What Is Trust-Based Philanthropy? A Guide for Nonprofits

The philanthropic landscape has changed greatly over the years. There is a shift toward more equitable and transparent relationships between nonprofits and grantmakers that are mutually respectful. This shift is at the heart of what is currently being referred to as trust-based philanthropy. But what, precisely, is trust-based philanthropy, and why does so much attention focus on it? According to Candid, there are almost 1.8 million nonprofits in the United States, and only a handful of them practice Trust-Based Philanthropy. This guide will walk through the concept, its origin story, key elements, and how it fits into today's landscape of grantmaking. We'll also explore how Fluxx can be a critical partner in putting trust-based principles into action.

What Is Trust-Based Philanthropy?

Trust-based philanthropy is an approach designed to drive mutual respect, transparency, and collaboration between the funding organization and grantees. Unlike traditional philanthropy—with its cumbersome application processes and rigid reporting requirements—trust-based philanthropy seeks to lessen these barriers. It strives towards a more balanced distribution of power in which nonprofits can carry out their day-to-day missions rather than get bogged down by further administrative requirements.

At the heart of it, trust-based philanthropy is all about changing the locus of control to partnership. It really believes that grantees are experts in their fields and gives them autonomy to move their money down the line in the best possible way. This not only empowers nonprofits but has more impactful and sustainable outcomes for lasting change.

Who Started Trust-Based Philanthropy?

The history of trust-based philanthropy is based on a few progressive philanthropists and foundations that became aware of the limitations of traditional grantmaking. One champion leading the charge in this movement is the Whitman Institute, designed from its founding to be an outspoken champion for trust-based practices. The approach by the Whitman Institute has inspired many others in the sector when considering how one engages with grantees.

This movement picked up more steam as the Trust-Based Philanthropy Project—launched in 2018 as a five-year peer-to-peer funder initiative—came to center stage. According to this group, the radical shifts it seeks to make in the sector are hinged on shifting the intrinsic power balances within philanthropy back to where trust-based precepts were the norm. Through this initiative, like-minded funders who have been changing the way philanthropy does business today have come together.

What Are The Key Elements of Trust-Based Philanthropy?

Trust-based philanthropy rests on the following six main principles, all of which are intended to help create a much more balanced, respectful, and potent relationship among funders and grantees.

1. Multiyear, Unrestricted Funding: Multiyear funding allows grantees flexibility and freedom for long-term planning, distributing resources where they are most needed in their work. In other words, it gives the capacity to adapt to changing circumstances, invest in organizational capacity with the nonprofit sector without fearing financial pressures in the short term.
2. Less Red Tape/Streamline Paperwork: Making application and reporting easier for nonprofits will lighten the administrative burden and make more of their time properly focus on the mission. Endeavor because according to a Center for Effective Philanthropy study, 60% say that reporting diverts grantees from the core work—that is, streamlining these processes is very key.
3. Transparent and Responsive Communication: The open lines of communication guarantee a closer and more honest relationship between funders and grantees. This is founded on the conviction that trust comes from transparency, and responsive communications provide a mechanism to resolve issues before they grow into serious problems.
4. Funders can solicit and act on feedback: Funders actively source information from grantees regarding their practice, demonstrating ways in which adjustments can be made in response to feedback, truly representative of a commitment to partnership. When receiving feedback, funders show that they value the perceptions of people with personal experience—the ones closest to the work being funded.
5. Beyond the Check: Funders provide grantee partners with non-monetary support in capacity building and networking opportunities that support thriving nonprofits. This holistic approach displays an understanding that, in addition to money, grantees need access to knowledge, networks, and strategic guidance.
6. Collaboration and Co-creation: The kind of relationship where funders and grantees collaborate in strategy formulation and solutioning, drawing from each other's expertise to ensure that strategies being funded are well-aligned to the needs of communities that are to be served and in whose outcome funders and grantees will jointly have a stake.

These components are designed to create a more balanced relationship, where both parties feel respected and valued.

Trust-Based Philanthropy and Its Effect on Grantmaking

Trust-based philanthropy is a paradigm shift in grantmaking. Traditional grantmaking fundamentally positions the funders have the power, while grantees have to prove their self-worth through rigorous applications and detailed reports. Trust-based philanthropy is all about real trust and minimizing precautions that regularly impede nonprofit success.

It prompts funders to consider themselves partners and not gatekeepers. Funders can best support the work of nonprofits by providing flexible funding, streamlining processes, and having open dialogue. Trust-based philanthropy—as will be argued—is not only in the best interest of grantees but also in those of funders, as it contributes to deeper and more meaningful relationships with them—impacting better outcomes.

How Fluxx Can Help

The principles of trust-based philanthropy can be very hard to implement, especially if any organization is accustomed to traditional ways of leading grantmaking. This is where Fluxx comes in and makes all the difference. As a next-generation grant management platform, it is attuned to creating efficiencies, raising transparency, and fostering collaboration—all hallmarks underpinning trust-based philanthropy.

The Fluxx platform empowers funders to make multi-year, unrestricted grants with ease, avoid redundant reports, and maintain open communication paths with grantees. By using Fluxx tools, funders better put into action trusting-based principles in ways that ensure their grantmaking processes are the best they can be in terms of efficiency and effectiveness.

Build More Powerful Partnerships for Bigger Impact

Trust-based philanthropy is not a trend, but rather something of a sea change in how philanthropy can and should work. This approach can forge stronger, more equitable partnerships between nonprofits and funders and drive greater social impact. There is, therefore, a real need for those nonprofits wishing to thrive in this new scene and for an inside understanding of and advocacy for trust-based philanthropy. With the proper tools, like Fluxx, the implementation of those principles can also be smooth and effective.

Ready to see how Fluxx can support your trust-based philanthropy journey? Request a meeting today and start building stronger, more impactful partnerships.