SEATTLE — The Bill & Melinda Gates Foundation gives away $3.5 billion a year in grants, but to stretch its dollars further, the nonprofit has begun making loans, equity investments and loan guarantees.

Its investments so far include $20 million to a German company to expand banking services for entrepreneurs and low-income groups in Africa, $20 million to an international consortium to boost commercial micro-credit lending in Africa and Asia, and an $8 million equity fund to invest in health-related ventures, such as distribution of bed nets to protect against malaria in Africa.

The Gates Foundation is also working on loan guarantees toward U.S. education.Known as program-related investments, or PRIs, such methods are meant to further the charitable mission of a nonprofit, not to make money. They also impose financial discipline on recipients to help them operate more like businesses, said Karen Haque, the Gates Foundation’s associate general counsel.

“We’re going to treat these as business deals,” she said. Backing from the world’s largest private philanthropy also acts as a stamp of approval to help organizations raise other funds, she said.

Last year’s stock-market plunge hit many foundations hard; it shaved 20 percent from the Gates Foundation’s $35.1 billion endowment, causing it to rethink spending plans.

Foundations are looking for ways to maximize their impact at a time when assets have shrunk and budgets have been cut back. As more managers move from corporations into philanthropy, they are also bringing business-world approaches with them.

Program-related investments have been in the U.S. tax code since 1969, but only recently have begun to attract broad interest among charities, said LaVerne Woods, a lawyer and partner at Davis Wright Tremaine in Seattle.

“They’re becoming a tool of great interest to a wide array of foundations,” said Woods, who specializes in the nonprofit sector. Since the money comes back and can be reinvested, “it’s the gift that keeps on giving.”

With PRIs, nonprofits can make loans or equity investments in for-profit companies. One example is a Gates Foundation investment in a for-profit pharmaceutical company to develop vaccines for poor countries, Woods said.

“These can be used as tools to promote economic activity in the for-profit company where there is no incentive financially,” she said.

“There is no lucrative market for vaccines that have applications only in the Third World, but clearly it forwards a charity mission to encourage development and distribution of those vaccines.”

But it’s not the same as mission-related investments, which align investment of assets with a charity’s mission, and include actions by shareholders to affect the behavior of companies.

The Gates Foundation came under fire in 2007 after the Los Angeles Times reported it was investing in companies contributing to health problems and other human suffering the foundation was working to alleviate through its grants.

“I fully commend them for PRI investments, said Lance Lindblom, chief executive of the Nathan Cummings Foundation, “but that’s a separate issue from using their voice as owners.”

He advocates that foundations and nonprofits use their voting power as shareholders to persuade companies they own to act more responsibly on climate change and other issues, “especially when that stock is owned by a foundation with that mission,” Lindblom said.

Considering the billions that the Gates Foundation has at its disposal, “they could have tremendous influence.” 

• Kristi Heim