Trust-based Funding: The Role of Unrestricted Funding in Developing Nonprofit Capacities and Effectiveness

How does unrestricted funding lead to increased nonprofit capacities? What factors can influence the decision to (not) provide unrestricted funding?

Recent developments show a trend where large foundations move towards more unrestricted and trust-based funding practices. Research shows that unrestricted funding can play an important role in the development of nonprofit capacities, such as financial management, operational capacity, mission orientation and innovation. And increased nonprofit capacities lead to higher nonprofit effectiveness: the extent to which an organization achieves its goals. In this session, we will first explain how (gradations of) unrestricted funding lead to increased nonprofit capacities. Second, we will focus on the role of funders.

Specifically, we will discuss factors that may influence the decision of funders to provide unrestricted funding, and how it relates to other questions regarding the design of funding mechanisms. We will introduce a concrete tool (co-created with funders during the Funding Systems Change initiative) that supports funders in reflecting on the design of their funding mechanisms, of which one is to what extent the funder is investing in project costs only, or moving towards ‘core funding’. Based on the opportunities for diverse funding mechanisms, we will discuss which types of funding approaches are most conducive to addressing complex challenges and fostering change on a systemic level. Finally, we will explore what might prevent funders from choosing the most effective funding strategy.

Speakers: Pamala Wiepking (Center for Grantmaking Research, VU Amsterdam & IU Lilly School of Philanthropy) and Nora Wilhelm (the well • change atelier and collaboratio helvetica)
Discussant: Stefanos Oikonomou (Philanthropy Europe Assocation)

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