The racial funding gap in philanthropy and grantmaking

Racial inequity is embedded in many industries—however, many nonprofit organizations, business leaders, and individuals across the country have committed to addressing systemic racism. For funders and grantmakers, who have intentions to solve some of society’s biggest social ills, this means reflecting on the role they play in perpetuating inequitable systems and committing to creating an equitable grantmaking process.

Nowadays, many grantmakers and funders are committing to closing the racial funding gap. In fact, nearly 90% of grantmaking leaders are planning to focus more on racial equity by increasing staff and board diversity, reducing barriers to funding, and building relationships in more communities.

In this article, we’ll explore the racial grantmaking gap in greater detail and provide actionable next steps for how to address it. Let’s get started.

Research on the racial grantmaking gap

To help shed light on the racial funding gap in grantmaking, institutions like Echoing Green and Greenlining, and initiatives like Race to Lead, have studied the demographics of grantmaking organizations. In particular, they focused on the distribution of funds to nonprofits led by people of color compared with those led by their white counterparts.

They found that in general, nonprofit organizations led by people of color rely more heavily on grant funding while those with white leadership have larger budgets and receive a much greater portion of the total grants and grant dollars awarded.

This is true even for nonprofit organizations with similar purposes. For example, nonprofits aiming to improve the lives of black men with black leaders receive less total funding than those received by nonprofits that aim to do the same but have white leaders. Organizations led by black women received the least amount of funding.

The inequitable distribution of funding is not limited to nonprofit organizations led by people of color. It can also be seen in organizations led by and addressing concerns of the LGBTQIA+ and disability communities. These nonprofits serve communities that continue to grow in number, but the grantmaking industry continues to provide them with limited support.

How to confront the racial grantmaking gap

The first step to addressing the racial grantmaking gap is understanding the barriers that diverse nonprofits experience to receiving equitable funding to their white counterparts. Some of these barriers include:

• Connections: Diverse nonprofit leaders need access to social networks that lead to connections in the grantmaking and funding community.
• Building relationships: Bias may inhibit relationship-building between diverse nonprofits and the grantmaking industry.
• Securing support: Grantmakers and funders may lack an understanding of culturally relevant approaches, leading them to exclude diverse nonprofits.

To confront these barriers to equity, grantmakers and funders must question their application processes, evaluative criteria, and assumptions of trustworthiness. Here are some steps you can take to establish more equitable grantmaking in your organization:

• Center DEI principles from top to bottom. Begin with the top of your organization by evaluating your leaders and how they can work towards implementing DEI principles. This could mean committing to having a diverse board, creating a diversity statement for your organization, and investing in DEI training.
• Examine your criteria for grantees. Consider the ways that your grantmaking criteria exclude diverse nonprofits and rework them. For example, you may have expectations of budget size and organization longevity that make it difficult for smaller, diverse nonprofits to receive the funding they need.
• Evaluate your processes. Keep in mind that nonprofits serving diverse communities will have different approaches because they are taking into account their community’s unique culture and needs. Evaluate your processes for how you can empower nonprofits to better serve their beneficiaries. Discuss with your organization’s leaders how your practices center DEI and the lived experience of those closest to the issues the nonprofit is addressing.

To truly address the racial funding gap and implement DEI principles, systemic change is needed in the grantmaking industry. Keep an open mind and don’t be afraid to challenge the norms. Assess how diverse your previous grantees have been and ask yourself what you can do better to create the positive change you’re committed to.

The bottom line: Committing to racial equity

The grantmaking industry has many changes to help diverse nonprofits receive the funding they need, so make sure to play your role in improving the system and centering DEI principles. Confronting the racial funding gap is no easy task, but it’s work that must be done to ensure an equitable future for everyone. Reflect on the demographics you are unintentionally excluding with your processes, and commit to the principle of racial equity.