When people donate to charities, they want their donation to make a positive difference in the world. They want to accelerate impact where it matters most to them. But the philanthropic sector is complex and fragmented. Challenges arise; both from the side of the funders and the receivers. But why is this happening? What are the specific challenges that funders and receivers face? And what are the opportunities for positive change?
Challenges in the Philanthropic Impact Ecosystem:
- Fragmented impact measurement: There is no objective impact measurement framework or tool to assess the efficacy or impact of projects on a global scale.
- Lack of alignment: Visibility and collaboration within the Philanthropy Ecosystem is limited as is the cross sector engagement needed to solve complex problems.
- Mismarriage between expectations and reality: High net worth individuals (HNWI) and families wish to receive expert advice, guidance and information on philanthropy and impact investment opportunities not currently provided by their wealth advisors. This idea is supported by publications from Philanthropy Impact.
- Lack of trust: There is a decline in public trust of charities, as seen in research by CAF.
Challenges that Receivers face:
- High costs: Fundraising, whether to attract investment or grants, comes at a high cost as effective communication and access to funders is hard with a lack of a common language and approach. This makes organisational structures unstable, and favours those with large reserves, endowments and other resources with the risk of missing out the smaller, newer, impact-led organisations.
- Dependency on short term, one-off grants: The current funding paradigm is reactionary, and organisations ask for funding according to what area they feel their existing funders would be interested in, rather than what is really needed. Ideally, more funders would offer a package of appropriate support ranging from grants and skills to repayable finance and impact investments.
Challenges that Funders face:
- Decision making bias: There is a tendency towards decisions being made on an emotional, relational, or loyalty basis, as opposed to data, transparency and impact information. This leads to a lack of focus on long-term global sustainable development and a lack of alignment, creating funding gaps within the sector. One way we at Maanch address this is by vetting projects and measuring them against the Sustainable Development Goals, so funders can measure the impact of their donation against tangible results. Check out our registered charities here.
- Lack of trust: Lack of transparency and awareness has made people lose trust in the system, limiting funds that can be deployed meaningfully.
- Lost potential: Small but effective social projects often struggle to scale because they don’t have enough visibility and funding.
- Wasted funding: Funding given to ineffective projects due to lack of measurement, tracking, and follow-up.
- Lack of transparency: Minimal sharing of data or join up between funders working in common cause areas which inhibits scaling of projects that could have a systemic impact.
At Maanch, we understand that philanthropic giving is an investment of your time, energy and money. Everyone is different, and different people prefer to give in different ways. Whether you rely more on your head, your heart… or somewhere in between, we offer support on your giving journey. Get in touch with our philanthropy experts.
Need for Innovation
If we are going to accelerate collective and lasting impact towards the big social issues of our time, we need to understand the interlinkages between funder and receiver challenges and address them in an innovative way.
“Philanthropy is not going away, nor should it, nor can it,” says Eric Kessler, founder, principal and senior managing director at Arabella Advisors, a philanthropy and impact investment advice firm. “Many long-term problems can be fixed by market-based investable ideas, but many other problems will always be dependent on generosity.”
The question for funders then becomes which strategy to deploy when tackling complex social and environmental issues. And with so many worthy causes, it can be challenging to know where to start. At Maanch, we are working on a unique funder-charity matching solution. This will assess the individual’s funder type and then match them to appropriate projects.
We have identified some key requirements for positive change:
- Highlighting gaps and areas of unmet need in causal areas, giving non-profits the visibility that is needed to bridge funding gaps and deliver their services in areas that may not be visible (neglectedness); and also finding a way to provide impact tracking and mapping through the universally approved framework of the SDGs (effectiveness).
- Enabling data and aggregation oversight making all data available in one place (effectiveness).
- Conducting due diligence, and shortlisting the most relevant and appropriate charities (effectiveness).
- Creating more catalysts for partnerships and collaboration between funders and charities to ensure coordination and maximum traction on impact.
Evidence suggests a strong link between people giving collectively and an increase in the total amount given. A recent study conducted by New Philanthropy Capital (NPC) and the Beacon Collaborative, showed that collaborative philanthropy around a causal area (e.g., climate change) can “increase and improve philanthropic giving” – this cause-focused approach provides higher potential in delivering more effective impact. Furthermore, by rallying around causes that need urgent attention, there is a greater chance of delivering the SDGs. Bill Gates has recently highlighted how the COVID-19 pandemic will push collaboration amongst funders to the centre of their activities, which will in turn create a “profound” impact on philanthropy moving forward. He has also emphasised the vast potential of digital platforms, which have made it easier for funders to donate to worthy causes.
SSIR also studied collaborative giving and found that when executed well, in terms of good relationships, proactivity and a clear shared strategy, funder collaboratives can drive tremendous results: greater results than funders generally believe they could achieve by working on their own. The most commonly reported benefits of collaborative giving according to SSIR interviews are:
- Learning more and forming important relationships in the sector.
- Funding a strategy more aligned to the scale of the problem.
- Identifying grantees; giving more money to an issue than it is possible to do alone; and taking more funding risks.
Despite progress in some areas, we remain a long way behind the funding required to reach the SDGs and solve the critical issues of today’s world. More innovation and effective collaborative giving is one way to bridge this gap.
At Maanch, we bring together funders who wish to collaborate on specific causal areas. If that’s you, get in touch.