All Facts & Findings

Prioritise grantee centric funding

Challenge any potential assumptions that the particular social or environmental issue your business is intent on supporting is simple or already understood by you and your team. Put in the time to listen to grantees and understand their approach. Seek to explore their own preferences for funding.

Consumers

may look at a product like Thankyou, and it could be a three to five second read.

"Not everyone's going to read the entire blurb as well. That's the challenge of trying to communicate our impact model - a complex development model - about what our partners do plus the role that you the consumer is playing - all in a very quick and concise manner. So that's the challenge that we have in front of us.”

An unrestricted funding model

comes with its own set of challenges and risks

It requires a higher degree of dedicated input from donors to establish longer term, trust-based relationships with nonprofit organizations receiving funding. Measuring for impact, rather than activities, requires a deeper understanding of complex problems. It demands a high level of trust in grantees to deliver for impact, and to overcome unforeseen obstacles along the way. Businesses adopting an unrestricted funding model will need to be more comfortable with ambiguity, as activities may change throughout the life of a project. Deliverables may require longer time scales.

150,000 people in rural Uganda

benefited when a nonprofit partner pivoted from income training to food-relief.

“They were so successful in terms of pivoting that they reached 150,000 people. Now the national government in Uganda looked at their approach in the way that they pivoted. They've asked them to reach a million more Ugandans in the space of 12 months. And they were saying you couldn't have done that without unrestricted funding.”

Trust

Peter Yao reports:

“In shifting our entire giving strategy to support our grantees in what we call a grantee centric or a trust-based manner, it's having a really, really great impact. In our first twelve months that we've switched, the feedback from our partners have been really positive because they've had to pivot and they've had to meet new needs of the community [in response to COVID-19], which they couldn't have done if it was restricted funding.”

$10 million

of unrestricted grants

For Thankyou, their shift to a partnership-centric, unrestricted funding model saw them give $10 million of unrestricted grants to 18 nonprofit partners in 2020.

Sanitation in Cambodia

iDE Global's 10 year timeline to achieve success

A project of this kind - involving iterative pilots and testing, collaboration with the existing market to create an innovative solution, and a ten year timeline - would not be possible with short-term funding tied to a particular set of activities. Yet, this is how lasting and meaningful impact in this context was achieved.

10 years later, only 20%

of the people (in Cambodia) don't have a toilet

"So we really shifted the market. And so in 10 years we went from 80% open defecation to 20%, thanks to this sanitation marketing approach instead of just educating or capacity building.”

"Entrepreneurs don't go out to sell anything!"

“What we missed in our first pilot is we assumed that those entrepreneurs could also sell the toilets. But in the Cambodian context, entrepreneurs don't go out to sell anything. They wait for the customers to come. But how will the customers from the rural village in Cambodia go to a town to buy those toilets? Impossible. After this first pilot, iDE iterated their approach. They began training students and community members how to sell the toilets, using a door-to-door marketing approach."

80%

of the population in Cambodia, 10 years ago,

...was still doing open defecation. People did not have access to toilets and they didn't want to use them. So nothing had changed. One, maybe because they did not have access to a toilet. Two, they didn't know where to buy it. Three, they didn't know what a toilet was. What iDE did differently is we created what we call ‘sanitation marketing’, using human centered design. Instead of providing toilets for free, (iDE) wanted to create a sustainable solution that would outlast their project work. They identified concrete producers and taught them how to produce the toilets and how to sell them."

The freedom

unrestricted funding gives NPO's

When nonprofits are no longer constrained by tied funding and these short term reporting and funding cycles, it opens up the scope of their activities, and enables these organisations to pilot new programs, test solutions in the field, and measure impacts over a longer time period.

Thankyou's move

from tied funding to unrestricted funding

“I feel corporates seem to feel pressure to fund something really simplistic because they believe consumers can only understand it to a particular degree. We were the test case. We could've gone both ways, but we chose to make the step because we knew at the end of the day, we needed to make funding decisions that matter for the community. We'll wear the risk as a brand. But thankfully, the sales haven't dropped, and I would even say that there’s been even more positive brand recognition.”

Thankyou pivots

away from their 'Track Your Impact' model

Instead, they have shifted their focus to a model of what they term ‘unrestricted funding’. In this system, partnerships with nonprofit organisations are established over the long term, funding cycles are extended, and funding is not tied to a defined set of activities. While the desired impacts are clear, alleviating people from extreme poverty, the activities and outputs may change as required.

Thankyou's Track Your Impact

model is compelling in theory but can perpetuate obstacles

Track Your Impact and models like it might be intuitive for people to understand and support, but they can underestimate the complexities of the issues needing to be addressed and how to create lasting impactful change.

A nonprofit leader says:

‘For some reason, [funders] expect nonprofits to be miracle workers, when in fact we’re all cutting corners, skimping on resources, doing everything with far less than we should, and then bending over backward trying to find a way to make it sound like we’re succeeding, while also making sure to keep the challenges front and center, but without sounding desperate or as though we can’t handle it.’

Nonprofit organisations

have long called for multi year unrestricted funding

This type of funding enables them to plan for the future, invest in their team, and focus on impactful work. In seeking an explanation for why it is not commonplace, (CEP) found that in many cases it simply had not been made a focus or priority by funders. For nonprofits, they saw it to mean funders did not trust the sector to deliver, and wanted to remain in control.

2 in 5

nonprofits received multi-year unrestricted funding

Those that did received only a little, with most reporting that unrestricted makes up less than a quarter of their funding.

Why the success

of a project may not transfer to other countries.

"A lot of organisations assume that something that worked very well in Africa is going to work very well in Asia, but the context is completely different. The culture is different, the needs are different.”

"Interventions are very traditional"

"Sometimes funds are not flexible enough to make people innovate."

"We need to go into the communities, talk to them, see if the solution fits or not. Not all the donors can or are willing to do that. Some donors fund the pilots. Some donors, no. They want you to go and to start as soon as possible, and start doing things [before we] know yet what solution is going to work best. We need to do some research and to pilot things."

Tied funding further limits nonprofits

to account for their spending before they have been able to commence a project.

Unforeseen challenges or unexpected opportunities discovered along the way are not easily retrofitted into the project scope.

Alternative models of corporate giving

Providing short-term cash...is one model, but providing long-term financing...is a really important space.

"Large organisations need to think about their capacity to support beyond those cash donations, because it does create tension for so many charities that they're reliant on short-term funding. How can you, as an organisation, invest for the long-term, when the funding you're getting is subject to annual expectations?”

Innovation

is limited when the time scale on which to measure the effectiveness of a project is limited.

Reporting requirements on outputs and shorter time frames mean that many charity partners are constrained to rolling out traditional initiatives and particular activities in order to secure ongoing funding.

Start small and build success

“In the beginning, maybe we start with very little numbers. But if you keep funding this initiative, then years later, you will have great success. Donors, they want, in the first year, 100,000 people impacted. But how deep has this impact been?”

Short funding cycles

do not allow time for potentially impactful projects to prove their value.

Donors’ unrealistic expectations of costs needed by nonprofit organisations to roll out projects creates a ‘vicious cycle’ of underfunding, limiting the time for projects to prove their value.

Risk aversion

can limit innovation in the charitable sector

While in the business world, risk is accounted for, and accepted as a necessary element of investment in innovation, the charitable sector is often hamstrung by a low risk threshold from donors.

Restrictive funding

as a symptom of distrust in the sector

“There's this element of distrust in the philanthropic sector, and that's where you get really restrictive funders saying, ‘Hey, you can only use our funding if you do it in this way’. While they think it screams of accountability, what it actually means is it makes sense to me, the funder, which is really dangerous…”

Extreme poverty is multidimensional

"It's going to take a lot of different approaches to tackle extreme poverty.”

“Development is really complex. Extreme poverty is really complex. It is very multifaceted. Sometimes by simplifying a story, it loses all its nuances and worse still, it really doesn't do justice to some of the partners who are looking at systems and root causes as well."

Multidimensional Poverty Index (MPI)

The road out of extreme poverty is not one or two dimensional

Dimensions of health, education, and standard of living are interconnected. MPI considers factors such as nutrition and child mortality, attendance and length of schooling, through to access to drinking water, sanitation, electricity, housing, cooking fuel. In this way, it adopts a systems thinking approach to development.

Funder-determined time frames

May direct focus away from effective solutions

“It may put pressure on the NGO or the partner… They start to tailor their programs, not with the lens of reaching someone with the most effective solution, but actually reaching someone with a solution that's dictated by the funder or by the fund is a real strategy of trying to reach as many people as possible.”

Tied donations to a specific activity and timeframe

Can underestimate complexity of problem and solutions

A corporate giving model that ties a donation to activities to be carried out in a set time frame by the charity partner, rests on an assumption that solutions to address the experience of people living in extreme poverty are concrete, and that the solutions are already understood.

Evaluating the impact

of a particular project is a rigorous process

It involves accounting for what would have happened anyway without the initiative, determining the extent to which changes can be attributed to the initiative, and assessing the length of time that the measured change is beneficial. It requires greater overhead spending by nonprofit partners, with longer timelines, more resources, and a detailed framework and methodology for assessing the real impact of their projects.

The temptation of 'big numbers' in impact reporting

“I think there's always a danger with big numbers when you dig into it. We take big numbers with a grain of salt, because we don't want to be chasing numbers if they're not the most impactful things to chase. And so we've got to really know what's the most effective and impactful solutions, and that's the real number that we should be chasing versus an ethereal number to bolster up big claims.”