Research shows that funder–nonprofit relationships in India's social sector are improving, with more funders offering multiyear partnerships and supporting operational and core costs. Yet despite these improvements, gaps persist in funding for organizational development, reserves, and smaller or non-metro nonprofits. To build a more resilient and equitable social sector, a sustained effort will be needed to scale the current momentum and close the gaps.

The relationship between funders and nonprofits in India is showing signs of changing for the better. Our new research reveals that funders are increasingly forging multiyear partnerships with nonprofits and supporting their essential operational expenses alongside programme costs. Continued progress down this path for India's social sector will help nonprofits to build the organisational strength and resilience they need to deliver more effectively on their missions.

Multiyear partnerships and coverage of nonprogramme costs are tenets of the Pay-What-It-Takes (PWIT) India Initiative, launched five years ago to inform and influence the mindsets and practices of funders, nonprofits, and intermediaries in pursuit of greater social impact. To that end, research conducted by The Bridgespan Group – supported by six philanthropic partners and guided by an advisory council of 15 nonprofit leaders – has shown that the impact potential of nonprofits can be enhanced when funders follow five PWIT principles: develop multiyear funder-nonprofit partnerships; pay a fair share of core costs; invest in organisational development; build financial resilience; and embed diversity, equity, and inclusion in grantmaking in India's social sector.

Our latest research, based on a survey that received responses from 460 nonprofits and interviews with 51 nonprofit leaders, funders, and intermediaries, reveals that a significant number of funders have begun to adopt PWIT practices when it comes to covering the “true costs” incurred to run a nonprofit. True costs include core administrative expenditures (overhead), organisational development investments, and reserves or corpus funding alongside programme costs. The research findings indicate four signs that suggest a shift in funder behaviour in India's social sector:

  1. Funders and nonprofits are engaging in more dialogue on true-cost support.
  2. Funder-nonprofit relationships have become deeper, more trusting, and more sustained.
  3. Improved funder support is leading to more nonprofits investing in organisational development.
  4. Funders are increasingly recognising the importance of core-cost support.

Read the full article about India's social sector by Shashank Rastogi, Rachita Mehrotra, Gunjan Saini, Aaditya Yawalkar, and Roger Thompson at The Bridgespan Group.