Embracing flexible funding: A call to action for funders

Flexible funding has moved from being a buzzword to a critical necessity for nonprofits and funders aiming to drive meaningful change. In this issue, we explore the six essential attributes of flexible funding—adaptability, collaboration, transparency, risk-taking, strengthening competencies, and trust-based partnerships. This framework, developed by Humentum, Connective Impact, and a closed cohort of sector experts, is designed to help nonprofits communicate why unrestricted funding is key to achieving impact and to guide funders in becoming active participants in transforming the system. Read on for tangible steps.

Authored by:

• Moulaye Camara , Technical Director, Funding & Financial Systems, Humentum
• Alexandra Anda , Communications Manager, Humentum

In recent years, the concept of flexible funding has gained significant traction within the global development community. While it may appear to be a passing trend, Humentum is dedicated to transforming this buzzword into a pillar of effective funder operations.

Over the past five months Humentum, in collaboration with Connective Impact , has led a working group to develop a flexible funding attributes framework for funders. This collaborative effort brought together a diverse group of experts and representatives from the funder, NGOs and CSOs (Civil Society Organizations) communities, for enriching discussions and inputs. Based on the insights from this working group, Humentum will release a practical tool for funders to integrate practices that effectively bridge funder and nonprofit realities, especially in an ever-evolving development landscape.

Six attributes of flexible funding

What exactly does flexible funding entail, and how can funders adopt it effectively? Our working group tackled the issue and identified the six essential attributes that funders need to stay relevant, respond to dynamic needs, build trust, and foster innovation and sustainability. They also provided practical examples to show how each of these attributes can be successfully applied.

• Adaptability: Funders must adjust support based on evolving needs, including unrestricted funding.

A foundation in San Francisco, known for its traditional approach to funding after-school programs, faced challenges when the local school suffered budget cuts. However, the Foundation adapted by restructuring its funding to support teacher training in creative learning. This innovative approach saved the after-school programs and allowed teachers to deliver similar benefits within the day school, sparking a new wave of creativity and learning.

• Collaboration: Funders need to engage in participatory grant-making and involve stakeholders in decisions.

In Detroit, a health funder partnered with local community leaders to design a grant program addressing infant mortality. The collaboration identified transportation barriers as a critical issue, leading to funding for mobile health clinics in underserved areas that urgently needed attention.

• Transparency: Funders must clearly outline funding criteria, decision-making processes, and reporting requirements.

A Foundation was criticized for unclear grant application processes. In response, they developed a user-friendly online portal that outlined step-by-step instructions and eligibility criteria, as well as a timeline for the application process. They also established a grant review committee and published its members’ information, to show transparency in the decision-making process.

• Risk-taking: Funders can support innovation by taking calculated risks and providing upfront financial support.

An environmental funder in Kenya took a risk by providing a young non-profit with upfront funding for a pilot program on sustainable farming practices. The potential reward was improving environmental health through sustainable farming practices that could reduce soil erosion, support water conservation and protect biodiversity. The program proved successful, inspiring similar initiatives across East Africa, demonstrating that taking funding risks to support innovation have fruitful scalable impact.

• Strengthening competencies: Funders can support grantees by including training and knowledge-sharing components in every program.

An arts Foundation in New York City incorporated workshops into their program, offering grantees training on budgeting, marketing and fundraising. This customized training component equipped grantees with the skills and knowledge to effectively manage their projects and secure additional funding, contributing to the program’s overall success and sustainability.

• Trust-based partnership: Funders must collaborate with NGOs and CSOs to foster trust, transparency, and accountability.

An international development funder partnered with a local NGO in Syria to deliver essential humanitarian aid. The NGO’s knowledge allowed for the safe and efficient distribution of resources, while the funder provided financial? and global advocacy support. Working in isolation or in uneven partnership dynamics would have not allowed critical aid to safely reach those in need.

Implementing standards in flexible funding

Adopting flexible funding standards is not viable without funders’ support. Here’s how funders can take the lead in this game-changing journey:

• Active participation: engage recipients through continuous monitoring and feedback. This establishes their experience, and insights shape the program’s evolution.
• Monitoring adjustment: regularly adjust the program based on the needs and challenges that recipients identify. Flexibility is vital for addressing unforeseen issues and improving outcomes.
• Phased implementation: start by piloting a flexible funding program with a select group of grantees. This approach allows funders to test and refine the program on a smaller scale before a broader rollout.
• Clear communication: maintain open and transparent communication with all grantees. Clear updates and explanations ensure that every stakeholder seamlessly understands the program goals, progress and any changes made along the way.

Feedback and insights from practitioners

Members of Humentum’s working group have provided invaluable insights and feedback to highlight the importance of flexibility, collaboration and transparency. Their input, representing over a dozen of organizations across the world, has been instrumental in refining our approach and ensuring that the forthcoming framework meets the sector’s needs.

Here is what some of them shared.

One member emphasized the need for realistic budgeting tools, stating:

"No budget will ever be perfect because project and organizational needs change, often due to the sometimes unpredictable and complex nature of social change. Budgets should be tools that help us plan and adapt to evolving needs, not rigid imposing structures in which organizations often feel the pressure to get them 100% right because some funders only allow minimal changes later."

—Vanessa Stevens, Director of Innovation and Influencing at Global Funds for Children

Another member wants funders to provide support and step back:

"I would love to see some funders give money and get out of the way. They could follow the organization on social media, get new reports like everyone else, and attend webinars."

—Wardah Noor, Chief Executive Officer at xWave

By redefining funder-recipient relations as equitable partnerships built on trust, we can shape a future of efficient funding practices for impactful NGOs.

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Next steps for funders

Adopting flexible funding standards is essential for funders who aim to support sustainable development and foster innovative, locally-driven change. Humentum’s efforts to put together a working group and refine an inclusive framework are a testament to our commitment to an equity-centered model of development for fair, meaningful, and lasting change.

Stay tuned for the launch of this tool which will enhance collaboration, transparency, and overall effectiveness in funding practices.

Suggested readings & resources

• Power imbalances and funding inefficiencies impact progress in global development and harm our ecosystem. Discover the solutions in this quick carousel.
• Check out this carousel to learn how flexible funding can strengthen your organization's resilience in the face of budget cuts and layoffs.
• Video: Humentum's CEO & President, Christine Sow tackles the importance of long-term funding relationships for building trust and driving systemic change in global development at a Devex panel during UNGA 79.
• 29 organizations have lent their support to our open letter to funders, urging them to take concrete steps to shift power to civil society organizations. Will you join us?
• Want a deeper dive? Read our previous newsletter issue, "Unlocking the Power of Flexible Funding."