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RSPO Smallholder Funding Mechanism Study: Case Studies Objective of study: To assist RSPO to articulate its vision of and decide steps to make operational the RSPO smallholder funding mechanism. Project Deliverables:

• Review of problem the fund may address • Recommendations around possible fund structures • Review of existing industry practices (for funding mechanisms)

Case Studies:

Mechanisms selected from 20 organizations/mechanisms

Represent wide range of possibilities – loans to grants to hybrids.

Highlight key functions and issues

Respond to RSPO’s parameters/key attributes for mechanism RSPO Priorities for Mechanism:

1.Outcome of funding mechanism is to increase volume of smallholder CSPO.

2.Model should: Be replicable and global in reach. Demonstrate additionally – fill an existing need, serve an underserved population. Be capable of producing quick wins to catalyze demonstration effect for greater

impact. Produce SMART results (specific, measurable, attainable, relevant, time specific). Leverage external funding where possible.

Mechanisms Featured:

1. Cause-related marketing / Brand-licensing model 2. Global Roundtable Fast Track Mechanism 3. Microfinance 4. Private Foundation 5. Social Investment Fund

CASE STUDY 1: Organization: Root Capital Type of mechanism: Social investment fund Sector: Coffee, Cocoa, and other food crops (fruits, vegetables, grains)

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Objective: To grow rural prosperity in poor, environmentally vulnerable places in Africa and Latin America by lending capital, delivering financial training, and strengthening market connections for small and growing agricultural businesses. Established: 1999 Structure: Governance

Board of Directors: 17 board members whose role is overall guidance of the organization, advocacy, fundraising and investment decisions.

Executive Team: Comprised of Founder and CEO and five Vice Presidents (VP of Value Chain Relations, VP of Global Programs, VP of Finance & Operations, VP of Investor Relations, VP of Strategy, Knowledge & Innovation.

Administration

HQ in USA with six global offices in Africa and Latin America.

Loan officers and monitoring and evaluation officers in each region o 10 loan officers o 2 M&E officers

Financial Advisor staff in each region o 8 staff for financial advisory activities

Disbursement: Recipients: Farmer associations and private businesses (approximately 80% of portfolio is cooperatives). Clients are identified through trade shows, buyer referrals, and through their training projects. Selection criteria:

o Standard financial due diligence. o Adapted risk analysis for each target sector. o Target enterprises currently underserved by traditional financiers.

Loans: o Average loan size of US$ 50,000- US$ 2MM o Two types of loans:

1. Short-term credit and pre-harvest loans, for a term up to one year, used by borrowers to cover costs of purchasing raw product from their farmer suppliers.

2. Long-term fixed-asset loans with terms of up to five years for investment in equipment and infrastructure.

Financial Advisory Services:

o Targets prospective and existing clients o Helps small businesses to qualify for credit o Helps mitigating the risk of lending to these businesses.

Topics covered include: accounting, financial planning, financial risk management, financial statement analysis, loan application preparation, and credit management.

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Financial Advisory Services products include: o Information seminars to explain Root Capital’s credit products, credit requirements, and

training services. o Diagnostics and workplan workshops that offer comprehensive business. process

assessment and identify areas for improvement and development. o Financial training for potential and current clients that focus on developing and

improving financial management systems. o Loan application preparation services for potential and current clients. o Specifically on financial training for current and prospective clients.

Geographic focus: Latin America and Africa Budget / Cost of Implementation (2011):

o US$ 9.2MM in total operational expenses o 84% of lending costs are covered by interest and fee revenues.

Monitoring and Evaluation: o Root Capital designed its own proprietary system for M&E. o They develop specific sector metrics and have M&E officers working closely with

investment officers in each region. Exit:

o Root Capital hopes to continue to evolve their model to frontier themes, areas of most needs, i.e., climate-smart agriculture, etc.

Results (since inception):

o US$ 399M Loan Disbursements o 2.5M Household Members Reached o 1195 Loans o 463 Borrowers o US$ 398M Enterprise Revenue o 190 Small & Growing Businesses Trained o US$ 310M Payments to producers o 593K Producers reached directly o 122K Producers reached indirectly

Relevance for RSPO: Root Capital’s focus is on agriculture in rural areas and their clients are essentially smallholders, making it a good example for RSPO to evaluate. Further, their combination of training and loans represents an interesting hybrid model that could be relevant for the diversity of RSPO target smallholders.

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Pro’s Con’s

The approach of providing loans, rather than grants, presents a good proposition to RSPO as it will enable resources to go further.

Setting up a loan mechanism may be more challenging in that identifying and structuring a fund manager may be more complicated, particularly when considering multiple regions, etc.

The combination of advisory and loans is a good model for RSPO as its clients may be varied in terms of their capacity for managing and carrying loans and debt. This approach enables a greater reach for the RSPO mechanism.

The model requires a large number of staff, for provision of advisory services, loan disbursements, and M&E. This will create a large overhead burden for the organization.

Focusing on financial literacy TA is fundamental to minimizing Root’s own financial risk and also strengthening the pipeline.

Having a hybrid model may prove confusing to the recipients/clients and be a bit more challenging for communications and messaging.

Root Capital is an NGO and so also benefits from grants and other charitable donations that helps it subsidize some of its initiatives, which are not yet able to be sustained by the market.

CASE STUDY 2: Organization/Mechanism: The Persuaders / Product (RED) Type of mechanism: Cause-related marketing tool; Brand licensing. Sector: Public Health Objectives: An AIDS–free generation by 2015. Established: 2006 Structure: There are three organizations that make up this scheme:

1. The Global Fund to fight Aids, Tuberculosis and Malaria (the recipient of the funds); 2. The Partners: Corporations that deliver products with the (RED) brand and provide a

percentage of proceeds to the Global Fund (the fund providers); and 3. The Persuaders: A US-based LLC that owns the Product (RED) label and has contracts

with the partners and the Global Fund (the administrator, coordinator and marketing agent).

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How it works The Persuaders enters into licensing agreements with the Partners who pay The Persuaders a licensing fee in exchange for the right to append the (RED) label to a segment of their product line. Partners are usually large corporations such as Nike, Apple, and Coca-Cola. In addition to use of the (RED) label and associated marketing benefits, Partners also get category-exclusivity which means that The Persuaders may not enter into contract with a direct competitor for the same category of product. That is, there will only be one such (RED) product. In exchange for use of the label, Partners commit (through a legally binding contract) to:

o Provide a portion of the sale proceeds directly to the Global Fund. This amount varies among the different partners.1

o Assign a portion of their marketing budget to promote the Product (RED) brand. o Maintain “professional standards of business conduct in their manufacturing and

sourcing and work towards providing HIV/AIDS counseling and treatment to any person working for that company or making a (RED) product.”2

o Observe certain social responsibility guidelines. o Adhere to the specifications on the use of the label.

Governance The three organizations are completely separate from one another and each has its own separate governance structure and policies. The Persuaders enter into contracts with both the Global Fund and also each Partner. Administration Although all three organizations are managed and administered as separate entities, The Persuaders, as the owner of the (RED) brand, does fulfill some coordination duties for the mechanism, as a whole. These include:

o Managing and marketing the brand. o Raising funds and drawing in more corporate partners. o Negotiating the pledges for the Partners on behalf of the Global Fund to ensure that

contract terms are met. The Global Fund submits reports to the Persuaders informing them of the amount of funding received from a specific partner.

o Entering into contract with the Global Fund to assure that 1) the Global Fund disclose the contributions received from the Partners as a single aggregate figure; and 2) the funds raised under the (RED) arrangement go to AIDS relief work in Africa, with an emphasis on programs geared at women and children.

The Persuaders have

o 22 staff covering business development, marketing, administration. o Offices in New York and London.

1 If a particular product fails to generate profits for the Partner, the licensing agreement also contains a provision that requires a minimum donation to be made to the fund 2 http://www.iilj.org/research/documents/FDC.Dadush.pdf

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Notable highlights from the Global Fund’s structure:

Global Fund Board: o Composed of representatives from donor and recipient governments, civil society, the

private sector, foundations, and affected communities. o Responsible for the organization’s governance, including establishing strategies and

policies, making funding decisions and setting budgets. o Works on advocacy and resource mobilization for the Global Fund.

Global Fund Secretariat (HQ in Geneva): o Executing Board policies. o Providing strategic, policy, financial, legal and administrative support. o Screening proposals. o Overseeing monitoring and evaluation. o Issuing instructions to disburse money to grant recipients.

Country Coordinating Mechanism (CCM): o Selected by each country, the CCM should be an existing body, but a country can also

create a new entity. There is only one CCM per country. o Partnership of key stakeholders in a country’s response to target diseases. o Responsible for submitting proposals to the Fund, nominating the entities accountable

for administering the funding, and overseeing implementation.

Technical Review Panel (TRP): o An independent group of international experts in the three diseases and cross-cutting

issues such as health systems. o Meets regularly to review proposals based on technical criteria and provide funding

recommendations to the Board.

Principal Recipient (PR): o Designated by the CCM. o Receives Global Fund financing directly for program implementation or sub-granting (or

both). o Multiple PRs can exist in one country.

The Global Fund’s Trustee (Currently the World Bank): o Manages the organization’s money, which includes making payments to recipients at the

instruction of the Secretariat.

Local Fund Agents (LFAs): o Act on behalf of Global Fund – which does not have staff at country level o Monitors implementation o Provides recommendations to the Secretariat on capacity of the PRs and on the

soundness of regular requests for the disbursement of funds.

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Disbursement: Recipients: All proceeds go to The Global Fund to Fight AIDS, Tuberculosis and Malaria. Funds flow from the Partners directly to the Global Fund. The Global Fund then disburses these funds to programs working on the prevention and treatment of HIV and AIDS in Africa, specifically programs that serve orphans and vulnerable children, as well as the prevention of mother to child transmission of HIV. Geographic focus: The focus of the giving is Africa, Rwanda, Swaziland, Ghana, Lesotho, Zambia and South Africa. But the funds are obtained from global marketing and product distribution. Budget /Cost of Implementation:

For The Persuaders, operating costs are undisclosed, but the operational budget is said to be covered from the licensing fees which also seem to vary for each partnership and are also undisclosed.

For the Global Fund, about US$ 16.6 billion has been disbursed to date. The Global Fund's overhead is less than 10%. The (RED) funds all go to programs; none go to overhead.

Monitoring and Evaluation: o Product (RED) measures its impact along in terms of funds raised and people reached.

Exit: N/A

Results:

US$ 190 MM contributed to the Global Fund to fight HIV/AIDS

14 MM People reached by programs (RED) supports

Notable Highlights from The Global Fund’s M&E process:

1. CCMs and PRs are responsible for coming up with M&E plans as part of their grant application process. They set their own benchmarks for outcomes.

2. Currently grants are for five years renew in two or three year periods. The CCMs and PRs are responsible for tracking progress against their benchmarks either every semester or quarter and report this to the global fund through performance frameworks. If their reports have been inadequate at the end of first (two or three years) cycle, they do not receive additional funding (with some exceptions). T

3. The Global Fund offers a variety of tools to help PRs develop their frameworks. 4. The Global Fund contracts independent local fund agents (LFAs) who assess the

country data in order to help countries strengthen the quality of their data.

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Relevance for RSPO: Although this model leverages consumer-facing brands and benefits from heavy marketing, which are not relevant for the RSPO fund, the mechanism offers ideas around how the fund could best structure and benefit from an arrangement with a trading platform.

Pro’s Con’s

Core capabilities are maximized; each organization is able to focus on what it does best. (The Global Fund does not have to become an excellent marketer or increase its overhead significantly; they can focus on their program’s and cause).

If the products/label fails to bring in additional products, the Partners may not benefit and may wish to withdraw.

Joint efforts for raising awareness around one brand can be powerful; In the case of RSPO, this could potentially be the role of the mills.

The model relies on the strength and abilities of a third party (The Persuaders, a trading platform, etc.), which could involve risks given that their governance is independent of RSPOs.

The (Global Fund) model enables for alternatives to establishing in-country presence.

This mechanism is reliant on sales, which may fluctuate preventing a consistent stream of funding.

If successful, this model provides financial sustainability.

CASE STUDY 3: Organization: Mibanco Type of mechanism: Microfinance institution Objectives: Supporting business people in the medium and small-scale business sector. Established: 1998 Structure: Governance Mibanco, like many other MFIs, started as an NGO and transitioned to a financial institution with a limited banking license. Currently, it employs a typical structure with:

o Board of Directors, 12 directors total

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o Executive Committee comprised of five members who make management decisions. They are designated by the Board of Directors and meet twice a month. They are elected for annual terms

o Mibanco is managed along six departments: Human Resources, Marketing, Controlling and Finances, Service Banking, Business, and Risk and Standardization.

Administration o 74 offices throughout Peru; HQ in Lima. o 1,988 employees, including 765 business advisors. o Decision-making is decentralized to facilitate a quick turn around which is often cited as

most important for clients. Loan approvals averaged a few days for most of Mibanco transactions and business advisors approve the majority of the loans; a small percentage was also reviewed by the principal manager.

Disbursement: Clients: In 2003, half of Mibanco’s clients were below the poverty level and most had no prior access to the traditional banking system.

o 54% were women o 74% micro- entrepreneurs o 21% small-entrepreneurs

Mibanco offers clients a variety of credit and savings products3 such as:

1. Micapital: Working capital for buying goods, inputs or raw materials with payback periods of up to 24 months.

2. Miequipo: To equip or renew workshop or business equipment with payback periods of up to 36 months.

3. Mifacilidad: Personal loans for any type of need. 4. Mivivienda: To buy or build houses with resources from a Peruvian Government Fund,

payback period of up to 20 years. 5. Chasqui Efectivo: Directed to micro- and small businessmen with no or very little credit

experience; loans range between approximately $100 - $400. Mibanco’s approach is to create an environment of trust with its potential clients in order to generate loyal customers and grow with them. Mibanco business analyst4 have daily visits to potential clients to get to know them and gain a better understanding of their needs so as to identify which specific financial product is most adequate.

3 2005 data. 4 The typical business analyst had university or college level educations and extensive training from the company.

Typical disbursement cycle for MFIs: o Promotion of financial product. o Evaluation of potential client and their capacity to pay, risk profile. o Approval - based on various risk-analysis methods and the evaluation of the business

advisors. o Disbursements where the loan amount, terms, installments amount and repayment

date are arranged. o Loans can be received in a continuous sequence. New loans typically become

available to a borrower if the previous loan is repaid. o All loans are to be paid back in installments (weekly, or bi-weekly). o Simultaneously more than one loan can be received by a borrower.

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Business advisors are trained to use simple language and try to fit in with their surroundings – dress casually, eat the local food, etc. The MIbanco offices are also designed to be friendly, non-intimidating places. There are two main objectives for the advisors’ visits:

1) To conduct a basic financial analysis of the micro or small business and review the cash flows to evaluate re-payment capacity.

2) To begin the process of education for the client so that they are sure to fully understand the loan terms and repayment process.

Mibanco does not require assets to guarantee loans. Qualification included: o Proof of a permanent address. o Sufficient cash flow. o Six months of operations (for businesses) and official identification.

Geographic focus: Peru, rural and urban areas Budget/Cost of implementation: Like most MFIs, Mibanco charged higher interest rates on loans compared to the market average in Peru because its creditors demanded higher rates given the higher perceived risk of Mibanco’s borrowers. However, Mibanco, like most MFIs, had a lower bad debt ratio than the market average due largely to, like most MFIs, the strength of relationship between the business advisors and the clients. This relationship building, however, takes time and effort on the part of the business advisors which results in higher fixed costs for Mibanco.

Monitoring and Evaluation: Mibanco tracks its performance along several financial indicators such as:

1. Number of clients 2. Number of loans 3. Average amount disbursed 4. Gross loans 5. Total disbursed 6. Overdue portfolio

They also track the number of clients that receive training and are developing additional social measures.

Typically microfinance institutions borrow capital from the banks at a fixed rate of interest of 5.5% to 8.3%. The MFI then has to add the cost of servicing the loan before disbursing the loan to the borrower. Thus the interest paid by the borrower of microcredit ranges from 13.5% - 20% fixed rate of interest depending on the cost incurred by the MFI for servicing the loan.

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Exit: NA Results (2010):

1. Total number of clients: 581,128 2. Total loans: 681,384 3. Average amount disbursed: US$ 2,396 4. Gross loans: US$ 1.3MM 5. Total disbursed: US$ 1.5MM 6. Overdue portfolio: 3.11%

Relevance for RSPO: Mibanco serves as a good case for RSPO to evaluate when considering a fund that would deliver loans in relatively large numbers. Mibanco faces challenges similar to those confronting RSPO, a diverse client-base with varying levels of education and business experience in rural and remote areas.

Pro’s Con’s

Ability to reach a large number of beneficiaries/ clients.

Requires development of large team in order to be successful; significant management burden.

Provides a model that can be financially sustainable and profitable.

May exclude the most vulnerable and needy.

Could leverage existing RSPO partners. May face competition from existing players and also fail to demonstrate additionality.

Would require long initial set-up period in order to establish trust within a community.

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Mibanco represents but one model of microfinance lending; several others exist which could also offer lessons for RSPO: Associations: An association is formed by the poor in the target community to offer microfinance services to themselves. The association then gathers capital and intermediates between banks, MFIs and its members. Bank Guarantees: A donor or government agency guarantees microloans made by a microfinance bank to an individual or group of borrowers. Compulsory deposits by borrowers in such banks are also included in this model. Community Banking/ Grameen Bank/ Village Banking: These are formal versions of ‘associations’ and are created by members of a target community who wish to improve their living standards and to generate employment. By offering microfinance services, these banks seek to develop their communities. Guarantees are provided by social collateral (peer-pressure) as services are distributed through 5-member groups where each member’s eligibility for loans is based on his/her peer’s performance. Credit Unions: In a credit union, members of a target community gather their money and make loans to one another at low interest rates. Compared to community banks, credit unions are smaller and non-profit oriented, charging interest rates that merely allow sustainability. Non-Governmental Organizations (NGOs): Unlike community-based models, NGOs are ‘external organizations’ and their activities range from offering microfinance services (loans, insurance, savings, etc.) to improving credit rating of the poor, training, education and research. NGOs may also act as intermediaries between the poor and donor agencies and operate locally, as well as globally (through a physical or online presence). ROSCAs Rotating Savings and Credit Associations: These are small groups, typically composed of women, where each member makes regular cyclical contributions into a common fund, which is given entirely to one member at the start of each cycle (weekly, monthly, quarterly). The benefit of this model is the matching of a client’s cashflows with the loan, the ability to structure the deal without interest, and the absence of over-head. Source: Microfinance Hub. April 2010.

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CASE STUDY 4: Organization: Sustainable Trade Initiative (IDH) Mechanism: Soy Fast Track Fund Sector: Soy Objectives: To decrease the social and environmental impact that is associated with soy cultivation. Its goal is to help soy producers to become compliant with international accepted norms for responsible soy production (RTRS or comparable). Established: 2008 Structure: Governance

o The Soy Fast Track Fund (SFTF) Board approves projects and is responsible for fund policy.

o Fund Board is comprised of donors; to date this is only IDH. o IDH selected Solidaridad (an international network organization / NGO) in Latin America

as fund manager and secretariat.

Administration o The fund is administered through a project manager within IDH in the Netherlands.

o Main role is liaising with European buyers and driving market development. o Through their engagement with buyers, IDH staff also develop projects for the

SFTF.

o Solidaridad o Identifies, screens and develops proposals. o Supports M&E of projects. o Provides inputs into strategy and decisions around the fund. o Currently, there are approximately three part-time and two full-time staff

working on the SFTF in Latin America. Disbursement: To meet the objective of increasing volumes of responsible soy, the STFT employs a deliberate focus on medium and large farms; they also look to support producers in areas defined as having higher risk (in environmental terms, deforestation, etc.) As such, the funds go to support producers and producer groups to improve their agriculture practices in alignment with the RTRS standard. Project proposals are both developed by Solidaridad, in partnership with various supply chain actors and also submitted independently by the producers and traders themselves.

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Approximately half of the projects are identified by IDH in conjunction with the buyers in Europe. Selection criteria includes: o Organizational commitment to the RTRS and long- term plan to work towards 100% RTRS in

2015. o Projects must focus on ‘Improvement through producer improvement’ o Projects must support producers and traders that deliver RTRS soy to buyers in Europe. o Projects must cover a minimum of 50% of the program costs themselves o Projects will be proposed by supply chain players. o Projects must address strategic roadblocks as identified by the IDH/IFC gap analysis. o Projects must be demand-driven: supply chain players in the lead. Commitment to procure

the certified soy from the projects into Europe. o Projects must be open to sharing of lessons, impact assessment, strategic reflection sessions

and learning events. o Have SMART result targets. o Include open book budgeting and collaboration in audits. In addition to supporting projects, the SFTF also aims to strengthen the RTRS system through outreach activities and will also offer support for the finalization of the High Conservation Value Area biodiversity mapping. Geographic focus: Brazil, Argentina, Paraguay, Bolivia, and Europe Budget/Cost of Implementation: o IDH is currently the only funder for the SFTF. o The current budget is approximately US$ 8.3MM. o The SFTF only commits to a maximum of 50% of total project costs; the other 50% must be

provided by the project itself, through supply chain actors or other donors. The vision is to evolve to a model where the SFTF covers 1/3 of expenses with supply chain actors covering the other 2/3.

o Management of the fund costs approximately 10% of total fund costs. Monitoring and Evaluation: o Projects must propose and track key performance indicators, as approved by IDH. o Solidaridad’s support includes tracking the projects’ performance.

o IDH has set very specific targets for the SFTF (target date is 2015)

o Purchased volume in metric tons of RTRS certified soy by program partners: 4-6 million

o Number of hectares under RTRS certified responsible land use by program partners: 1.3-2MM

o Number of hectares of certified farms in high deforestation rate program areas: 60,000-240,000 (20%)

o % of RTRS soy procured by NL/BE/UK/Scandinavian private partners: 100/100/30/50 o Number of partnerships between producer associations and private partners

working towards responsible soy certification: 5

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Exit: o The SFTF has is targeted to end in 2015.

Results: To date:

Goal Progress 2011 Target 2015

Purchased volume in metric tons of RTRS certified soy by program partners

124,000 4-6MM

Number of hectares under RTRS certified responsible land use by program partners

41,000 1.3-2MM

Number of hectares of certified farms in high deforestation rate program areas

6 60,000-240,000

% of RTRS soy procured by NL/BE/UK/Scandinavian private partners

6/2/0/tbd 100/100/30/50

Number of partnerships between producer associations and private partners working towards responsible soy certification

1 5

Relevance for RSPO: Good point of comparison because it deals with a roundtable focusing on a global commodity, with similar issues. However, there are three characteristics to keep in mind that greatly distinguish this mechanism: 1) RTRS has a smaller and more homogenous scope; 2) The target beneficiaries are not smallholders, so different set of challenges; and 3) RTRS is not formally affiliated with the mechanism.

Pro’s Con’s

External management makes for a lesser burden to IDH and leverages expertise and resources of Solidaridad.

Administrative set up with PT staff can be challenging and not as effective as having dedicated staff.

Has good clear objectives and end date which make external communication and tracking progress easy.

Project sourcing approach may prove to be limiting in terms of the scope of projects submitted for consideration.

Match funding requisite ensures leveraging additional resources.

Limited in that it only provides grants.

Deliberately narrowing the focus on target “change-agents” is an effective approach.

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CASE STUDY 5: Organization: Blandin Foundation Type of mechanism: Private community foundation Sector: Cross-sectoral Objectives: Strengthen rural Minnesota communities Established: 1941 Structure: Governance

The Foundation’s funds come from a Residuary Trust established by the Founder in 1941. Two entities oversee Trust investments and disbursements: a corporate trustee who is a representative of a financial institution and an individual co-trustee. Per the founders request, every three years the Residuary Trust also reviews its accounts and disbursements before a judge. The Foundation’s leadership team has a typical structure, comprised of a President and CEO and Directors of Public Policy and Engagement, Leadership Programs, Grants, Communications, Finance and Human Resources.

o Decisions on all grants over US$ 50,000 are made by the Board of Trustees (12 trustees in total).

o Quick response grants (less than US$ 50,000) are approved by staff. Administration The Foundation has 30 staff that are divided among the different initiatives: Leadership, Public Policy, Grantmaking. Blandin Foundation is a hybrid foundation as it has activities beyond grants. Blandin has its own leadership program and has built in-house capacity to provide leadership training. There are eight full-time staff that implement individual coaching, seminars and leadership training. They are complemented by external consultants. Disbursement: Blandin Foundation provides grants that are awarded to local NGOs. Individuals can apply for the leadership programs. Blandin grants range from under US$ 1,000 to over US$ 250,000. There are four types of grants. All but the major grants are accepted and reviewed throughout the year. The Major Grants are reviewed only three times a year and require a letter of inquiry (LOI) and an invitation to submit a full proposal. For most grants around US$ 1,000, only a brief project description, budget and 501 (c) 3 status proof is required.

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1. Major Grants ($50,001 - $250,000+) 2. Quick Response Grants ($1,001-$50,000) 3. BCLP Quick Start Grants (up to $5,000)

4. Itasca County Area Community Donations ($100 to $1,000)

Geographic focus: Rural Minnesota Budget/Cost of implementation: The US IRS Code determines how much the Residuary Trust distributes to the foundation, about 5% of the previous year’s net assets or 100% of the Trust's income, whichever is greater. The Blandin Foundation is the sole beneficiary of the Trust, and Residuary Trust income is the primary source of the foundation’s funding. Blandin’s average annual budget is approximately US$ 20MM:

o Total annual giving: US$ 13MM o Leadership program/training: US$ 3MM o Public Policy work: US$ 1MM o Administration: US$ 3MM

Monitoring and Evaluation: The Foundation gathers information – both qualitative and quantitative- through a consultant and produces a report. The main objective is to reflect on whether the activities are effectively getting the organization to their desired outcomes. When working with their grantees, Blandin provides guidance for the monitoring and evaluation. Applicants can select from a set of outcomes and indicators, or provide their own.

Private Foundations can be individual (i.e., Blandin) or Corporate (i.e., Shell, Cargill,

etc.). Corporate Foundations have the following notable characteristics:

Objectives: Most recently, corporate foundations are moving toward supporting

objectives that employ and leverage their core competencies, rather than the more

traditional CSR approaches. For example, Citi Foundation focuses on financial literacy

and education and works to structure programs that can both benefit from its

expertise as a leader in finance and also ultimately benefit its corporate objectives.

Governance: Most corporate foundations source trustees from the founder

company.

Source of Funding: Corporate foundations derive the majority of their funds from: o Investment income on assets originally given by the company o Regular donations from a company o An endowment linked to a company's profits

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They are required to deliver a report of no more than four pages to the foundation to describe progress. Exit: As an endowed foundation, Blandin’s giving will be continuous. However, they require grantees to demonstrate financial sustainability when possible. As a community foundation, they are committed to be a steady funder in the local area, particularly during economically challenging times. Results: o Since inception, 5,600 grants have been approved totaling US$ 336 million. o Blandin has partnerships with over 6,000 rural Minnesota leaders. Relevance for RSPO: Although there is a significant discrepancy between RSPO’s global focus and smaller pool of resources vs. Blandin’s narrow focus and large pool of resources, the Foundation’s multi-tier funding approach and wide range of target issues serves as a good reference for RSPO.

Pro’s Con’s

The financial mechanism – a trust – is a good tool in that it enables a long term, financially sustainable sources of funds. Trust rules are country-specific, so would have to be further evaluated.

A trust requires a certain threshold of resources which may be outside the scope of RSPOs fund and/or may delay how quickly RSPO can begin fund disbursements.

Tiered giving allows for a tailored approach that is best suited for each specific project/organization; tiered giving also enables cost-effective giving by minimizing the requirements for the smaller grants and allowing for more nimble funding.

M&E approach is deliberately flexible to capture both quantitative and qualitative outcomes, particularly when dealing with activities such as leadership training which are difficult to quantify In terms of their impact. However, this approach also makes it more difficult to manage risks and prevent potential failures.

Combination of capacity building and grantmaking helps the Foundation strengthen its own pipeline of future grantees.

The hybrid approach does require greater in-house capacity and therefore, higher overhead and management costs