People often discuss how public contracts with charities do not get increased inline with inflation. This leaves charities struggling to pay staff, rent and utilities as they’re expected to do the same with less in real terms.

But what about grants?

Do foundations and other grantmakers increase the sizes of the grants they make? Do philanthropists acknowledge that you can’t get a Freddo for 10p anymore? Short answer: not usually.

But more interesting, is why.

Are grant sizes keeping up with inflation?

Our new dataset of UK grants has let us properly answer this question for the first time. We have gathered the majority of grants from the past 5 years, direct from funder and recipient accounts.

We tracked the median grant size of the 3,596 funders that published a grant list in both 2021-22 and 2024-25.

At 14% of funders, the median grant was exactly the same.

And if we look at funder giving to the same charity in consecutive years, 35% of the time it was for exactly the same amount.

Of course some of these might be a multi-year grant paid annually, so we looked at just those where there was a gap in funding, and it’s still the same kind of pattern:

Why:

Aside from the madmen at Asda, Freddos have jumped up in unpleasantly large 5p increments. Grants are the same.

People like giving out grants in nice round numbers. For grants under £50,000, the majority of individual grant amounts are exact multiples of £1,000 or £2,500

You can see the effect most clearly if you plot the number of grants against grant size. It’s not a nicely sloped curve, it’s a staircase:

When prices have gone up by 19% over 3 years, that’s purchasing power charities are losing directly, because of the attachment to the appeal of easy addition.

Jumping a step

Some funders have internalised the cost of living increases, and have done more to increase their grant sizes.

But interestingly, the way they most commonly do it, is by jumping an entire step — going from £1,000 to £1,500 or £2,000. Of the £1,000 grants that were increased, two thirds went up by multiples of £500, most to £2,000. 171 funders moved up a “standard step”, from £1,000 to £2,000, £5,000 or £10,000.

What’s going on with the money?

If the grant sizes are decreasing in real terms, does that mean the amount of funding is also falling?

For a typical funder, yes. The median funder gave 12% more in cash in 2024-25 than 2021-22, but that’s a cut of 6% in real terms.

If you add up total funding, no. The biggest funders, particularly Wellcome, Great Ormond Street and Arts Council England increased their funding enough in real terms to more than make up for the median — 18% increase after inflation.

But leave out the top 10, and everyone else gave 11% less in real terms.

And interestingly, even funders whose giving grew mostly didn’t turn to bigger grants. They typically give to more organisations, and increase the size of their grants only at the largest end.

So it’s all a bit complicated. In real terms, there’s more funding, but most funders are shrinking. Typical grants are shrinking, but the big funders are growing.

Fund odd grants

This is an extremely niche recommendation. But we think funders should deliberately give grants in weird, odd amounts.

If you deliberately abandon the round numbers before inflation hits, we think you’ll be less inclined to anchor to them when prices go up, and more inclined to give uplifts to maintain their purchasing power.

It’s pretty arcane, but the alternative seems to be grants that drift in value without any real reason.

There’s actually some evidence in the data: funders that grant odd amounts are more likely to uplift with inflation already:

This is probably correlation, not causation, and likely because “mostly odd” funders are explicitly tracking the costs for a charity. Which, well is probably the point we’re making. The amount of a grant should be the result of a calculation, not a convention.

So to complete this, we’re finishing with the most obscure ever ranking of grantmakers: are they bouba, or are they kiki?

Bouba top 10

Kiki top 10

PS

The Thomas Waley-Cohen Charitable Trust deserve a particular mention. They don’t fund round numbers. They fund round numbers +1. That’s not quite what we meant, we don’t understand it, they probably shouldn’t be in this table, but we do love it.

In a very nice hotel in Cheshire last week, I was having a conversation with Caia Park Partnership — a fantastic charity in Wrexham.

They’re often struggling to keep staff, particularly youth workers. That wasn’t hugely surprising. The Government is now investing 1/6th of the money (in real terms) on youth clubs as it was 15 years ago, so wages and job opportunities have consistently seen little improvement, as local commissioners cut budgets. Though there was something interesting about the timing.

Youth workers were not leaving at the end of a contract, or in response to changes in the service, or other opportunities. They were leaving because there was no job security past the end of a commissioned contract. People with mortgages to pay, children to look after and lives to live, cannot afford to wait for a Local Government to make a decision on a contract renewal, so quite sensibly, they get other jobs before the service hits the cliff edge.

But the service did get renewed. The problem is, the staff have already left — forced away by the uncertainty. They can’t easily come back, and now the charity has to recruit and train new staff, and the commissioner expects young people to build new relationships with trusted adults: one of the most protective factors for a vulnerable child. As well as damaging relationships, this is obviously a terrible use of public funds, and for the Local Council, an entirely self-inflicted error. Exactly the same scenario plays out across the country, and not just for youth work, but for domestic violence support, mental health provision, and all kinds of other services delivered locally.

How do we solve it?

Most ideas for solutions focus on educating commissioners on the damage this is doing. But while it may be overly generous, I think most commissioners know full well. Some feel their hands feel tied, primarily by procurement. Many are actively fighting for stability, and some are winning.

Some commissioners have shifted to multi-year SLAs and actively defend renewals against budget pressure — Acton Community Council, Wrexham CBC and funders like the Steve Morgan Foundation are examples from Caia Park's own experience. But even where multi-year contracts exist, renewal decisions tend to land far too close to expiry. Staff retention pressure is a function of the gap between 'will it be renewed?' and 'when does the current contract end?' — not just contract length itself.

So we might need to try things that aren't reliant on waiting for changes in commissioning teams.

This is where philanthropy could come in. And to address the immediate objection: not for bridge funding. As soon as you talk about private philanthropy for publicly funded services, you need to think of the incentives. Any model that uses donations to fund services at risk of government cuts risks encouraging the austerity you’re trying to protect against.

But here’s a different idea for philanthropists: don’t guarantee the service, guarantee the staff.

The idea is fairly simple: a funder commits to pay the gardening leave of all the staff on a commissioned contract if it is not renewed. Say, 3 months. Crucially, the service still ends. The commissioner still faces the consequences of closing something valuable in the community. Explicitly, the philanthropic funder is paying for these workers to be able to sit around on their sofa all day and not work.

It sounds a little absurd, but this guarantees staff income. In the worst case scenario, the contract is not renewed, and everyone gets an extra 3 months to look for a new job full time, during which time, they are still getting full pay. It means no one is forced to leave early because of the uncertainty.

How it would work:

An individual charity would struggle to make this commitment. Agreeing to pay everyone hired on a 1 or 2 year contract for an additional 3 months, at a time when funding has just been lost because of the end of a contract, is incredibly financially challenging at a time when ~40% of charities are operating at breakeven or at negative margin. Reserves ought to be in place to provide this buffer, but after many years of contracts not being uprated for inflation, this has been extremely difficult. So the funding probably does need to be sourced from elsewhere.

But, this model is also much more efficient. It is essentially providing an insurance function. By spreading the risk across many individual services, the same amount of money held back to pay for this eventuality can go much further. This could be constructed so that this applies to services that will renew most of the time, e.g. those that have already been renewed previously, where the charity can demonstrate clear value. It could be structured as similar to a grant funding round, where you apply for “protection” for your existing commissioned service, and is then evaluated in the normal way by a grantmaker’s decision making process. Depending on the cancellation rate, you can therefore protect many more individual workers than each charity doing it individually.

For a £250k fund, and a £30,000 salary average:/

Cancellation rate Equivalent reserves required for 1 charity Workers protected 5% £5m 666 10% £2.5m 333 20% £1.25m 166

The other possibility is that the contract is renewed, but late. This is unfortunately extremely common. Having the team on gardening leave, rather than already gone into new jobs gives the possibility that they could restart when the contract lands. It also means the charity can have longer to try and search for alternative sources of funding, whether that’s an NHS contract instead of Local Authority, or from a grant funder separately. If this happened, some portion of the fund could be paid back to the pool, ready to be used elsewhere.

The wrinkles:

This idea definitely needs a test before anyone fully commits. There’s a lot of wrinkles that would need to be ironed out.

Firstly, TUPE (Transfer of Undertakings (Protection of Employment) Regulations). Simplified, when a contract is renewed, but the provider changes, people employed under the contract keep their employment and move organisations. This situation would need to be excluded from the funding arrangement, and the payment to be limited to entire cancellations of a service, though employees would still benefit from the peace of mind before the contract renewal. Overall, this significantly reduces the likely “cancellation rate”, as many contracts that look like they’ve ended in the stats, have actually moved provider.

Secondly, insolvency. The whole point of this proposal is that charities are running on thin margins, and are in an environment where building up reserves is extremely difficult. So in many cases, the end of a service contract may put a providing charity into insolvency. There may not be any employing infrastructure left to pay the gardening leave. The fund would have be constructed so that the gardening leave payments are ringfenced, or have the option to be routed through an anchor employer, perhaps through local infrastructure.

And then one more legal issue: redundancy. Statutory redundancy pay is owed independently of notice — anyone with two or more years of service is entitled to it whether or not the fund extends their pay, and the liability sits with the employing charity, not the fund. That means the scheme doesn't substitute for redundancy, it would have to sit on top of it.

Finally, like any insurance-like situation, there’s clearly an uncertainty as to how much this would cost. Any fund would have to set aside an amount, have an expectation of how much would be claimed, and be prepared for a much larger sum. This could be mitigated by protecting contracts in a diverse set of areas —so that local government section 114 notices are not catastrophic to the fund, and themes — so that changes in overall Government policy aren’t too damaging. However, it would still definitely be better suited to a philanthropist with a solid stomach for risk, or with an actuary on staff.

Possibly the biggest barrier would just be the weirdness of the funding. The positive social impact is made by the commitment to fund something. The actual thing you fund is deliberately not useful (the option for people to sit at home doing nothing), but the recent memories of the furlough scheme might mean it’s more understandable.

What would success look like?

The key measure would be: does reduced income uncertainty increase staff retention in the run-up to the potential end of a commissioned contract?

There will always be other reasons people leave jobs, whether that’s for better pay or a change in role, but if people are frequently leaving because of contracting uncertainty, we should see some evidence of change. Crucially, staff need to be extremely informed of what this protection means, as its the awareness of its existence that is the only mechanism for having any effect.

In terms of measurement, it’s unlikely a pilot will be large enough to have real statistical power to distinguish based purely on staff retention rates in the preceding months, so the evaluation would have to be mostly qualitative: interviews and surveys, rather than being able to run a full measured randomised controlled trial.

Who could fund this?

It can’t be a local funder: it would be too exposed to changes in politics or budgets of particular local authorities. It can’t be a thematic funder either, for the same reason. In all likelihood, this would be a pooled fund of risk-taking philanthropists with an understanding of local service delivery charities, probably with some background in finance or insurance, who are willing to look a little eccentric.

If that pool does come together, at Plinth we would be very keen to help identifying eligible services, tracking contract risk, communicating the guarantee clearly to staff, and measuring whether it actually improves retention. We’re extremely happy to look a little eccentric.

As a business, if all else fails, you can just try and copy someone else, but do it better or cheaper.

You can be the Aldi to the Asda, the Monzo to the Barclays, or Google to the Yahoo. But when it comes to charities, that doesn’t work.

The concept is faintly ridiculous:

Instead, charities carve out moral monopolies. They end up “owning” a particular combination of problem, solution and location. It could be geographic: being the “community centre for the Kingsmead Estate”. You could be the only organisation that cares about a particular problem, like the “Shrimp Welfare Project”. Or, you could have a novel way to address a more common issue, like using volunteer organised runs in parks to encourage greater physical activity.

Charity done well is good, charity done better, is better. But, through some combination of no shared understanding of what “better” is, an inability to measure it, or a simple lack of strong donor demand for tangible measures, charities rarely compete on this. The implications are interesting.

Moral matchmaking

For a charity, fundraising becomes more about finding a match between your “moral monopoly” and a donor/funder’s interests. You can be most successful by doing 2 things:

1. Picking an attractive and distinctive moral monopoly

2. Reaching all the potential donors whose interests match your choice

Unfortunately, number 1 might not really be an option. If you have a legal mandate set over 100 years ago, you probably can’t change it. If you’re a local charity based in an area no one wants to fund, you’re not MK Dons — you can’t really move. This is when you have to get creative — stretching your description of a project to make it sound more distinctive:

Growing up is a trap

As a charity, if you can’t in some way articulate your uniqueness, if you find yourself saying “we’re pretty much just a youth club”, you are probably a little doomed.

And often, the biggest risk to losing this distinctiveness is in trying to scale a small charity. Working on a niche problem, or in particular local area comes with a sense of identity which is neat and easy to draw: a local community centre can probably colour on a map the area in which they have a “moral monopoly”.

A business that starts small or local might start to expand by doing the same thing elsewhere: opening new locations, offices, shops etc. They lose the cosy “independent and local” brand, but gain economies of scale. The costs of the same staff, distribution network, suppliers can be spread across a wider area, and they can use this saving to improve their product or cut prices and get new customers. In contrast, charities can make these effectiveness improvements, but because they can’t really compete on price, they get no credit for it. They lose the local distinctiveness for little return.

The charities that have scaled successfully have been because the size or importance of the problem increased (e.g. climate charities, food banks), or because their method/model for addressing the problem was genuinely differentiated (e.g. Parkrun, Samaritans). But without an extremely clear-eyed assessment of whether this is true for a small organisation, scaling for scaling’s sake is pretty dangerous.

How do you compete with that?

But say you’ve avoided this danger. You’ve carefully distinguished your mission and your approach from all the other community groups around you.

Now you’re all in the same grant pot. You’re going for the same Government contract. You want to hire the same staff.

How do you win, when there are no clear, comparable metrics available to keep score?

You’re again reliant on hoping your particular moral claim happens to align better than the rest. It’s a beauty contest where you don’t meet the judges, don’t know the criteria, and only find out afterwards that this year they were really interested in intergenerational loneliness.

It’s no secret charities hate these processes, but funders and commissioners find them extremely difficult too.

It’s all too easy for any critique of an organisation to feel like disagreement with its mission, as if pointing out problems with Cancer Research means you’re pro-Cancer.

But for charities, the currency the moral monopoly produces isn't profit — it's uncriticisability.

Is it NICE to see what works?

So people have proposed solutions. If the problem is that charities are hard to compare in a fair and tractable way, the answer is obvious: make them comparable.

Strip out the local story, the emotional connection, and the moral claims, and get out the spreadsheets and randomised controlled trials. How much good does this project do? For whom? At what cost? Compared to what?

That’s the promise of Effective Altruism, GiveWell, NICE and the What Works Centres. There’s a push, backed by big money, to try and funnel funding based on measures like “Quality-Adjusted Life Years saved”, framed as researching “cost-effective ways to give”.

But a charity’s moral claim depends on its distinctiveness: the sense that you’re always comparing apples to oranges, or air ambulances to malaria nets.

Standardised measures flatten that. It coldly extracts the uniqueness, and substitutes an effect size and a confidence interval. Most threateningly, it means you can be ranked. You can win or lose.

There’s been a huge backlash to these measurement attempts. Some of that backlash is right. Standardised measures often can’t capture what really matters. They can reduce dignity and community to a spreadsheet, and mistake what’s counted for what counts.

But perhaps sometimes it is simpler than that: no monopolist likes competition.

My main takeaways from the CoF conference in Minneapolis last week were not what I anticipated.

American Community Foundations are sitting on huge piles of money, but could be doing a lot more with how they give it out. In a lot of ways, and unexpectedly, they are seriously behind the curve.

Frankly, I found the difference between the US and the UK confusing, and spent most of my time asking pesky questions.

From this outsider’s perspective, these issues feels downstream of the incentives set up by tax policy, donors and the foundations themselves.

Here’s what I mean:

Asset Management

When we met someone from a Community Foundation, we usually heard 2 things:

1. Where they’re from

2. How many millions or billions of $s they manage

That is how size is measured.

The explicit focus is on accumulation, not distribution. People at foundations who know their exact asset values can struggle to describe which non-profits they've made grants to.

And if you go to their websites, you’ll see different asset-management strategies, different asset types they can handle (stock, crypto, property etc), and their fees: charged as a % of assets under management.

Community Foundations will even offer their asset management services out to local non-profits, offering to manage/acquire their own endowments/reserves.

Crucially, you’ll also see their tax advantages…

Tax Incentives

The structure of philanthropy in the US depends on specific rules made by the IRS (US version of HMRC). Donors can deduct charitable giving from taxable income, but there's a catch - donate over a certain amount (~$20,000, it depends) and you need itemized receipts from every charity.

This bureaucratic nightmare means wealthy donors rarely give directly to charities, like they would in the UK.

Enter Donor Advised Funds (DAFs). Donors put money into a DAF, get their tax deduction immediately, only need to list a single charitable recipient (the DAF), and then tell the foundation where to distribute funds later.

They’re Donor Advised by name, but often Donor Directed in practice. The donor will typically tell the foundation (the DAF sponsor) exactly which charity they want to give to, how much, and when. Many DAFs will donate to a select few organisations, and often just 1, or even 0.

The Barbell

But Community Foundations also have their own endowments, often massive. Some of the largest manage over $5 billion with no donor restrictions, and the largest 100 all manage more than the biggest in the UK.

They distribute a % of these every year, and it’s entirely up to them how much, and where they donate it. It could be as low as 0.5% (if you’ve heard of a 5% rule - that only applies to private foundations, not community foundations).

So they operate on extremes:

• On one end: Endowment funds where boards decide everything

• On the other: DAFs where donors call all the shots

• In the middle: Almost nothing

And that thin middle ground - issue-focused funds where foundations prepare open grant rounds and advise donors based on community needs - is where UK foundations excel and most of their grantmaking comes from.

It's the difference between a donor saying “give $10k to this youth club” vs the foundation saying “we've identified these 3 food banks serving populations with the highest need - here's why we recommend them”.

But in the US? The middle exists, but barely. DAFs are largely about compliance and payments infrastructure, meaning CFs face stiff competition from Fidelity, Schwab, and fintech start-ups like Daffy.

The value of the middle

This middle point, where the process is driven by the foundation, and approved by the donor, is tricky, in a good way. It requires the foundation to really know what is needed in a community, to have trusted relationships with community groups, and to really demonstrate the value of their expertise.

If they don’t, the donor (or often, Local Government funds) will just go somewhere else.

It forces CFs to do a good job.

And, when foundations get paid based on the amount of money they help disburse, not based on their assets they’ve accumulated, it pushes the CF’s incentives in the right direction for the community.

This shows in the numbers too - recent research into UK foundation payout rates (combined with some quick maths) reveals that Community Foundations are paying out around 3x as much as other foundations: 17% vs the ~5% average for the largest 100 foundations.

Right now, these incentives don’t exist in the US. And it shows.

The processes, the relationships and the systems clearly lag behind as a result.

The Processes & "Trust Based Philanthropy"

We heard a few conversations about being more Trust-Based. This is a sort of US equivalent to IVAR (the Institute for Voluntary Action Research)'s “Open and Trusting Grantmaking”: a campaign to improve the grantmaking processes of foundations.

But like American chocolate, it definitely doesn’t pack as much punch as the UK version.

There’s no equivalent of IVAR’s accountability/review cycle, and the recommendations are much less specific and tangible:

Category 🇺🇸 Trust Based Philanthropy 🇬🇧 IVAR Open & Trusting Core Practices 6️⃣ practices:
💰 Multi-year unrestricted
📋 Do homework
📄 Streamline paperwork
💬 Be transparent
👂 Get feedback
🤝 Support beyond $ 8️⃣ commitments:
⏰ Don't waste time
❓ Relevant questions
⚖️ Accept risk
🚀 Act urgently
📊 Be open
🔄 Be flexible
💬 Purposeful comms
📏 Be proportionate Specificity 📖 Broader principles
🎯 Values-based framework ✅ Detailed commitments
📊 Measurable outcomes Accountability 🪞 Self-assessment
👥 Peer learning
🤲 Voluntary participation 🔍 External review
📅 Every 2 years
💬 Charities assess funders Timeline 📅 Ended 2024 🏛️ Ongoing program Data 🤝 External research 🔬 Primary research

And that reflects the wider environment.

While we might complain a lot about problems with funder practice in the UK (and we have certainly done our fair share), Community Foundations in the US have grantmaking processes that are on the whole not as applicant-friendly, as transparent or frankly as helpful as the UK.

Some of the things done as standard in the UK, like having different length application forms for big vs small grants, were viewed as novel innovations in the US.

Invite-only grant rounds are the default, and clear guidance on funder priorities is not all that common.

There’s still generally something of an attitude of “non profits need to get to know us”, rather than “meeting non-profits where they are”. It's still donor-driven. There's not as much evidence of grantmaking processes being in service of the community.

Community Relationships

I think (though it’s hard to tell after a week), that this has sometimes led to more strained relationships with communities. Particularly in the case when foundations are administering Donor Advised Funds, as this can limit the transparency a foundation can give about their donors, income sources and grants.

At the conference, I heard of one CF that had actually been sued by their local community for not adequately delivering on their mission. Another Foundation talked about a participatory grantmaking discussion that got so heated, the community simply dropped out and refused the money.

Though of course, UK Community Foundations can also have fractious relationships with local community groups, we probably just sue each other a bit less (again, because of the incentives, but that's another issue).

At the conference, there was a clear aim to fix this where these relationships were difficult, with a lot of focus on “Community Listening”.

I especially enjoyed the session run by Community Heart & Soul about the work they've done in rural communities to help Community Foundations facilitate conversations about what communities really want and need in their local area. So I don't think it's just foreigners that can sense a problem, or identify solutions.

Processes & Systems

On technology, from the land of Silicon Valley, we definitely expected more.

But, given the different incentives (towards donors and assets, rather than on community-focused grantmaking), we probably shouldn’t have been surprised that systems were lacklustre.

There wasn’t much innovation in Grant Management Systems, and surprisingly barely any mention of AI, compared to the frequent discussion at the UKCF conference last year.

Certainly, there was no evidence of the number of experiments and new ideas happening in the UK (both from us here at Plinth and elsewhere), whether that's on applicant <-> matching, better impact reporting or on using AI to reduce the application burden.

The most engaged conversations I heard about software were around the benefits of adding character limits to application questions.

But then some things we’ve built in the UK, like our automated due-diligence checkers and assessment support just aren’t as relevant, as grant funds are so much less likely to be open/competitive. To be honest, I'm not sure whether it's processes stopping innovation in tech systems, or vice versa.

Bright spots

Despite these systemic issues, we encountered some genuinely impressive innovations that show what's possible when incentives do align with community impact.

And what I can say is, when Americans go, they go hard.

We came across:

• Foundations working in rural regions that could give out $1000s on the same day as the initial application.

• A foundation buying billboards advertising the results of their grant programmes, so the whole community could see the impact.

• A common decentralised platform for grant applications, backed by $100s of millions.

• A network of foundations raising over $5 billion in new money to be spent supporting communities in just a small city, after the George Floyd protests.

• A foundation suing the Federal Government for cutting its contracted grant programme to indigenous communities.

And I particularly liked the Minneapolis Foundation’s campaign to tell donors to:

Get off your assets

They're working against the incentives, and trying to double the amount that their donors actually spend each year, and to put the emphasis on actually getting funds moving in their community.

So when the focus is there, big things get done.

Learnings for the UK

UK Community Foundations are newer, so haven’t had time to build up these massive endowments that you have in America.

A large endowment sounds nice, but they clearly have their downsides.

The UK model creates an interesting tension: CFs need to prove their worth annually to keep funding flowing, which keeps them accountable and responsive. But this also means they're often dancing to the tune of whoever's paying - whether that's government with its electoral cycles or corporations with quarterly targets.

The sweet spot might be having enough reserves to think beyond the next government contract (maybe 2-3 years of operating costs?), but not so much that you become disconnected from community needs. Enough stability to make long term investments in the community, but not enough to get complacent.

Above all, UK foundations must resist the temptation to retreat from the messy middle. The moment donors stop questioning whether you're the expert in where their money should go, you've probably stopped earning that trust.

Of course the UK could do more to follow the best of America: releasing money for individual projects more quickly, building a wider donor base to support with things like match funding, and yes - having enough breathing room to think strategically.

But building massive perpetual endowments? That feels like solving the wrong problem.

Ideas for the US

But in truth, I saw much more that the US could learn from the UK.

And I have a few concrete suggestions:

• Create a mission-focused DAF that charges based only on distribution. As the foundation, you would then run an open process, produce research on your community, evaluate the impact and report back to donors who want to tackle a particular issue, but don’t know quite how.

• Check out IVAR. They don't normally work with non-UK foundations, but if you can fake a British accent, maybe you can get away with it. At the very least, steal and implement all their recommendations.

• Lean hard into the community listening work that I heard Community Heart & Soul talk about with rural foundations.

• Build the evidence case. Take the “Vital Signs” concept from Canada and tailor it for a US context, like in Flint, Michigan.

• Set up better tech systems to support those new processes (though we would say that).

And what most of these have in common: US foundations should look for ideas outside the US more often. It's telling that the UKCF conference was extremely international, with visitors from across Europe, Africa and Latin America, whereas I met no-one else last week who wasn't from North America.

With over 1,000 community foundations managing $100+ billion in assets, even small improvements in distribution efficiency could unlock billions more for communities that desperately need it. The question isn't whether American foundations can afford to innovate - it's whether they can afford not to.

And if anyone in the US, or the UK, wants to talk more about this difference, or get help with tech solutions to enable better grantmaking, let me know: tom@plinth.org.uk.

In strategy sessions and on websites for foundations and philanthropists across the globe, you'll increasingly hear the language of Venture Capital investing. "Catalytic funding." "First-mover advantage." "Disruptive innovation." This isn't coincidence — it's a deliberate shift as philanthropy increasingly models itself after Silicon Valley's investment approach.

It's easy to understand why. The Venture Capital model has created unprecedented wealth, has its alumni in the top positions of Government, and the sector is perceived as attractive and glamorous (or at least as much as you can be in a Patagonia vest). If philanthropy aims to solve intractable social problems, shouldn't it adopt the methods of the most successful problem-solvers in the private sector?

Yet, this borrowing of vocabulary and mindset comes with an unexamined assumption — that the fundamental dynamics of investing and philanthropy are similar enough to warrant the same approach.

One of the core concepts in investing (particularly VC) is that you have to be contrarian and right. In philanthropy, you don’t. You just have to be right.

That changes everything about how we should think about funding innovation and risk.

In investing, returns diminish once others see the same opportunity. If you invested in Uber in its first funding round, you’d have made 5,000 times your money, if you invested a year ago, you’d have lost 2.5%. The only way to be a “good investor”, is to buy things (companies, commodities, currencies, etc), that are going to be more valuable than everyone else thinks, before everyone else realises.

This perspective on the world is deeply burned into everyone that’s ever worked in investing. Traders talk about “alpha”, VCs talk about “picking winners”, and hedge funds boast about their "proprietary insights”. In investing, if you don’t have an edge, you’re nothing.

However, philanthropy is not investing.

The crucial missing ingredient is ownership of the return.

An investment buys you a slice of future returns — a share of the pie. But once those returns become obvious, capital floods in, and the opportunity gets competed away. That’s what drives diminishing returns and why investors are always hunting for an edge: the moment something works, it stops working.

In philanthropy, this doesn’t exist. Your donation or your grant gives you no share of the non-profit, no claim to the “social benefit” generated by their work — ownership still fully sits with the mission, and society as a whole. That’s why it’s charity — obviously.

You don’t need to “get in early”, and actually often it’s a better strategy to back a programme or an organisation once it’s been proven to work. It’s often cheaper and lower risk to fund, with none of the downsides you’d get if you were an investor — because the opportunities to make an impact are not ever going to be competed away.

We shouldn’t think about most philanthropy as investing. A better analogy is procurement.

Philanthropy as procurement

Yes, it’s a bit of a step-down the excitement rankings — from helping “the daring build legendary companies” to “no one ever got fired for buying IBM” — but let’s elaborate.

For many charities or non-profits, even large grants are not really used as capital to invest in new programmes or try new things. Instead, they’re treated as revenue to spend on mundane things, like rent, staff salaries, heating bills or tax. In essence, grants and donations are buying outcomes or impact, often in an extremely tangible way.

Everyone knows what a youth club does. Everyone knows why a food bank needs to exist. Everyone knows how a malaria net works. Donations or grants trade money for more youth clubs, more food banks or fewer kids dying from malaria. Most philanthropy should be focused on making this trade as effective, as efficient and as large as possible.

And this isn’t easy. Being a procurement officer may not be glamorous (apologies to the many we work with…), but it is still very important. Crucially, it’s a weak-link problem — the big mistakes matter more than the big successes. Funding a youth club with inadequate safeguarding will lead to much more harm than good, just as poorly distributing funds in an emergency can lead to a “second disaster”. In these kinds of cases, there’s both direct harms to the people involved, and other indirect reputational risks to the people who were part of funding it.

Which is why, despite much of the external communication from large grant-makers being about “innovation” and “supporting bolder change”, most of the internal operations are actually about minimising risk. Most of the people involved are spending time running due-diligence checks on organisations, making sure projects match their legal requirements, and considering whether there would be reputational concerns with particular individuals.

This all actually makes complete sense if philanthropy is acting more like procurement than investing. Funders don’t need to be first movers, they just need to be smart buyers.

Doing procurement more effectively

The problem is that funders are talking the investor talk, but walking the procurement walk — and the conflicts between the two are responsible for many of the problems with grant-making.

The investor mindset resists exactly what makes procurement effective: investors avoid reinvesting when others have caught up, they prioritise flexibility over efficient process, they keep criteria deliberately vague to discover contrarian outliers, they constantly shift strategies to find new opportunities and they idealise innovation even when incremental improvement delivers better results.

But if funders can choose to shake off the burden of trying to be “investors”, there’s an awful lot they can do to become smarter buyers:

• Renew and expand contracts after the first grant — if many charities deliver similar work, and the main risk is funding an inappropriate organisation, funders should be giving more repeat grants. You’ve already done the due-diligence heavy-lifting, and you have all the additional insight from their monitoring and reporting. If the first grant went well, a “regrant” should be a common, perhaps even the default, scenario. Rules like “don’t reapply if you’ve received a grant in the past X years” are particularly counterproductive.

• Invest in process automation — if the job is to purchase outcomes and impact in the community, you should be trying to cut out all of the unnecessary costs and inefficiencies from this process. Maybe this looks like the “Lean Review” done by foundations like Northern Ireland Community Foundation’s, or perhaps that’s investing in Plinth’s AI tools to support with automating due-diligence and eligibility checks (shameless plug).

• Make it clearer what you’ll fund — no procurement process starts out with open, all-encompassing criteria. It would lead to an unmanageable influx of enquiries from every potential supplier under the sun. Yet, this is common practice in grant-making, and is one of the contributors to extremely competitive processes for applicants, and mounting administrative costs for funders. Funders should be much more specific about what they want to fund.

• Keep consistent strategies — if you relieve yourself of the pressure to find the “neglected” problem, or to “lead the change” in a space, because there are so many things that you know work that require continued funding, you don’t have to keep changing your strategy. That in turn means charities you might want to work with have a clearer understanding of what funders do and whether they will be a good fit.

• Stop encouraging core work to be dressed up as innovation — finally, if funders can stop pretending to be investors, they can openly support charities’ essential, core activities rather than pressuring them to disguise them as novel ideas. Both sides can be more comfortable with the honest reality that most of the time, grant funding goes to fund the continuation of existing work.

Good procurement is hard, as is evidenced by how difficult it is to work with so many procurement departments. Just using the word procurement might be enough to bring some charities out in cold sweats from painful past experiences, but unlike rigid government procurement with its inflexible RFPs and opaque decision-making, philanthropic procurement could be more adaptive and relational.

The best funders can combine clear criteria and consistent processes with the flexibility to back promising organisations for multiple cycles, adjust reporting requirements based on grantee capacity, and make thoughtful exceptions when the situation demands it. It doesn’t need the “investment” façade to do this.

Do procurement well, not investment poorly.

The exceptional cases

Of course, there are situations where funders should act like investors, both in promise and in practice. An entirely standardised procurement-like approach would likely lead to stagnation across the sector pretty quickly.

For problems where there’s no proven solution, someone has to fund things that are a bit more out of the box. Right now, by using the wording of investment, but the practice models of procurement, funders are failing these areas too, perhaps even more-so than elsewhere.

While most charitable funds should lean into their procurement-like reality, a small, dedicated portion should be explicitly earmarked as “risky investment”.

This portion should only fund things that are explicitly contrarian and at high risk of failure. “Risky” might mean new untested approaches or technology, things that need patient long-term thinking, areas that are currently extremely taboo, or radically different ways or making decisions and sharing power. But importantly, this should be a clear and obvious different mode of thinking to normal grant-making, and in practice would probably need to be run as a separate fund, or by different people.

Because in the right contexts, this genuinely contrarian approach can have really important effects, but where the scale and direction of impact may not yet be clear, as the real-world examples clearly show:

Funding untested approaches:

• Direct cash transfers: GiveDirectly's universal basic income trials in Kenya challenged conventional wisdom about aid effectiveness

• Digital innovation: National Lottery Community Fund's Digital Fund supported tech solutions where outcomes were unproven

• Medical breakthroughs: Early funding for malaria vaccine research that traditional healthcare investors considered too risky

• Housing innovation: Robert Wood Johnson Foundation's backing of "Housing First" when conventional wisdom prioritised treatment before housing

Tackling unpopular or taboo issues:

• Marginalised communities: Open Society Foundations' funding of sex worker advocacy when few would support such work

• Reproductive health: Hewlett and Packard Foundations' sustained funding for abortion access despite political controversy

• Mental health alternatives: Beckley Foundation, MAPS, and Wellcome Trust's pioneering research into psychedelic therapy despite legal obstacles

• Environmental activism: Sea Shepherd's direct-action conservation work that more mainstream funders avoided

Taking the long view:

• Existential risks: Open Philanthropy's work on AI safety and biological threats requiring decades-long thinking

• Nuclear security: MacArthur Fund's commitment to nuclear threat reduction over generational timeframes

• Climate intervention: Harvard's Solar Geoengineering Research Program exploring controversial but potentially necessary approaches

• Ecosystem restoration: Arcadia Fund's rewilding initiatives requiring patience beyond typical funding cycles

• Early childhood development: The decades-long Perry Preschool Project that transformed understanding of early intervention benefits, funded continually by HighScope Educational Research

When early "investor-style" philanthropy successfully proves a risky approach works and is important, what should happen next is clear: "procurement-style" funders ought to step in, providing sustained funding to continue or scale these proven interventions. This creates a healthy ecosystem where risky innovations that succeed can find long-term support.

However, in practice, this handoff rarely occurs because all philanthropic funders face strong institutional pressures to minimise risk. Unlike VCs who can tolerate frequent failures, and take almost perverse pride in them, because their few successes generate enormous financial returns covering all losses, philanthropic funders gain no direct financial benefit from their successful bets. Without this offsetting reward mechanism, the natural tendency is to drift toward safer, more conventional approaches — even for funds supposedly dedicated to innovation.

The challenge for philanthropy, is to create new incentive structures that genuinely enable and reward risk-taking. We need better offsetting mechanisms to recognise the significant social value created when funders’ risky bets succeed. Until we solve this incentive problem, philanthropic organisations will continue using venture capital language while avoiding the actual risk-taking that makes the VC model effective.

Overall

The irony is that by playing at being investors but practicing as procurement officers, funders are getting the worst of both worlds — the stresses of aiming for innovation without the real risk tolerance, and the constraints of procurement without its discipline and efficiency.

For philanthropy to reach its full potential, foundations must be honest about which mode they're operating in. The vast majority should embrace their role as professional buyers of social impact, bringing the appropriate toolkit and mentality to bear on maximising their effectiveness.

And for those looking to encourage the true risk-capital approach, we have a suitably contrarian suggestion next time.

Those who spend their wealth in God’s cause are like grains of corn that produce seven ears, each bearing a hundred grains. God gives multiple increase to whoever He wishes: He is limitless and all knowing. (2:261)

If you were told to annually give away 2.5% of your accumulated wealth to charity and in return you will see a tenfold increase in your own wealth - would you do it? Seems like any reasonable person would. What if, instead, that increase was more than money but extended to life experiences. You might not get all your money back directly but perhaps you will land the job you always wanted, meet someone who will change your life, or generally feel a lot more fulfilled in your day to day. Still tempting? Now, let's suppose you might not even receive any material or experiential return on your charity. Instead, your return is something otherworldly, an infinite promise of goodness in a life that is yet to come.

For most people, the final situation doesn't seem like a worthy trade. But for 4 million Muslims across the UK, this metaphysical logic lays the foundation for why Muslims are exceptional at charity, far beyond the UK national average.

Here's the facts:

• British Muslims donate over £1 billion annually despite being only 6.5% of the UK population. (MCF) More specifically, in 2023 total estimated charity giving was between £1.5 billion and £2.2 billion. (Blue State Digital)

• As of April 2024, British Muslims donated £708 per person which is 4.3 times more than the UK average of £165 per person. Such exceptional levels of generosity held steady across all age groups. (Blue State Digital)

• British Muslims also have extremely high volunteering rates with 43% volunteering in the past year compared to only 26% of the general UK public.(MCF)

• If such a scale of giving is predicted to continue, the sector is predicted to raise £4.39 billion annually by 2051. (Ayaan Institute)

• This is all despite the fact 50% of British Muslims are considered to be in poverty, compared to 18% of the wider population. (Independent)

How first principles lead to exceptional outcomes

Muslims believe this world is temporary and ultimately a test. The essential challenge of our existence, lies in pursuing good and resisting evil - in a manner that is according to God's prescribed path. Once truly internalised, the implications of this core principle is unbelievably powerful. Ordinary actions are transformed into acts of worship and deep spiritual significance. One of these is how Muslims spend their wealth.

Obligation vs Choice

In Islam there are two ways Muslims gives wealth; zakat and sadaqah.

Zakat is one of the five pillars of Islam and is not charity but a religious obligation. This outlines that Muslims must give 2.5% of their wealth annually to charity. This differs from secular giving which is generally viewed as voluntary. Therefore, non-payment of this is considered a serious religious violation. Paired with the islamic importance of community, it creates a robust system of accountability. Cultural norms of giving are established meaning the Muslim is accountable to God, their peers, and their community. Resulting in consistent giving patterns, regardless of economic conditions (e.g. the cost of living crisis, pandemic and poverty.)

Sadaqah refers to any voluntary charity beyond this 2.5% threshold but also extends beyond material wealth. For example, giving money to your family, helping the old lady cross the street and even smiling at someone (with the right intentions) are all acts of sadaqah.

Both acts are rewarded by God's bestowal of barakah (blessings) on the individual. The nature of such bestowal is a beautiful mystery. Perhaps it may take the form of material wealth or a future experience. Perhaps it is located in the life to come. Regardless, the micro-decisions involved in Muslim wealth-giving are influenced by a very powerful incentive structure. It's these principles that form the foundation of the Islamic charitable giving.

Community infrastructure and systemised giving

Such exceptional outcomes not only require individual will and motivation but also the systems and community infrastructure to enable it.

First we begin with the Masjid. The masjid (mosque) is not only a place of worship but a central hub for all types of charity collection and are fundamental to the robust networks that facilitate year-round consistent giving. Specialised zakat committees within these mosques ensure that donations are calculated, collected and distributed according to Islamic principles - ensuring transparency, accountability and serving as a direct link between the giver and the community.

Community-specific charity organisations can then provide the infrastructure to connect and amplify the impact of mosques. For example, groups such as Islamic Relief UK, Muslim Aid and Muslim Hands play a significant role in building capacity for mosques and enhancing their activities across the UK. Such a relationship is mutually beneficial, both in material and spiritual sense. Collaboration means mosques can serve as central points of disseminating information about charitable initiatives, collection of donations and organising volunteer efforts. In return larger organisations also launch joint programmes with mosques. For instance, Islamic Relief UK routinely partnered with mosques to distribute food packs to vulnerable groups in the country such as the homeless, low-income families and refugees.

Spiritually, giving is also deeply tied to timing. The month of Ramadan serves as a key moment for Muslims to fulfil their charitable obligations, ensuring their contributions are made as part of their religious duty. For example, 62% of British Muslims donate their zakat during Ramadan. This structured approach enables Muslim organisations to operate within a predictable charitable cycle, allowing them to plan and prepare for the large-scale distribution of wealth that occurs during this period.

Who's doing who a favour?

"The upper hand is better than the lower hand (the spending hand is better than the receiving hand)" - The Prophet Muhammad ﷺ (Hadith)

Islamic theology fundamentally inverts the contemporary understanding of the giver and recipient, which has profound implications for charitable giving.

In modern secular philanthropy, the relationship is typically framed as unidirectional:

• The giver is positioned as the one with moral agency and virtue who generously shares their resources.

• The recipient is cast as the beneficiary who receives assistance and must show gratitude for this generosity.

• The giver is doing the recipient a favour.

Such a framework inevitably creates a power dynamic where the giver is elevated while the receiver is somewhat diminished in agency.

Whereas, in the Islamic paradigm:

• The recipient is performing a service for the giver, enabling them to fulfil their religious obligation.

• The recipient is an instrument through which the giver's wealth becomes purified, resulting in increased blessings.

• The giver and recipient are both doing each other a favour.

Therefore, the act of giving is a privilege that is to be sought rather than a burden to be borne. Recipients can maintain dignity in receiving donations and wealthier givers actively seek opportunities to give rather than waiting to be approached. This also bears out in the data, with the generosity of richer Muslims being much higher than the 'average' richer donor in the UK.

Without God, how do we give more?

Ultimately, it is the profound spiritual dimension of charity that enables Muslims to give at such exceptional rates. Their acts of generosity are not just financial transactions but deeply rooted expressions of faith, responsibility, and purpose. Interestingly, although the mandatory nature of zakat plays a role (in attempting) to ensure all Muslims give, 72% of British Muslims donate as much or more in sadaqah annually. Reaffirming that Muslims don't see the act of giving as just an obligation but more as a moral duty.

Understanding this raises interesting questions about incentive structures. For example, can secular society cultivate a comparable incentive structure to encourage greater giving?

The first step must be cultural. Shifting perspectives so that acts of giving are seen not only as optional generosity but as a sought-after shared social responsibility, is crucial. A society that embeds giving into its collective identity – where supporting others is not just encouraged but expected – will ultimately build stronger, more resilient communities. Developing the concrete steps to achieve is complex and challenging, but finding ways to incentivise more people to give remains crucial.

After all, perhaps the greatest lesson to be learned from Islamic charity is that true generosity thrives when it is tied to something greater than the self.

Sean is a practising Muslim and Impact Lead @ Plinth.

References
Blue State. 2024. British Muslim Giving Behaviours: What We Know About the Most Generous Group of UK Donors. Blue State.

Hughes, Micah A., and Shariq A. Siddiqui. 2024. "From Islamic Charity to Muslim Philanthropy: Definitions Across Disciplines." Religion Compass 18: e70002. https://doi.org/10.1111/rec3.70002.

Mohammed, Jahangir, and Beatrice Bianchi. n.d. Aiding the Ummah: Analysing the Muslim Humanitarian Charity Sector in the UK. London: Ayaan Institute.

Muslim Charities Forum and nfpResearch. 2023. "British Muslim Charitable Giving Report II: The Impact of the Cost-of-Living Crisis on British Muslim Charitable Giving." London: Muslim Charities Forum

The Independent. 2022. "British Muslims Are Being Forced to Use Food Banks Due to Cost of Living Crisis." The Independent, November 19, 2022. https://www.independent.co.uk/news/uk/home-news/british-muslims-food-banks-poverty-cost-of-living-b2223668.html.