations that couldn't otherwise borrow. The foundation puts capital at risk but only deploys it if the borrower defaults.
Equity investments
Foundation takes an ownership stake in a social enterprise — typically accepting below-market returns in exchange for social mission alignment. Less common due to governance complexity.
Deposits and bonds
Foundation deposits funds with a Community Development Finance Institution (CDFI) or similar at below-market interest, enabling the CDFI to on-lend at affordable rates to community organisations.
Leverage: a single dollar of loan or guarantee can enable significantly more community investment than a grant. A $100,000 guarantee might enable $500,000 of commercial borrowing.
Recycling capital: unlike grants, PRI capital returns and can be redeployed — a foundation can achieve greater total impact over time with the same capital.
Filling capital gaps: some community needs require debt or equity, not grants. Affordable housing construction, social enterprise startup, community facility development — these may require capital structures that grants alone can't support.
Complementarity: PRIs complement grants in a broader philanthropic toolkit — some situations call for grants, others for loans or guarantees.
PRIs are less developed in NZ and Australia than in the US (where they have a specific tax framework), but are growing:
New Zealand Community Finance (NZCF)
New Zealand Community Finance is a social lender providing affordable loans to community organisations — supported in part by below-market deposits from philanthropic foundations acting as a PRI.
NHFIC (Australia)
Australia's National Housing Finance and Investment Corporation aggregates below-market financing for community housing providers — a quasi-PRI structure at scale.
Community development finance initiatives
Some NZ community foundations and charitable trusts have made below-market loans to social enterprises and community organisations as experiments in PRI-style investing.
Ākina Foundation impact investment fund
Ākina has worked to develop impact investment vehicles for New Zealand social enterprises — some involving PRI-like instruments.
Regulatory uncertainty: NZ and Australian charity law doesn't explicitly provide for PRIs in the way US law does. Foundations need legal advice on whether PRI-like instruments are consistent with their charitable purposes.
Governance complexity: PRIs require more active portfolio management than grants — tracking loan performance, managing default risk, monitoring financial health of investees.
Capacity: many foundations lack the investment management expertise to structure and manage PRIs effectively.
Pipeline: finding suitable investees that can service debt (even at below-market rates) is challenging in a small market.
Adjacent to PRIs are mission-related investments (MRIs) — where the foundation's endowment (not charitable distribution budget) is invested in mission-aligned ways while still targeting market-rate returns. MRIs include:
- ESG-screened investment portfolios
- Impact investments at market rate
- Shareholder advocacy and engagement
The distinction is important: PRIs come from the distribution budget and are mission-first; MRIs come from the endowment and are return-first with mission alignment.
PRIs are suited to foundations that:
- Have significant unrestricted capital that can tolerate delayed return
- Have or can access investment management expertise
- Have identified specific capital gaps where PRIs would be more effective than grants
- Are prepared for more active portfolio management than grant oversight requires
For smaller foundations or those new to impact investing, PRIs may be premature — a phased approach (grants first, then PRIs as capability develops) is common.
As New Zealand's philanthropic sector matures, PRIs and related instruments are likely to grow:
- Social enterprise sector development creating PRI demand
- Community housing finance need creating natural PRI opportunity
- Growing sophistication of foundation boards and investment committees
- International examples providing templates
Philanthropic sector organisations — Philanthropy NZ, the Social Enterprise World Forum — are building awareness and capability in blended finance approaches including PRIs.
Tahua's grants management platform supports foundations managing complex portfolios that include both grants and program-related investments — with portfolio tracking across instrument types, investee financial monitoring, impact measurement, and the tools that help sophisticated foundations manage blended philanthropic approaches.