Unrestricted Funding, Unlimited Advantages
by Gladys Onyango, Director of Program Learning & Impact
We recently wrote about what we are doing to become (and remain) the best partner to our grantee-partners based on what we learned from our 2023 Grantee Perception Report. The most significant theme emerging from the GPR is that our unrestricted funding is gold for our partners, nearly all of whom rely on grants and donations to carry out their important work. Despite a growing number of funders making a case for flexible, unrestricted funding, the trend has been slow to catch on in Africa, where most funding available to nonprofits is still majorly limited to specific projects or programs. Here is what our partners told us, in their voices, about the importance of unrestricted funding for their organizations and why more donors should consider funding as flexibly as possible.
1. Unrestricted funding promotes focus on mission and impact.
When organizations find their sustainability and survival dependent on the shifting priorities of funders, they are forced to be responsive to the funders rather than to their communities of impact. Mission creep — the tendency to take on projects outside one’s organizational focus to attract funding — is a common challenge, especially in Africa’s civil society landscape, where leaders often find themselves devoting more efforts towards fundraising than their primary organizational objectives. This sentiment is echoed in a recent Center for Effective Philanthropy (CEP) report.
Unrestricted funding affords organizations longer-term breathing room; as one of our grantee-partners described, “Because our funds are not restricted to particular activities, I can use a significant sum to pay staff salaries throughout the year to support communities without worrying… I know the rent will also be catered for, which gives me peace of mind to concentrate on the work.” Another partner who utilized Segal Family Foundation funding to develop a strategic plan after a tumultuous period of change says, “We are now very clear in what we want to achieve and how our activities align with the vision and mission of our organization…[this] is being appreciated by all our donors and it also directing our operations.” Perhaps not surprisingly, strong organizations with mission clarity tend to be viewed as more credible and capable — positioning them to leverage more funding from other donors.
2. It dignifies the people doing the work.
A recent article by Fund the People posits that nonprofit and social sector workers and volunteers are often regarded as an overhead cost, yet they are the bedrock. Unrestricted funding can help organizations pay equitable, dignified wages and benefits and invest in good human resource systems to promote staff well-being and development. The majority of SFF grantees said unrestricted funding was key in helping them to hire and maintain a highly qualified, productive team. For organizations that start out volunteer-led and then transition to paid staff, that shift is an expensive and intensive period that also likely generates the highest ‘return on investment’ because attracting and retaining qualified staff is foundational. A well-resourced and supported staff means an organization can effectively deliver programs well.
In Africa, the social impact and NGO sector is a significant employer; it is often a foothold into first employment for millions of youth and a training ground for seasoned professionals who then rise into leadership and policy roles in government or public service. However, the temporary nature of project-based funding structures contributes to precariousness in the sector. It creates ripe conditions for exploited volunteers and workers surviving on short-term contracts, unable to give their best, and always looking for the next thing. The sector cannot hire competitively; when they do, their skilled staff is poached for more stable employment elsewhere. Unrestricted funding is essential for any funder who cares about dignified livelihoods and a sector built on just labor practices: with flexible funding, nonprofits can pay competitive salaries and break the job uncertainty cycle for those doing the work. For us at Segal Family Foundation, flexible funding is one way to demonstrate our commitment to wellness.
3. Unrestricted funding enhances impact and supports organizational impact and longevity.
Nonprofits and social enterprises across Africa vitally complement governments and markets in providing immediate, tangible services and opportunities — often in marginalized and disadvantaged communities, a role made more visible during the COVID pandemic. For many of our partners, unrestricted funding is key to consistently delivering these essential services. An SFF partner running a community health center in an underserved community with high HIV, diabetes, and hypertension rates says, “Having enough medication to distribute to all our beneficiaries consistently has been one of the most significant changes from having unrestricted funding because people were suffering without the proper medication and treatment, but all now are well taken care of.”
In contexts such as schools, health care settings, and home outreach programs that require adequate numbers of professionals, access to unrestricted funding is a make-or-break when delivering high-quality programs. Leaders can respond nimbly to organizational needs as they arise and act promptly rather than looking for funds first. As another partner in the mental health sector describes, “With additional unrestricted funding, we have sponsored more nurses for psychiatric training, held more psychotherapy support groups, increased the number of outreach clinics, and thus reached more patients in communities across Kenya.” This financial freedom in turn helps organizations set aside reserves for tough times and diversify revenue streams by exploring earned income opportunities sans pressure — all of which go towards building resilience for the long haul.
4. It encourages responsiveness and accountability to the community.
Unrestricted funding enables our partners to design their strategies, governance, and accountability systems around the organization’s mission rather than various donors’ competing needs and demands — arguably leading to responsive programs that center communities. It also better equips organizations to navigate unforeseen challenges. This is highlighted in two examples shared by partners through the GPR. One, a therapy and rehabilitation center for children with disabilities, noticed that some were suffering from malnutrition due to poverty; Segal Family’s flexible funding enabled the center to produce a nutritional supplement and pilot an economic support program for parents. Another working in the arid areas of Northern Kenya, a region that has experienced biting drought for the past two years, reported that they had been able to continue providing humanitarian services to support vulnerable households to build resilience. Similarly, other partners shared how valuable unrestricted funding has been in enabling them to leverage catalytic opportunities to work with government and other key parties to amplify impact and expand reach.”
5. Unrestricted funding supports creativity and innovation.
Funding flexibly in a way that focuses on impact (rather than tracking budget lines) imbues organizations with the cushioning to be entrepreneurial. It fuels the testing of new ideas and creates the safety to fail. Our partners provide several examples of how unrestricted funding has given them the opportunity to test new products, new programs, and new ways of delivering services that turned out to be more effective and impactful. Because of unrestricted funding, they have had the financial muscle to define growth and scale at their own pace and on their terms and to seize opportunities to catalyze their impact. Others shared how vital flexible funding has been in helping them build monitoring, evaluation, and learning systems that have enabled them to answer the questions critical for their organization and constituents. In so doing, they have developed strategies to grow and scale their impact intentionally and sustainably. This ability to adapt and innovate in a dynamic and ever-changing world is crucial if the partners we support are to remain relevant and impactful in their communities.
Finally, by making unrestricted grants, donors can help level the playing field and disrupt traditional power structures in philanthropy. Flexible funding frees nonprofit leaders up to focus on implementation over being beholden to donor requirements. As one of our partners put it, “Funders and INGOS are not funding my vision — they are funding theirs. Segal is different.” In our partners’ voices, flexible, unrestricted funding should be seen not only as a just and moral imperative, but as an approach that delivers more and better impact to those who matter the most. As conversations about localization and decolonization of philanthropy gain momentum, we would love to see global development agencies advocating for not only increased funding flows towards proximate organizations and leaders but also for more power-awareness in issuing this support. As funders, we can’t be everything for our grantee-partners and solve every problem they face — but we can pay attention to the quality of our funding relationships. At Segal, we aim to partner with organizations in a way that amplifies their power to define the change they want to achieve for their communities and how to get there.
We welcome widespread use of our Equitable Giving Toolkit to learn more about trust-based grantmaking from Segal Family Foundation and other aligned peer funders.
