How COVID-19 can spur long-term grant-making reforms

This piece was originally posted on the Ford Foundation website. 

We know that what moves the needle on human rights, social justice, climate action and more is the collective power of thousands of nonprofits working on the ground. But when these nonprofits aren’t financially healthy, constantly struggling to keep the lights on, the movements they serve cannot succeed. This is especially true during a crisis like COVID-19; when need is great, resources dwindle and barriers rise. 

Justice organizations cannot respond to such crises—let alone the drumbeat of well-funded, organized opposition—if they don’t have cash reserves and diverse, stable sources of funding. Yet the funding system does not support this. Studies show that only 25 percent of nonprofits have six months of cash on hand, and our work indicates that less than one in 10 organizations have that level of reserves across the Global South.

The fate of justice movements is largely tied to the choices funders and nonprofits make in rebuilding from COVID: will we see business as usual or foundational changes, such as donors giving unrestricted, multi-year grants and nonprofits intentionally diversifying their income?

We at Ford have been working toward this shift since 2016, when we launched the Building Institutions and Networks (BUILD) initiative. This program offers 5-year, non-restrictive support and allows its recipients to make strategic decisions on how to invest grant funds.

Many BUILD grantees are also participating in the Financial Innovation and Resilience (FIRE) program, developed in partnership with Spring Strategies, which accompanies organizations to build greater financial strength. By working at the intersection of programs, strategic finance, resource mobilization, and communications, it equips nonprofits with the tools to attract more flexible, long-term funding from a variety of sources and create capital reserves. They realize a huge shift in perspectives and organizational culture, transforming their relationship to money. Currently, FIRE supports 137 Ford grantees in 28 countries, of which 74 are BUILD grantees.

We’ve seen how effective the approaches of BUILD and FIRE can be.

FIRE helped strengthen the work of Indonesia Corruption Watch (ICW) and its ‘defense strategy,’ bringing citizens together through its anti-corruptions school program, advocacy, campaigns and crowdfunding . The government’s mismanagement of COVID has proven a powerful rallying point, and the BUILD grant combined with the FIRE program equipped ICW with the plans, tools and funds to scale their response at an accelerated pace. Akili Dada is an organization based in Kenya that supports leadership development of girls and young women through mentoring, training and financial support. It now owns its office and training room after building capital reserves and securing mostly multi-year grants with few restrictions. The organization became comfortable asking for what they need and want, shifting their relationships with funders from transactional to grounded in open conversation and exchange of ideas. Because of this strong position, they are able to invest in a new program and COVID response: a virtual hub to connect with girls and young women across the continent for a broader, deeper reach as well as raising of funds.

Indonesia’s Kota Kita works to encourage urban planning that benefits all citizens and includes them in the design and development process. For Kota Kita, the BUILD grant and FIRE program is an opportunity to pause, reflect and position the organization for greater impact and scale. This includes avoiding overdependence on a few main sources of income, investment in critical capacities and a more proactive approach to identifying mission-aligned funders.

A strategic move beyond the traditional grant model is not just long overdue—it's urgent. For social justice, environmental, and human rights organizations to be innovative and adequately respond to intersecting global crises, shocks and emergencies they must adopt a long-term approach to financial resilience.

We believe BUILD and FIRE can be a model for funders to promote long-term financial health in nonprofits. In a welcome response to COVID, a growing number of foundations globally have come together to pledge greater flexibility, responsiveness, and fewer restrictions on funding. This is a good step toward reforming the funding system, but we also need to work to make it inclusive of marginalized groups and the Global South, which have long been neglected.

For years, changemakers have been challenging restrictive funding and the resulting systemic inequality in global philanthropic models. While there is much work to be done to correct for years of inequity, we are working toward this goal with the help of a historic $1 billion social bond. The net proceeds from this unprecedented financial move will enable the foundation to nearly double the $550 million it planned to distribute this year, with another $500 million for 2021. We also recently announced $180 million in funding for racial justice groups in the United States, and will continue to support those historically marginalized in society and the funding system around the world.

If funders build on the changes spurred by the urgency of COVID with an inclusive lens, we see deep, long-lasting change in nonprofits and their ability to serve their movements.

If one positive comes out of COVID, we hope it’s a profound transformation in how money flows—with equity and in service of people and the planet.