The case for unrestricted funding: Why true equity in philanthropy starts with autonomy

By Ena Taguiam, a London-based outreach and engagement coordinator and sexual health practitioner

But what is unrestricted funding, and what room is there for it in the philanthropic sector? More importantly, how will it change the way we manage programs, and how will it contribute to building more equitable and anti-colonial practices within a still-colonial system?

In the wake of what appears to be a major unravelling of the philanthropic sector following massive USAID cuts, experts and practitioners alike are urging the reimagining of the funding landscape. Most—if not all—of those affected are BIPOC-led and Global South organizations that work with communities in dire need of social support. 

At the same time, anyone who is immersed in the funding landscape within the development sector would notice a significant shift in the language used in anti-colonial discussions. While donor-advised funding (DAF) is pretty much still the standard, there seems to be a significant rise in unrestricted, core, or flexible funding where grantees have more autonomy to decide where funding goes in the organization. 

The growing support for unrestricted funding amid rising right-wing rhetoric is no coincidence. It is a heavy pushback by progressives on this emerging political climate. But what is unrestricted funding, and what room is there for it in the philanthropic sector? 

More importantly, how will it change the way we manage programs, and how will it contribute to building more equitable and anti-colonial practices within a still-colonial system?

Traditional colonial grantmaking

Before getting into the case for unrestricted funding, it’s important that we talk about the status quo in grantmaking today. Traditional grantmaking approaches are driven by heavy oversight and planning from donors, thus are restrictive in nature. If lucky, grassroots and community-based organizations are consulted beforehand. But often, donors work with strategic advisors or consultants to “review and ensure proper reporting at each stage, so gifts are used most effectively.” Accountability is used as a proxy for trust-building. 

But the truth is, it is more so for funders to maintain control. Restricted funding relies on a top-down approach where funders hold reins and dictate how resources are used, despite being the furthest from the problem. For organizations serving BIPOC communities, the situation is much more dire, as institutional racism manifests as challenges in our work and our funding. 

Several studies looked at how biases and unconscious prejudices remain barriers for Black-led organizations in seeking funding. Despite the crucial role of BIPOC-led organizations in addressing disparities and helping those most in need, funding remains a significant barrier to doing our work effectively. 

This is the result of historical under-representation in funding decisions – funders don’t understand the nuances and complexities at play in populations they want to help, but determine how impact is measured, completely removed from input from the communities. In most cases, the impact reflected in reports doesn’t manifest in communities (at least, not in the way communities would want to experience). The onus of accountability is on grantees, but not on the funders. True accountability goes both ways – while grantees are held accountable on how funding is spent, funders also have the responsibility to have an informed and participatory funding process.

Colonial systems are so deeply ingrained with mainstream funding processes that we don’t notice how they affect funding decisions. In the process, funders forget that communities of color have agency over their own fate. Despite being the closest to the problem, communities of color are the furthest from holding power in deciding how they are funded and which programs get funding in traditional colonial grantmaking processes.

This is the reality of prevailing colonial systems – where those in power continue to benefit, unless actively challenged through anti-colonial practices like trust-based and equitable funding.

Unrestricted trust-based philanthropy

Unrestricted funding is built on the idea of shifting this power imbalance within the development sector. Whereas traditional grantmaking is based on a unidirectional trust, unrestricted funding creates space on both sides for dialogue and mutual learning, ultimately building trust in the process.

In projects where unrestricted funding is in place, grantees are treated as partners, and they have de facto control over how they spend the funds received. Such fundings are transformative for organizations, particularly when they are multi-year, as they give them room to breathe and flourish, rather than just keeping afloat. 

Unrestricted funding often comes in the form of core grants, or general operating support. Funding entities like the Oak Foundation and MacKenzie Scott’s Yield Giving stress the importance of general operating support or core grants in building organizational capacity and scaling impact. Ideally, core grants cover the overall operational costs, rather than funding tied to projects. They cover the organization’s nuts and bolts—salaries, rent, utilities— which allows us to dedicate more resources to achieve our mission. 

BIPOC-led nonprofits in the health sector, for example, need heavy human resource support to be able to deliver satisfactory health outcomes, particularly in vulnerable populations. Having a fully developed strategy is necessary in such interventions, and having multiple coordinators and field workers to execute said strategy is an even more important feat. But how can nonprofits thrive when securing grants becomes a full-time function of our management and there is a lack of human resources in the field? 

The transformational nature of unrestricted grants

The report on MacKenzie Scott’s Yield Giving showed the transformational nature of unrestricted grants as leaders talked about how the grant gave them breathing room to pause, strategize, and scale up their impact. The Oak Foundation talked about their lessons from core funding, how working with grassroots organizations helped them challenge traditional ideas of grantmaking, and emphasized how having core funding as the default helped their team to fully invest in the missions of their partners. 

When the basics are covered, organizations can allocate more resources to think up more creative, community-driven solutions. When the basics are covered, there is open dialogue with the grantmakers and grantees, and more resources are allocated to activities and programs that the community needs – it transforms into the purest meaning of partnership.

I would argue the most significant impact of unrestricted funding is the trust it builds between partners and within community-based organizations. Grassroots organizations are often the most trusted and rooted in the community. We spend most of our time immersed in the communities we work with in order to understand deep-seated issues better and to converse with the population on what they need the most. And yet, we’re chronically underfunded, or the funding that we do have is project specific. There is very little room for us to reimagine our programs, never mind the room to make mistakes in the process. 

In today’s funding landscape, we are treated as beneficiaries, rather than the vanguards of justice.

The ability to spend on overhead costs also helps grassroots foundations get additional funding. The Yield Giving report shows that getting unrestricted funding has emboldened grantees to be more strategic in funding opportunities they apply for. Unrestricted funding inevitably gives grassroots organizations a cushion or fallback to be more purposive in the grants we get, which in turn strengthens our mission. 

Perhaps as we look to a new funding future, we envision an anti-colonial and equitable system in place – one where funding is reparative, not extractive; where relationships between donor and grantee are reciprocal, not transactional; and one where our metrics for success are defined by the communities we work with and aligned with lived realities. 

While we recognize that the work towards building anti-colonial systems is long, arduous, and seemingly endless, we must strive for practices that centre autonomy, reciprocity, and justice. Unrestricted funding alone won’t undo systemic inequity, but it is a critical starting point in reshaping how power moves within philanthropy. After all, community-based organizations and the communities we work with already know how we can build our future. We only need trust to do so.