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.