The relationship between funders and nonprofits in India is showing signs of changing for the better. Our new research reveals that funders are increasingly forging multiyear partnerships with nonprofits and supporting their essential operational expenses alongside programme costs. Continued progress down this path will help nonprofits to build the organisational strength and resilience they need to deliver more effectively on their missions. 

Multiyear partnerships and coverage of nonprogramme costs are tenets of the Pay-What-It-Takes (PWIT) India Initiative, launched five years ago to inform and influence the mindsets and practices of funders, nonprofits, and intermediaries in pursuit of greater social impact. To that end, research conducted by The Bridgespan Group – supported by six philanthropic partners and guided by an advisory council of 15 nonprofit leaders – has shown that the impact potential of nonprofits can be enhanced when funders follow five PWIT principles: develop multiyear funder-nonprofit partnerships; pay a fair share of core costs; invest in organisational development; build financial resilience; and embed diversity, equity, and inclusion in grantmaking. 

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Our latest research, based on a survey that received responses from 460 nonprofits and interviews with 51 nonprofit leaders, funders, and intermediaries, reveals that a significant number of funders have begun to adopt PWIT practices when it comes to covering the “true costs” incurred to run a nonprofit. True costs include core administrative expenditures (overhead), organisational development investments, and reserves or corpus funding alongside programme costs. The research findings indicate four signs that suggest a shift in funder behaviour:  

1. Funders and nonprofits are engaging in more dialogue on true-cost support. 
2. Funder-nonprofit relationships have become deeper, more trusting, and more sustained. 
3. Improved funder support is leading to more nonprofits investing in organisational development.  
4. Funders are increasingly recognising the importance of core-cost support. 

But change arrives in increments, not big steps, leaving more work to be done as funders and nonprofits learn how to work more productively together. The survey also found that despite this progress:

1. Limited core-cost support remains a significant issue.  
2. The amount of organisational development support continues to be inadequate to meet nonprofits’ needs.  
3. Support to build financial reserves is still inadequate.  
4. Small and non-metro headquartered nonprofits continue to be the most underfunded. 

Admittedly, many funders remain skeptical of the push for true-cost funding, hence the slow pace of change. Until recently, skeptics could point to what one Indian funder several years ago called “a serious shortage of evidence”¹ to justify covering true costs. Today, however, evidence is mounting from organisations like the A.T.E. Chandra Foundation; the Grassroots, Resilience, Ownership and Wellness (GROW) Fund; and the Rebuild India Fund demonstrating that maximising impact requires funding nonprofits’ true costs.  

Encouragingly, more funders in India are moving in that direction. The challenge is to sustain and scale the shift that is underway. The opportunity lies in the greater impact that results when true costs are consistently covered. If funders continue to advance these practices – and nonprofits and intermediaries play their parts – India will develop a more resilient and equitable social sector over the years ahead. 

1. Pritha Venkatachalam, Donald Yeh, Shashank Rastogi, et al., Building Strong, Resilient NGOs in India: Time for New Funding Practices, The Bridgespan Group, March 2021