May 19, 2010; Source: MarketWatch.com | Critics of the national donor advised funds affiliated with mutual fund companies sometimes charge that they are passive, transaction-oriented entities functioning simply to collect and distribute grants—little creativity beyond their (impressive) technical capacity to process huge amounts of charitable dollars. None of them are staffing up with lots of fee-costing philanthropic advisors to run “initiatives,” but Schwab Charitable is demonstrating a creative use of the assets of donor-advised funds while they sit in investment accounts.
Schwab’s “Double Give Program” allows donors to use up to 10 percent of the funds they have in donor advised funds managed by Schwab to help guarantee microfinance loans in the developing world. The funds continue to be invested and earn money for the donors’ charitable accounts, but help leverage important microfinance resources. According to Schwab Charitable’s press release, the first year of the program has generated $10 million in guarantees, which are managed by the widely admired Grameen Foundation.
The Schwab-backed commitments have been used by Grameen to close on transactions benefiting over 100,000 borrowers in Egypt, Indonesia, and the Philippines. This program has received across-the-board plaudits since it was announced by Schwab’s president and CEO, Kim Wright-Violich.
Schwab’s success points out, however, an interesting challenge for foundations: If the funds in Schwab’s charitable accounts could be used to guarantee Grameen microlending loans—and still earn money unless the guarantees had to be drawn on by Grameen—can’t we think of more creative ways of using the half trillion dollars of private foundations’ endowments as they passively generate income in market investments? Foundations might look at Schwab Charitable’s creativity and the inventiveness of foundations like the F. B. Heron Foundation and others with mission-related investments to think of how the millions in their control might be used to leverage many millions more for socially beneficial purposes.—Rick Cohen