Philanthropy Impact

Inspiring philanthropy and social investment across borders, sectors and causes

Thinking Big, Funding Small

Expert opinion

Philanthropists and foundations often set themselves highly ambitious goals. The biggest and most intractable social problems, however, aren’t always best tackled by the biggest charities. Lloyds Bank Foundation works day in, day out alongside small and medium-sized charities across England and Wales supporting vulnerable people facing issues like homelessness, domestic violence, drug and alcohol abuse, or offending. We’ve seen first-hand the challenges these charities are facing at a time when funding is tighter and yet demand for their services continues to rise.

The Foundation recently launched two reports looking at the state of play for small and medium-sized charities in 2016. Navigating Change, produced by NCVO, uses their unique historical Almanac dataset to show how small and medium-sized charities (those with a turnover of £25k - £1m) have navigated the financial landscape in the aftermath of the 2008 crisis. Too Small To Fail, an evidence review from IPPR North, examines the literature to ask whether size really matters. What sort of value do small and medium-sized charities create? Is this value distinctive?

The two pieces of research – summarised here – paint a picture of a section of the sector at risk. The evidence review shows how smaller charities that are rooted in their community have the understanding and credibility to reach the most disadvantaged. Yet those same charities have been most vulnerable to volatile changes in income, reliant on a single source of funding. Funding from local and central government fell by up to 44%. As these kinds of charities are reduced or withdrawn, IPPR North identified that deprived and BME communities will be hit hardest. Given the level of ongoing squeeze on public expenditure, particularly at local level, this will get worse for some time to come.

Foundations and philanthropists may be disappointed to learn that at an aggregate level, the contribution of independent funders is dwarfed by the public purse. But as NPC’s Angela Kail has argued in a series of recent blogs, it is the investment of independent funders in core costs – rent, utilities and the salaries of leadership and support staff – that can underpin the effectiveness of small and medium-sized charities. A commitment to long-term grants and providing unrestricted income can give small and medium-sized charities the stability that an organisation needs to thrive, not just survive. We think foundations and philanthropists should ask themselves three questions:

1. Do we understand the distinct role that small and medium-sized charities play in tackling the problems we want to solve?

We know from the grants we make that smaller charities are often best placed to reach the most vulnerable and their work cannot easily be replaced by larger, more generic service providers.

2. Do our processes allow small and medium-sized charities to access resources fairly?

In our experience, smaller charities cannot afford professional bid-writers, and there are often unacceptably high opportunity costs for putting together applications. Likewise, monitoring and evaluation must be in proportion to the size of the grant and the capacity of the charity.

3. Does our funding support small and medium-sized charities to build resilience for the future?

We feel that funders should look to provide support – financial and non-financial – that helps charities be strong for the future, like diversify their income or collecting better evidence of their impact.

If we do not make and win this case for small and medium-sized charities, there is a real danger that we will not know what we have lost until the small charity is all but extinct. We must act now to protect their crucial work.

Alex Van Vliet is Research and Data analyst at Lloyds Bank Foundation for England and Wales.

This expert opinion is tagged under:

  • Promoting philanthropy
  • Strategy advice
  • Trusts & foundations