Effective philanthropy through grantmaking
An overview of good practices by Accelerate Indian Philanthropy with support from The Convergence Foundation (TCF)
A new guide by Accelerate Indian Philanthropy outlines the life cycle of grantmaking using live case studies to illustrate the different stages of the process, as well as highlighting good practices that are results-oriented and equitable.
Introduction by Ashish Dhawan, founder-CEO, The Convergence Foundation
Philanthropy has long been embedded in the fabric of Indian society and contributed heavily to the creation of modern-day India. Pre-industrial Indian society saw business families giving away a proportion of their income to local charities. Even with India’s history of giving and rapid wealth creation in the last few decades, challenges that have inhibited Indian philanthropy include a trust deficit between new philanthropists and the impact sector, the parochial nature of giving, and programmatic giving that doesn’t lead to system-wide impact. Despite the challenges, I believe Indian philanthropy is now poised to take off, particularly with the recent uptick we’ve witnessed in domestic philanthropy.
While there is a myriad of approaches to philanthropy, grantmaking is often a starting point for many individuals as they embark on their giving journey. In fact, grantmaking was an integral part of operations at Central Square Foundation in its early phase, with a focus on supporting young partner organizations developing innovative, systemic solutions in primary education.
For grantmaking to be effective and lead to sustainable impact, philanthropists must have a well-thought-out, cogent, decision-making framework and grantmaking must ultimately be strategic in nature with a broader objective.
There are four strategic ways that philanthropists can drive grantmaking to create outsized impact:
- Give grants to build new institutions
- Provide flexible grants that can fund innovative models and test new ideas to function as risky R&D for the government
- Support governments to improve the system of delivery
- Channel capital to engines of economic growth, where philanthropy doesn't traditionally focus
While there are many philanthropists in India who have been doing this effectively, with Azim and Yasmin Premji and Nandan and Rohini Nilekani leading the way, there is an opportunity to build more knowledge resources to support wealth creators to give more, sooner and better.
This report by the AIP team attempts to provide decision-making frameworks for effective grantmaking through the culling of insights and experiences across a cross-section of philanthropic actors.
The underlying idea is to encourage many of us to think about grantmaking in a structured and strategic manner. We must keep in mind that strategic philanthropy and trust-based philanthropy are intertwined. At the heart of strategic philanthropy are the nonprofit organisations, and their teams and leaders who make the impact possible. By enabling them to reach their true potential, philanthropists can come closer to their goal of creating sustainable economic growth.
I believe Indian philanthropy is poised to take off with many modern-day philanthropists showing the power of strategic giving. I hope this study serves as a useful addition to the body of ecosystem resources that help channel effective grantmaking by many more philanthropists.
The text below is an abridged version of the executive summary.
You can download the full report here.
The five stages of grantmaking
For philanthropy to be both effective and fulfilling, a philanthropist or funder has a raft of decisions to make: which causes to support; which groups to give to; how much to give and for how long; how to monitor progress; how to assess impact.
We explored the beliefs, approaches and good practices related to grantmaking among more than 20 organisations and individuals through in-depth interviews. The respondents were: Large (with over 20 employees), Lean (with under 20 employees) or Individual (philanthropists who operate alone or through a family office) funders.
Through our study, we attempt to answer many of these questions and offer a roadmap to potential funders.
We determined through our conversations that a typical grantmaking life-cycle consists of five distinct stages across pre- and post-grant processes. While this might differ to some degree between organisations, grantmaking largely tends to follow these steps.
- Grantmaking thesis
- Post-grant support
- Monitoring and evaluation
1. Grantmaking thesis
A Grantmaking thesis sets out a framework for decision-making on what, whom and how to support. It is an articulation of the funder’s giving philosophy, answering questions like: ‘why do you want to give?’; ‘what cause(s) do you deeply care about?’; ‘what is your philanthropic risk tolerance?’; 'how does this align with your values?’; and ‘what change do you want to create?’.
Through our conversations, we discovered that a robust Grantmaking thesis tends to have three key components: Focus Area, Approach, and Type of Funding. Each of these components involves further decisions. For instance, the Focus Area can be broad, viz. health, education or livelihoods. Or it can be narrow, viz. primary healthcare for women and children in rural Bihar.
Typically, every funder is faced with a plethora of choices, which can become a stumbling block to effectiveness. A cogent thesis, infused with the funder’s motivation, objectives and values, is the backbone to giving better. It sets out where to act, what needs to happen for goals to be reached, and how those actions fit together, thereby bringing in efficiency and clarity for both the funder and the partner organisation.
Funders explore the sectoral landscape in a systematic manner, to identify opportunities that align well with the grantmaking thesis. Issues, organisations, and geographies are identified and researched in the process of discovering implementing organisations that can be potential partners. This process of sourcing for opportunities has three broad approach types: Outbound, Restricted Inbound and Open Inbound.
NB. The Open Inbound approach is most suited to large foundations equipped with the resources required to sift through and assess large numbers of open applications. Given the vast and complex nature of the Indian ecosystem, inbound sourcing will likely inundate funders with a large volume of applications that can vary in quality. Consequently, we encourage funders to do their homework first, and simultaneously invest in the process of discovery to widen their reach beyond the usual circles.
Funders consider a range of factors to assess how well an organisation or project will fit with the funder’s objectives and priorities. The factors range from being partner specific – leadership, governance, track record, impact and sustainability – to funder specific factors like how well the partner meshes in with the funder’s own strategy and vision. Some respondents also evaluate how much political risk they are willing to expose themselves to, keeping the regulatory environment in mind.
Since due diligence processes can stretch the resources of potential partners, we encourage funders to contain their requests to essential information. Detailed requests can be used in a focused manner with a few high-potential applicants.
4. Post-grant support
Once a grant is made, most funders remain actively engaged to varying degrees by providing qualitative support geared towards enhancing the partners’ development impact, organisational resilience, and financial sustainability.
Respondents to our study unanimously agree that giving better entails working closely with partners to understand, not only their operational requirements, but also their strategic needs, which cannot be met by financial aid alone. Examples of such qualitative support include: capacity building; story-telling and communications; advisory and strategy support; fund-raising; and partnerships.
5. Monitoring and Evaluation
Monitoring and Evaluation (M&E) enable funders to assess progress at periodic intervals with a view to determining the extent of impact: how have the funds been used thus far; what has been accomplished; what have been the challenges and how are those being addressed? is any recalibration required?
Our study throws up two M&E models:
Low-touch Model and High-touch Model
While it is always a good idea to ensure that resources have been used effectively, funders must reflect on the larger purpose behind this. ‘What is the need for information?’, and ‘what will be done with it?’, are some key questions a funder should consider while making a choice about the kind of reporting they expect from partners.
Some good practices
It is important to develop a well-defined grantmaking thesis founded on the funder’s
beliefs, objectives and values. It is advisable to invest time and effort in discovering potential partners through a combination of referrals from the network and their own due diligence.
Funders must build a collaborative, trust-based relationship with the implementing organisations (i.e. treat them as partners, create appropriate feedback loops to hear from them, and facilitate ongoing learning, reflection and calibration.)
Combining flexible, long-term financial support with need-based, non-financial support is an effective approach in returning robust outcomes.
Good M&E strategies are integrated at an early stage of the grantmaking process – through early discussions with partners about success metrics and progress indicators, aligning these with the partner’s objectives and the funder’s priorities, ongoing interactions and feedback, all of which feed into the grant renewal process.
Philanthropy must come from the heart, in resonance with the term’s origins from the Greek ‘philos’ and ‘anthropos’ meaning ‘love of humanity’. But for philanthropy to be both effective and fulfilling, it must be led with a combination of the head and heart.
Our study shows that while there is no ‘one size fits all’ approach, there are some good practices that philanthropists must adopt to get desired outcomes from their grantmaking efforts.
This guide to grantmaking was written by Accelerate Indian Philanthropy (AIP), an organisation set up by philanthropists for philanthropists with the vision of building an institution that fundamentally transforms the giving landscape in India.