What's Risky About "Risk Grantmaking"?

Firelight’s extensive experience working with emerging community-based organizations in Africa refutes the common notion that these organizations do not have the capacity to manage international funding.

Some funders hesitate to make grants to African community-based organizations, despite the great and growing need for local responses to HIV/AIDS in Sub-Saharan Africa. International funders express concerns about the organizational capacity of small community-based groups, including the administrative structures, financial experience, and communications skills of these organizations. One survey of donors and intermediary funding organizations found that “concerns about financial accountability” was the most common reason why these funders were not providing more resources to African community groups serving vulnerable children (Save the Children U.K., 2005). Funders believe that emerging community-based organizations cannot administer and document international funding.

Firelight’s experience proves otherwise.

Consistent with our philosophy of responsible risk-taking, Firelight’s “risk grantmaking” program offers small grants directly to African community-based organizations. These grants ensure that resources are available to those at the frontlines of response to the orphan crisis. The organizations receiving these grants often operate in rural areas, undertake innovative new programs, and rely on few or no paid staff. Sometimes they do not have computer or telephone access. Usually, they have little or no track record of managing external donations. In spite of these constraints, Firelight has found that risk grants improve the lives of vulnerable children and build the capacity of communities to address their own needs.

Firelight’s Definition of a Risk Grant: A new grant that is often, but not always, a small dollar award (defined as US$5,000 or below) given to:

• an emerging organization that may lack a formalized organizational structure, established financial history, or other external funding sources; or
• an organization undertaking a pilot program or particularly innovative activity; or
• an organization with limited communication or proposal-writing skills but with extensive community participation, strong leadership, well-thought-out plans for growth, or other indicators of great promise.

At of the end of fiscal year 2004, Firelight had awarded risk grants to 98 carefully reviewed organizations. Totaling $631,100, these grants constitute a significant portion of the Foundation’s new grant portfolio. Risk grants are smaller than the average grant given by Firelight, as we have found that small awards best facilitate the growth of these organizations. These grants represent 6 out of every 10 new grants awarded but only 41% of all new grant dollars awarded.

Risk grants initiate relationships between Firelight and community-based organizations. Our application, reporting, and oversight processes strengthen the capacity of these small groups to gain additional funding from Firelight and from other external sources. These grants lend credibility to the group’s efforts, enhancing their visibility and reputation with community members, local government agencies, and other donors. Most risk grant recipients successfully secure continued funding from Firelight. However, a few risk grant recipients do fail to satisfy the Foundation’s minimum standards for regranting.

In Firelight’s extensive risk grantmaking portfolio, only 10 risk grantees, or 17% of those applying for continued funding, have failed to receive regrant awards to date. Importantly, these recipients DO NOT tend to fail for reasons of organizational capacity, including financial mismanagement. Rather, Firelight’s analysis shows that unsuccessful risk grantees are most commonly declined due to concerns about activities or program orientation. These concerns might include sustainability, the level of community involvement, or other issues regarding program implementation (e.g., limited community participation, the absence of a psychosocial support component, not strongly child-focused, or overly broad activities).