Why Isn’t No-Strings Funding More Common?

(Photo by iStock/timsa)

Philanthropy’s constructive critics, financial activists, and virtually all nonprofits have long argued for a dramatic increase in unrestricted grantmaking. Yet grants untethered from funder restrictions and requirements remain relatively rare. As a result, funding is usually earmarked for things like new or specific programs rather than covering essential costs related to retaining talent, upgrading technology, pursuing innovation, or engaging with communities to define needs and solutions. Even in the face of widespread calls during the COVID-19 pandemic to loosen the strings, a 2022 report from Candid and the Center for Disaster Philanthropy showed that only 18 percent of 2021 pandemic giving was explicitly designated as flexible or for general support.

Results are not the problem. A 2023 Center for Effective Philanthropy (CEP) study on the effects of $14 billion in grants from MacKenzie Scott—issued without restrictions on use or timing, and requiring limited or no reporting—found that recipients accelerated their impact by investing in pay equity, capacity, innovation, and operational initiatives that improved staff morale and creativity. A study of unrestricted, five-year grants from the Ballmer Group turned up similar findings, and at the individual level, research on direct giving and guaranteed income programs shows lasting positive effects.

The funder critiques of Scott’s giving expressed in CEP’s study are revealing. The report notes: “More than three-quarters of the interviewed funders express concern about nonprofits’ ability to handle large, unrestricted gifts,” citing worries that recipients might start “resting on their laurels” or have difficulty “understanding the complexity of that infusion of cash.” The report also notes that about a third of funders worry a lack of conventional reporting requirements means a lack of accountability.

Concerns like these—which CEP points out were not borne out by its research on the nonprofit recipients—are hard to combat with data alone, because they reveal hidden barriers. No-strings funding activates unacknowledged power dynamics and unexamined money myths, including the idea that if you just give people money, they won’t spend it responsibly or will become dependent, and the belief that only people with the expected credentials know how to invest or spend money wisely.

These beliefs and assumptions, along with the anxiety that comes with giving up control, work against wider adoption of unrestricted funding. And they are more powerful than most of us realize. We’ve found that even the Just Economy Institute (JEI) Fellows we work with—people who want to shift the flow of capital and power—are surprised by how much exploring their relationship with money changes their perspective.

To unpack the dynamics at play and gain insights on breaking down barriers, we interviewed three JEI advisers and alumni who have practiced or influenced no-strings giving.

Facing Risk Aversion, Anxiety, and Status Quo Bias

“People who are tremendously successful investors in a mainstream market rate environment are very comfortable with a certain kind of perceived risk,” observed Farhad Ebrahimi, who spent 17 years running the Chorus Foundation, a spend-down institution that made unrestricted long-term grants a central part of its strategy. “But then you talk to them about mission investing or unrestricted grant making, and all of a sudden they’re incredibly risk averse.”

Some of that risk aversion comes from funders who continue to believe, regardless of the research, that they are ideally positioned to set the program agenda, and that grantees don’t have the expertise or sophistication needed to be effective outside the bounds of a rigorous grant structure. Others are worried about preserving their role as leaders: If I’m not directing, what am I here for? (The liberating answer, Ebrahimi said, is realizing, “Oh, if I stop making those decisions, there will be other things that I’m actually needed to do where my wisdom really matters.”) Many funders appreciate the principles of trust-based philanthropy and community self-empowerment but don’t move on to unrestricted giving because they fear alienating resistant colleagues, boards, or family members.

Experienced no-strings practitioners can extend their impact, Ebrahimi believes, by supporting this last group with concrete organizing strategies. “We’re just starting to apply these strategies to the world of philanthropy, but we can certainly help people to power-map their institution or their family, and focus their interventions,” he said. “Who are the decision-makers? Who has influence over them? What are the narrative strategies you might use? Who can you cultivate as potential allies? What do you need to do to invest in their leadership so they can show up most powerfully?”

People with inherited money who want to support environmental and social justice are often attracted to the no-strings approach but default to following the counsel of conventional philanthropic advisers because they are anxious about giving in “the right way” or experience shame associated with where the money came from, a feeling that keeps them from acting on their own intuition.

Jessyca Dudley, founder and CEO of Bold Ventures, advises those who are curious about no-strings funding to “get clear on why [it’s] the approach you want to take and what makes you uncomfortable about it. If you understand what makes you uncomfortable—perhaps a perceived lack of control or knowledge about how funds will be used, or questions about the organization’s leaders or approach—then you can address those concerns by building relationships and defining what information you need to proceed.”

Dudley’s team worked with a donor who sought to build a stronger knowledge of the destructive legacy of slavery in the United States, areas of potential investment, and philanthropic approaches tailored for reparations. After supporting the donor in articulating the personal values that would frame their giving, Bold Ventures developed a learning plan that delineated the legacies of slavery and their current impact on communities where the donor's family generated its wealth. The learning process included research and interviews with movement leaders building economic and political power with Black communities, as well as creating materials to share with the donor’s family. Bold Ventures also connected the donor with other donors, partners, experts, and networks that could help inform their strategy. The result was a multiyear unrestricted giving plan that enabled the donor to give confidently.

“The learning journey that we developed for this donor was critical to deepening their political education and expanding their personal knowledge of the linkages between the historical development of their family wealth, which included the enslavement of Black people, and the contemporary challenges faced by Black communities that are a direct result of slavery,” Dudley said. “This kind of linkage feels integral to supporting more donors to embrace no-strings-attached strategies, because it gives them both the knowledge and the confidence to fully support and build meaningful relationships with organizations that are aligned with their values.”

Achieving Outcomes Through Trust

Funders are trained to develop detailed strategies for addressing problems, and then fund organizations that fit their strategic guidelines and can report on their metrics. That approach is often at odds with funders’ underlying goals, and it can inhibit their ability to learn from communities and generate positive impact. In other words, the funding framework dictated by risk aversion can actually increase risk.

“What I’ve learned is that the simplest solution is usually the right solution,” said Springboard To Opportunities CEO Aisha Nyandoro, who launched the Magnolia Mother’s Trust (MMT) guaranteed income program for single Black mothers in Jackson, Mississippi, in 2018. “Trust people, center their agency and dignity, and give them what they need.”

MMT grew out of discussions Nyandoro had with Jackson residents in her affordable housing program. Residents, all Black mothers, told her they didn’t need more programs and forms—they needed cash. “I feel like we overcomplicate the process,” said Nyandoro, “but the overcomplication has less to do with those being served than it has to do with our ideologies and our isms and the centering of ourselves in the work.”

The mothers have used their $1,000 monthly cash grants to improve their housing situation, get out of debt, go back to school, buy clothes for their kids, and otherwise improve their lives. MMT cohort evaluations show the program has had a lasting positive impact on parenting efficacy, parent-child relationships, and children’s mental health. And as the longest-running guaranteed income program in the United States, it has inspired the launch of many similar programs. It’s also led to the creation of the Guaranteed Income Community of Practice, which engages policy experts, advocates, researchers, leaders, funders, practitioners, and elected officials in the grassroots, guaranteed income movement.

That remarkable impact is because of, not despite, the lack of strings—an experience Ebrahimi echoes. The Chorus Foundation gave long-term unrestricted funding because it wanted to support community self-determination and “it’s just the right thing to do,” he said. “But we learned how much more strategic it is to allow grantees flexibility. What we have seen over a decade or more of funding is that the things our grantees have taken on, the things that they’ve accomplished, and the things that they’ve experimented with and learned from have all been well outside what anyone could have foreseen at the beginning.

“Had we been funding them in a project-by-project way or a year or two at a time, it would have restricted their ability to do the kind of work that they did. It might even have prevented them from doing certain things altogether. When we see ourselves as generals, we lose out.”

No-Strings Funding for Systemic Change

The gifts of time, respect, and trust, and the ability to focus on what an individual or organization most needs to do may be the most powerful investment funders can make in communities.

Springboard To Opportunity’s cohort evaluations have found that MMT mothers report a statistically significant increase in self-efficacy—belief in their ability to achieve goals and overcome obstacles—along with greatly improved material conditions and resilience. Nonprofits participating in CEP’s MacKenzie Scott study reported the same benefits from unrestricted grants.

It's challenging to do this kind of giving amid the funding systems and mindsets currently in place. Yet more people are seeing that it’s highly effective, and many see helping others do it as part of their mission. As Ebrahimi said, it’s liberating for both the funder and the recipient.

So what are funders waiting for? The challenges and problems are clear, and the people and organizations closest to them have the solutions. They know how to use the money. And they need it now.

Read more stories by Deb Nelson & Tina Beck.