Pandemic shifted how potential donors gave

When Wendo Aszed, the founder of a health nonprofit in rural Kenya, is asked about her frustrations with donors, it doesn’t take long before she brings up a hot-button issue in philanthropy: restrictions on how to use donations.

The “pain point” for her is when funders won’t allow contributions earmarked for one project to be used on related emerging needs. One donor, she notes, funded family planning services — like birth control — but then objected to the money being used for HIV testing on the same women. And some, the 43-year-old added, didn’t want contributions they made prior to the COVID-19 pandemic to help implement virus safety measures at her organization, Dandelion Africa.

“They would prefer the organization closes, even if the funds were for essential services, than use their funds for prevention,” said Aszed, adding that some restricted grants even prohibit buying masks for a project. “We deserve unrestricted grants. We’ve been having these conversations back and forth with some funders who give us restricted funding. Some have gone well, and some have not gone so well.”

Unrestricted funding allows organizations to use donations on what they want. It makes an organization’s infrastructure more durable by funding overhead costs. Proponents say it also corrects donor blindspots in areas like racial equity funding, breeds trust and provides organizations flexibility to respond to shifting needs.

While Aszed’s organization gets a few of these contributions, most of its funding is restricted — earmarked for a specific project by the donor. The debate over these funding models has been around for many years. But nothing has been more galvanizing in this conversation than the pandemic, and to some extent, the racial justice protests following the police killing of George Floyd.

Since last March, about 800 donors — both in the US and abroad — have signed a pledge, spearheaded by the Ford Foundation, that called on them to provide the organizations they fund more flexibility in their pandemic response. Soon, donors committed to a list of new steps, including loosening restrictions on current gifts and making new donations as unrestricted as possible. But, experts say it’s unclear if these practices, popular among grantees, will continue.

For its part, the Ford Foundation, which gives the majority of its contributions as unrestricted support, is trying to get it to stay. It announced Wednesday it will launch a second edition of its BUILD program -- a multi-year, $1 billion initiative aiming to provide unrestricted funding to 300 organizations worldwide. So far, the foundation’s six-year program has given more than $950 million to social justice organizations; with new contributions slated to be awarded beginning next January.

“We very much hope other funders who signed the pledge continue in this direction,” said Hilary Pennington, the foundation’s executive vice president for programs, adding, “philanthropy needs all the encouragement and pressure it can possibly get in that regard.”

Though unrestricted donations, especially ones that happen over multiple years, are the holy grail of funding for grassroots organizations, it’s often hard to attain because donors — foundations, corporations or philanthropists — tend to tie their giving to projects.

Donors also restrict their giving out of concern the funds will be used to pay salaries or other costs and “keep business as usual,” Smith added. “If you talk to most donors about why they’re giving, they’ll say ‘I want to make a difference in the world.’ And I think, especially with some of the newer wealth that started to come into philanthropy from Silicon Valley, billionaires and other people that have made their money in technology, they kind of brought almost a venture capital mindset where you were going to have very clear objectives, very measurable indicators, in order to be able to justify and communicate and measure the impact.”