Grantmaking during an economic downturn
There are times when the government has to increase its spending to compensate for falling investment in other parts of the economy. Community grantmaking is a productive way to use public funds. Grantees don't hoard money - it will circulate through the economy promptly. During an economic downturn grantmakers need to be clear about strategy and practical about tactics, and must - above all - keep their grantmaking vision in mind.
How does the grantmaking landscape change during a downturn?
- Grantmakers can expect their workload to rise during a recession, regardless of whether they increase their offerings.
- Some philanthropists will inevitably cut back, and those that do not will be under greater pressure.
- The competition for available funds will increase.
- More work will be put into each application.
- The number of worthy recipients might be expected to increase, while the money available to fund them remains static.
What can grantmakers do?
- Government grantmakers should seek larger giving budgets.
- Philanthropists should consider minimising sudden cut-offs by temporarily increasing expenditure as a proportion of their endowments.
- Consider making a larger number of small grants, to give more people a slice of the pie. This can help mitigate the risk of more good projects going without support.
- Ask grantees whether there is a way you could rearrange their payment schedules to help.
- Consider tightening conditions on your grants to ensure maximum efficiency. You may wish to:
- Mandate inclusiveness (participation by disadvantaged groups);
- Insist on cooperation between grantees - sharing of resources, joint operations, even pressure for consolidations or mergers;
- Take a closer look at the governance structures and administrative efficiencies of project partners.
- Be careful not to increase your own inefficiencies. There may be organisations desperate enough to bid for loss-making projects, to push cash-flow problems further down the line. Treat this as a danger sign for both parties.
- Be clear about your strategy and practical about your tactics, and be prepared to review both of these as the situation alters.
- Always keep your vision at the forefront of your mind.