The Eye Fund: a program-related investment case study

The Eye Fund

This case study illustrates the strategic use of a program-related investment1 or “PRI” by the Bernard A. Newcomb Foundation to fund an innovative blended finance structure, stimulate investment from other sources, accelerate the expansion of affordable eye care for low-income patients, and reduce blindness through 280,306 cataract surgeries and three million outpatient procedures. By demonstrating the effectiveness of blended finance structures, the Newcomb Foundation’s PRI helped to transform the financing and expansion of affordable eye care across developing countries, and catalyzed other impact investment initiatives across the finance, energy and health sectors.

Philanthropists are increasingly using impact investing as a tool to further their charitable purpose beyond what grants alone can achieve. Impact investing refers to investments made into companies, organizations and funds with the intention of generating a measurable positive social or environmental impact alongside a financial return. This case study examines the strategic use of an impact investment made by the Bernard A. Newcomb Foundation, a supporting organization of Silicon Valley Community Foundation, to reduce blindness in developing countries by expanding treatment capacity of affordable eye hospitals.

Identifying the Need
Adequate eye care remains a unmet need in the developing world, with 89% of the world’s visually impaired living in low and middle-income countries. Blindness strips individuals of their ability to make a livelihood and care for themselves, and as a result, often creates a severe economic burden for families. For those already living in poverty, the loss of sight can easily translate into hunger, impoverishment and even death. Yet, an estimated 80% of blindness is either curable or preventable. Cataracts can be cured through cataract surgery, one of modern health care’s most effective interventions. However, avoidable blindness continues to persist at a large scale across developing countries primarily because affordable eye care organizations are constrained in their growth by lack of access to investment capital.  In 2010, there were 250 of these organizations globally.

Addressing a Capital Gap
In 2010, the board of the Newcomb Foundation approved a $500,000 subordinated debt investment in the Eye Fund I, LLC. The Eye Fund was structured and managed by a global asset manager, in collaboration with Ashoka and the International Agency for the Prevention of Blindness who convened investors and advised on the recipient eye care service providers.  The opportunity to participate in the Eye Fund was introduced by SVCF to the Newcomb Foundation board.

The Newcomb Foundation’s investment was made as a PRI, which deprioritizes financial return in exchange for highly targeted impact.  The $14.5 million Eye Fund utilized a pioneering blended finance structure with four tranches of capital (see table below). Investors agreed to receive a range of fixed rates of return ranging from 1% to 4.6%. The Newcomb Foundation accepted a lower rate of return (2%) for the riskiest, subordinated tranche of capital. This provided credit protection to the senior tranches and catalyzed an additional $12.5 million of more risk-averse capital that was essential for the Fund’s eventual formation and size.

Eye Fund Chart

Achieving Results
The Eye Fund lent capital to three hospitals in China, Nigeria and Paraguay. The three service providers were carefully selected for their commitment to increasing the affordability of their eye care services through a cross-subsidization pricing model, pioneered by the Aravind Eye Care System in India.  With this model, higher income patients subsidize lower-income patients. Across the three service providers, approximately 55% of treatment and surgeries were provided free or subsidized for lower-income patients.

The three service providers used the capital to construct five new specialized hospitals, expand community outreach programs, purchase specialized equipment and provide training programs with the goal of improving and restoring sight for lower and middle income people in their respective regions. The Eye Fund monitored impact performance of the hospitals using key performance indicators organized around themes of growth, social mission, financial sustainability and quality.  

From 2010 to 2016, the three organizations greatly expanded eye care services to low-income patients, achieving annual increases in surgical output and operating revenues equal to a compounded annual growth rate of 9% and 10%, respectively.  Collectively, these hospitals delivered 280,306 cataract surgeries and three million outpatient procedures, resulting in large scale reduction in blindness, and proof that affordable eye care organizations can deliver strong social impact and sustainable financial outcomes.  In 2017, the Eye Fund repaid all investors in full with interest.

In addition, by demonstrating the effectiveness of blended finance structures, the Eye Fund helped to catalyze other impact investment initiatives. In one example, former members of the Eye Fund team have partnered with a large foundation to establish GlobalVision, a holding company that intends to establish a global network of affordable eye care hospitals.

Catalytic Capital
The Newcomb Foundation’s strategic use of a program-related investment to address a capital gap and catalyze social benefit at scale illustrates a key “but-for” characteristic of a successful PRI. Which is to say that but for this PRI, the targeted charitable activity would not have occurred. More specifically, but for the foundation’s position as a subordinated debt holder, which de-risked the investment for others and attracted more capital, the charitable activity of accelerating the expansion of affordable eye care to low-income patients would not have occurred, nor at the scale at which it did.

Philanthropy has been referred to as the “thin edge of the wedge” of social change. This case study illustrates that concept by demonstrating how a relatively small program-related investment can be used to de-risk an investment for other investors, catalyze additional capital, and address a systemic social need at scale.

1 Program-related investments are legally defined in private foundation tax code.  While technically not applicable to supporting organizations or donor advised funds at community foundations, SVCF follows private foundation definitions and IRS guidance as a matter of best practice.


About SVCF
The Newcomb Foundation’s investment in the Eye Fund also helped to shape SVCF’s impact investing services, which include due diligence, deal structuring, administration and monitoring. Since 2007, SVCF has provided impact investing expertise to a growing number of individual and corporate philanthropists wishing to make impactful investments to both for-profit and nonprofit social enterprises.  Contact or visit for more information.

SVCF thanks the Bernard A. Newcomb Foundation for their ongoing support of SVCF, their commitment to assist the blind, and for the leap of faith they took in 2010 in making their first program-related investment to address preventable blindness in developing countries.  We are grateful to David Green of Ashoka who introduced the Eye Fund to SVCF, and to Asad Mahmood, who together with David made the concept a reality. Last, we thank the project team at Tideline, including Jane Bieneman, Tristan Hackett, Christina Leijonhufvud and Ben Thornley, who drafted and shared an early release of their report, Impact Performance Assessment, THE EYE FUND I, LLC.