Consider this: In 2020 alone, an estimated $472 billion was donated to nonprofit organizations, yet only 4% of funding went to organizations led by Black, Indigenous, and People of Color (BIPOC). It’s a reminder that communities of color and other underrepresented communities are disproportionately excluded from traditional philanthropy. The entire grantmaking process is often exclusive and expensive, making it accessible to only select nonprofits with the right expertise and networks and costly for organizations and funders to seek and distribute funding. If we are going to truly center equity in our giving, we must first understand where the philanthropic system is breaking down and what solutions are available.

System Problems in Philanthropy

Three systemic problems in philanthropy prevent money from moving to the chronically underfunded. 

The 2020 DAF Report, National Philanthropic Trust, 2021; 
Racial Equity and Philanthropy: Disparities in Funding for Leaders of Color Leave Impact on the Table,” The Bridgespan Group and Echoing Green, 2020; Shallow Review of Grant Writing, Charity Science. 

1. The amount of money sitting idle

While there are efforts underway to address the policies that govern Donor-advised Fund (DAFs) distributions, donors can proactively unlock their assets now by contributing dollars to BIPOC-led organizations and communities.

2. Smaller nonprofits are shrinking 

In 2020, big nonprofits got bigger, but the smallest nonprofits got smaller. Consider revisiting your giving strategy to provide meaningful, long-term investments in smaller organizations typically working at the forefront of social justice issues and movements.

 3. Applying for funding is complicated 

Applying for grants is a tedious, expensive process, with about 40% of applications taking a week or more just for writing. 

For historically excluded communities to thrive, those of us with access to capital need to adopt more equitable grantmaking practices making funding more accessible. 

Good News: A Shift in Philanthropy Is Happening

Philanthropic leaders are taking encouraging steps to address the systemic inequities in our sector, specifically how money is distributed to organizations. A few trends we’re seeing:

  • Organizations are strengthening mutual aid practices and regranting philanthropic dollars on their own. 
  • In 2020, foundations loosened restrictions on grantees and 56% say they plan to permanently stick with the less burdensome practices they adopted.
  • Collaborative giving is on the rise and funders are joining together to mitigate risk and learn in community.
  • More funders understand that people closest to the problems are closest to the solutions. They are centering those individuals and their experiences in the grantmaking decisions.

Five Actions You Can Take

Adopt Trust-based Philanthropy Practices
At its core, trust-based philanthropy begins with understanding power — and acknowledging that we operate in a world wherein power is wielded and hoarded in a way that is destructive to our vision of a just, equitable, and democratic society. Trust-based philanthropy is a holistic approach that requires alignment of four key aspects of work:

  • Culture
  • Values
  • Leadership
  • Practice

As you shift to more equitable grantmaking practices, streamlining applications and reporting and facilitating relationships based on transparency, dialogue, and mutual learning will go a long way.

Simplify Your Application
#FixTheForm is an international grassroots movement to identify and fix the worst elements of funding application forms that waste time and money.

Nonprofits report that up to 20% of their time is lost on “technical time-wasters” of grant applications; that’s millions of hours lost every year that could have been invested in mission-advancing work. Based on thousands of reviews of foundations and 500 responses to #FixTheForm survey, we know that grant applications are the top opportunity for reform in the field. The top three pain points are:

  1. Not being able to see the full application ahead of time
  2. Time taken to apply is disproportionate to funding amount awarded 
  3. Forms you can't save and return to. 

We can all pledge to #fixtheform.

Automate Decision Making 

GO! Grants -- designed by Headwaters Foundations -- are quick turnaround, high-impact, low-stress $5,000 grants. The simple, streamlined application process is designed to take less than an hour (and less than 10 minutes for recurrent grants) and the foundation then uses the internal scorecard to turn grants around in less than a week. 

For individuals who want to streamline the giving process, consider making grant recommendations from your DAF. Your DAF provider will ensure the funds go to an IRS-qualified nonprofit, but you are not required to request a proposal. 

Consider Who Is Making Decisions About Where Your Funding Goes

The participatory grantmaking approach to funding cedes decision-making power to the very communities impacted by funding decisions. Giving Circles, Collaborative Funds, and donor networks are moving toward this type of decision making where guidance for grantmaking comes directly from the communities themselves. 

Use a Common Proposal or Find and Fund Frontline Organizations 

JustFund is a nonprofit grantmaking solution to help funders move money to the frontlines. Through a common proposal model, organizations can apply to any funding opportunity on JustFund with one click, and individual donors and foundations can access the growing common portal with a “Find and Fund” membership. JustFund has helped move nearly $100 million to frontline groups from funders who care about getting their money to the movement. 

Request a demo.

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