The end of the grant era

The changes in the funding landscape are fast and furious, especially for organizations that promote equality, human rights, and climate justice. We are increasingly witnessing efforts by governments and big corporations to silence dissent or clamp down on foreign funding.

It is no surprise, therefore, that CSO leaders globally tend to share the same two main concerns: the shrinking of civic space and securing their financial resources. While there are ongoing discussions about overhead and “pay what it takes philanthropy” (e.g., allowing non-profit organizations to use what they truly need for administration costs, rather than allocating an arbitrary 10-15%), only a small group of funders are actually changing their practices. Most still believe that investments in learning and innovation, state of the art technologies, good salaries and a healthy workspace are luxuries that CSOs can do without. But when grants have unrealistic overhead expectations—as most traditional grants do—organizations simply starve.

Now is the time to rethink the financing of the critical work of ending inequality and securing rights and climate justice. 

Now is the time to rethink the financing of the critical work of ending inequality and securing rights and climate justice. In fact, while this shift might be driven by necessity, it also presents a real opportunity for greater influence and impact. The vast majority of CSOs promoting rights and justice globally still have the support of traditional, mostly foreign grants—where a donor supplies money for a program or project. These grants can actually leverage innovation through investment in financially resilient models that sustain the work beyond grants.

New financial models are a great opportunity to affect change. Asking donors for money and then turning around to implement funded programs is an old model—so is making a grant and waiting for results. CSOs need to break with the notion that funds are a means to an end, and begin to develop financial models that are integral to the mission of their organizations.

Accompanied and supported by Spring Forward, close to 100 CSOs globally have moved towards becoming more financially resilient by building greater fiscal strength in a radically changing funding landscape. Once leaders take the time to reflect on their specific funding model, along with the developments and trends affecting this model, they are quick to become pro-active and innovative. Building and sustaining financial strength requires the same level of innovation and resilience as running high impact programs.

In a world where boundaries between “doing good” and “making money” are increasingly blurred, a whole new array of financing opportunities are beginning to present themselves. For example, the Kenya-based Arid Land Information Network (ALIN) has developed a social enterprise model by creating a company called Sokopepe Limited. Through Sokopepe, ALIN helps to strengthen farming practices with record keeping and marketing. As a result, farmer’s revenues have gone up considerably, enabling them to pay for services. In turn, this has generated a new revenue stream that helps ALIN advance its mission.

Image by Apptio (Some rights reserved)

In a world where boundaries between “doing good” and “making money” are increasingly blurred, a whole new array of financing opportunities are beginning to present themselves.

Another case is Hivos Impact Investments and its Mideast Creatives program, which aims to grow a youth-driven creative sector. They do this by investing in collaborative workspaces, business development trainings and improved access to financing by mobilizing additional capital from financial institutions, individuals and through crowd-funding. Mideast Creatives supports young people in building social enterprises in areas of design, music, arts and the gaming sector. The goal is to promote disruptive ideas that challenge the status quo and introduce sustainable change in the Middle East, where sustainability is defined in terms of social impact as well as financial return.

But creative financing models aren’t limited to social enterprise. By creating a partnership with the New Delhi municipal government and a corporate partner, Manas Foundation was able to train close to 200,000 New Delhi based auto-rickshaw and taxi drivers in preventing sexual harassment and violence against women. The municipal government provided access to the auto-rickshaw and taxi drivers by making the training a requirement for maintaining their license while the corporate player, through its Corporate Social Responsibility program, provided the funding. In the process, the three partners are learning from each other and attracting new players to replicate this public-private partnership as they move into other urban areas, making India’s cities safer for women.

Another example is The East Africa Sexual Health and Rights Initiative (UHAI), whose financial model is focused on the following three steps: generating funds to purchase their own office building, creating an endowment that will generate a return to cover their entire operating budget and finally, expanding the endowment to a level where returns cover the vast share of their annual budget. UHAI recently purchased its new office building and step two is currently underway.

Then there is Conectas in Brazil, which committed to lowering its foreign grant dependency by making a strategic investment in engaging individual donors, as well as more pro-active engagement with national level foundations. Such an individual engagement strategy will grow the support base for their work, building credibility while at the same time generating revenue.

All of these examples are a clear departure from the traditional grant system. But while new financing models have great potential, they also present certain risks. Even though CSOs need to pursue alternatives, contexts vary and organizations learn and adapt in different ways. These processes require strong visionary leadership, excellent teamwork of leads on finance, resource mobilization and communications, effective positioning and communications, as well as an injection of investment capital. For this to happen, frontline leaders and their grant makers need to move from a transactional to a transformational relationship. CSO leaders need to develop and share their vision and model for future financial resilience, and traditional grant makers need to think of themselves as investors, trusting their partners to find their own unique way to adapt to changing contexts. And this includes giving them permission to fail.

We are at an inflection point. Those able to find inspiration in this disruption are able to turn the challenging external context into a real opportunity. Only when frontline leaders and their grant makers, embrace a new way of working and innovating together, are they able to deliver real transformation and big impact. Both want to get to a more just future faster. The key to doing that is to change the conversation on financing for equality, rights and climate justice.