Letter to the Editor: Building Trust in Philanthropy

Letter to the Editor: Building Trust in Philanthropy

Last month, The Economist published a Special Report highlighting some global trends in philanthropy that center on trusting communities and the local organizations that represent them to know best how to manage resources for their own benefit. Some of the trends it discussed included no-strings giving, investing specifically in organizational overhead, and funding local organizations based in the communities they serve. In addition to the benefits of these approaches, the report raised some potential pitfalls. Based on our extensive experience as a funder of community-led development, we wanted to build on the analysis in the report with some additional reflections.   

The article “No-strings philanthropy is giving charities more decision-making power” captures a fundamental truth the development community is beginning to acknowledge: that organizations based in the communities they serve know best how to address their own challenges and build their own opportunities. 

It also seems to suggest a trade-off or dichotomy between achieving trust with local communities and having strong accountability to funders with measured outcomes.

At the Inter-American Foundation, we are proud to have proven that both achieving local trust through our community-led model and strong accountability are possible at once. Congress actually suspected this already back in 1969, when it founded the Inter-American Foundation (IAF) to deliver U.S. foreign assistance directly to grassroots and civil society organizations who design and propose their own projects. More than 50 years of experience have shown us this is not just “nice” but cheaper, more effective, and more sustainable over time.

To help mainstream community-led development, the IAF’s lessons in mitigating the challenges of no-strings approaches noted in the article could be helpful to others:

  • Requiring reporting can build trust rather than hamper it. The IAF puts community-led organizations in the driver’s seat without neglecting our responsibility to oversee our funds. In a 2023 Center for Effective Philanthropy survey, grantees rated us in the top 1% of a comparison group of 300 funders for having an evaluation process that helps them to reflect and learn. By setting those measures of success together, we build mutual respect and accountability. 

  • Strengthening the leadership capacity, administration, and systems of community organizations does not require a no-strings approach. The IAF invests directly in developing grantee organizations’ capacity, with 92% of grantees receiving support in areas such as staff training in strategic communications, board development, and fundraising. We strengthen organizations precisely so they can compellingly demonstrate their impact. 

  • Funders can trust organizations that are not the well-known targets of other donors. To select dynamic, trustworthy grantees that truly represent the populations they seek to benefit, the IAF vets organizations not through fame but through careful triangulation of information from application materials, reputational assessments, and pre-selection site visits. Nearly 98% of our independent audits validate grantees’ scrupulous use of funds, with most audit findings resolved through improved accounting practices. We also develop trust-based giving over time, with most initial awards at ~$125,000 over 2–3 years, followed by more than $200,000 on average over several more years once organizations demonstrate success.  

Coverage on this topic will contribute to the momentum for delivering development funding directly to community organizations. Keeping our oversight of resources and stewardship of ongoing relationships strong will help make that case. Each year, the IAF can only fund a fraction of the localized, community-led proposals we receive. The model works; our collective challenge now is to put real resources into community-led development. 

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