How today’s increased appetite for coordination can drive efficiency in the philanthropic sector

Impact-driven funders across Asia are calling for increased coordination in the philanthropic sector. In our recent article 'How Are Impact-Driven Funders Thinking about Giving Better?', we interviewed over 20 leading philanthropists, corporate foundations, private banks, and philanthropic aggregators to understand new needs and trends in the sector. The majority of respondents cited lack of coordination between organizations as a major impediment to their work. 

In this article, we highlight 3 recommendations for how impact-driven funders can increase coordination and efficiency to ultimately achieve better results for the people they serve.

#1 Implement recommendation engine techniques to source needs from the community

Challenge: One of the main challenges interview participants face when determining where to give is assessing needs on the ground. Restrictions on movement and in-person interaction due to Covid-19, limited Social Service Agency (SSA) capacity, and rapidly changing needs make it especially difficult to stay up-to-date and responsive to community needs.

Sector Inspiration: In the early days of online streaming, companies like Netflix and Amazon developed new recommendation engine techniques to better target their content to customers. One of these techniques was collaborative filtering, which was a tool developed to design algorithms that draw on peer recommendations and behavior to recommend television programs tailored to individual preferences. The collaborative filtering approach created algorithms that use the opinions and actions of customers as predictive data about which products other, like-minded customers would want. 

Leaders in the social sector have drawn on private-sector inspiration to apply the use of a collaborative filtering techniques to social problems. When used in the social sector, collaborative filtering offers an efficient way to gather large amounts of qualitative data from communities, and have community members themselves rank the issues that are most important to them. Collaborative filtering allows program designers to surface peer-ranked insights about what’s really happening in a community and identify the greatest needs from a beneficiary perspective. 

Example: The collaborative filtering approach has been applied to the social sector by an organization called DevCAFE, an open-source mobile platform that enables rapid, scalable collection and analysis of quantitative and qualitative data in the field. In Uganda, DevCAFE used a collaborative filtering approach to source recommendations to improve a women’s training program on family planning. Women answered a few standard quantitative questions and then had a chance to provide an idea for improvement in their own words. The other women then rated each of these ideas, and the end result was a filtered list of prioritized and community-validated suggestions. The top three included adding a water well, including men at training sessions, and improving access to family planning materials. The team successfully implemented all three".

#2 Create a one-stop shop to standardise due diligence processes

Challenge: Another major challenge impact-driven funders face is avoiding the duplication of due diligence efforts. When social sector organizations apply for funding, they often have to complete multiple lengthy and onerous due diligence processes to receive funding, which diverts scarce resources like staff time and funding away from program delivery. 

Sector Inspiration: Instead of having separate, bespoke due diligence processes for each organization, some social sector actors are beginning to develop standardized due diligence processes where funding applicants can submit one common application to be considered for multiple funding opportunities. The approach is similar to the idea of a common application for college admissions, where applicants fill out one main application to apply to multiple schools.

Another approach is to create a syndicated funding model in which one lead organization is appointed to conduct due diligence on behalf of a group of organizations and then shares the results with the group. The benefit of these approaches is that they save time and resources for both the funder and the grantee.

Example: Third Sector Capital used a syndicated funding model during the creation of a Social Impact Bond in Salt Lake County, USA, focused on reducing homelessness. The project raised $11.5M USD from 12 local, national, and international funders from the public and private sectors. Instead of submitting applications to each funder separately and answering individual due diligence questions from each stakeholder, Third Sector created a common standardized system and aligned stakeholders to designate a single funder for each tranche to conduct due diligence on the social service agency involved in the project. The appointed funder then circulated their results to the other funders so as to minimize repetition. The result was a significant reduction in time and effort that it would have taken to complete all 12 due diligence processes separately.

#3 Create partnerships between funders with different mandates to provide mixed financing options to social sector organizations

Challenge: A third challenge highlighted by impact-driven funders during the course of our research was that narrow funding mandates often limit the type of support individual funders are able to provide. During Covid-19, SSAs have a wide variety of funding needs, including the need for working capital to maintain operations throughout the period of disruption. Since most funders are structured to give programmatic grants for specific programs, obtaining flexible funding and diverse funding types can be difficult for SSAs.

Sector Inspiration: Impact-driven funders with diverse missions and mandates can work together to bridge the gap when restrictive mandates present a barrier to SSAs obtaining the type of funding they need.

Example: Social Investment Business in the UK created the Resilience and Recovery Loan Fund (RRLF). RRLF is a new fund for social enterprises and charities that are improving people's lives across the UK and are experiencing disruption to their normal business model as a result of COVID-19. The fund was established to make an existing government scheme, the Coronavirus Business Interruption Loan Scheme (CBILS), more accessible to charities and social enterprises. CBILS was created to support small businesses during Covid-19 by providing lenders with an 80% guarantee if the borrower fails to repay. However, social enterprises and charities are excluded since CBILS is only available through lenders accredited by the British Business Bank. In order to make this scheme accessible to the social sector, Social Investment Business acts as an accredited lender that uses the CBILS scheme to support loans made by RRLF, making the program accessible to charities and social enterprises".

This article represents the conclusion of our 4-part series on how impact-driven funders are thinking about giving better. Through our research and discussions with funders, we have seen an increased appetite for collaboration in the philanthropic community. In response to growing interest, we have been asked by funders in Singapore to create a Community of Practice (CoP) among a close group of philanthropy professionals. If you're interested in getting involved, please reach out to a member of our team for more information.

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