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.