How to make funding go further under inflation

The global economy is facing record inflation in 2023, which unfortunately affects not only businesses and consumers across the globe but also philanthropic efforts. 

Foundations lost nearly $250 billion from investment portfolios year-over-year, falling from a record high of $1.3 trillion at the start of 2022 to $1.06 trillion at the end of the year, according to data from FoundationMark’s Grantmaker Investment Value (GIV) Performance Index. 

On top of this, grantees are facing increased costs simply to operate and plan their regular programming. So, how can funders battle this rise in inflation? 

Inflation is certainly a social issue, impacting grantmaking and funding at many levels. It’s essential for funders to provide more bang with each buck. 

Here are some tips for inflation that funders and grantmakers can consider to increase impact.

Increase funding

An increase in funding is the simplest and most effective way to adjust to your grantees’ needs. If you want to maintain your current funding momentum, consider adjusting your funding amounts to match worldwide inflation. 

According to the International Monetary Fund (IMF), global inflation was 8.8 percent in 2022 and is expected to fall to 6.6 percent in 2023 and 4.3 percent in 2024. While there is some good news in those decreasing numbers, inflation is still well above pre-pandemic levels of about 3.5 percent.

The dangers of inflation are very real for grantees, and for your funding to continue driving impact, it’s essential your grantees have the support and resources to operate and manage their projects effectively.

Provide unrestricted grants

An inflationary economy provides funders and grantmakers the opportunity to consider a trust-based philanthropic strategy. What does trust-based funding mean?

In short, it’s a funding model focused on redistributing power systemically, organisationally and interpersonally to build an equitable non-profit sector suitable for all participants. 

Providing unrestricted funding is just one aspect of trust-based philanthropy, which removes limits and rules around how funding is used and provides flexibility in how your grantees deploy funds.

In this inflationary economy where grantees are paying increased costs to maintain regular operations, this flexibility helps programs focus on what matters most. 

Consider multi-year support

Multi-year support can ensure the stability of your funding impact. It encourages long-term planning and gives grantees the confidence to make strategic long-term investments through their work. And, ultimately, it underlines your support for the mission as a whole and for the foreseeable future. 

A multi-year funding strategy can help reduce the impact of inflation and provides your grantees with the opportunity to focus on their missions at hand without having to cut corners that could negatively affect their impact. 

Create strategic partnerships

It’s no secret that we can do more together than alone. And this certainly applies to philanthropic efforts. Strategic partnerships between funding and grantmaking initiatives can create long-lasting impact for grantees and their work.

When organisations work together in a funding partnership, they can extend their brand reach and make a greater difference. This could mean doubling the funding amount and greater publicity for the funding initiatives. 

It’s important to lay out the terms of the partnership in a donor or partnership agreement with a shared understanding of any liabilities, roles, and advantages for each party. Learn more about partnership models that can help deliver desired impact and how to move forward with them through The Partnering Initiative, which offers an insightful report on the topic. 

Look to small organisations to make big impact

Consider diversifying your funding initiatives by offering support to small and medium-sized community initiatives. These types of smaller organisations can often drive lasting impact in a community because they are closer to the challenges at hand and better understand the solutions required.

Inflation unfortunately can be more keenly felt at these smaller grassroots levels, and an increase in funding and support can go a long way to drive big impact and sustainability for these community initiatives.

Cut costs, carefully

Regular cost-cutting is part of any business and budgetary strategy. But, it’s important to be thoughtful about it, and not cut costs blankly across the board. Consider your operations—where can you work smarter with less? 

Technology is a big part of this equation and having an economical grantmaking software to help you streamline regular everyday operations can be a big time- and cost-saver. 

“Organisations shouldn’t overlook the substantial benefits that can come simply from identifying key activities and making them more effective,” McKinsey Quarterly reports. 

People and organisations are feeling the effects of inflation across the globe, and the impact of funding and grantmaking initiatives are more important than ever to help power positive change. Consider these strategies above to help make your funding go further and your impact continue to grow, despite economic challenges.