Bridging the Funding Gap for Nonprofits Serving Underserved and Historically Excluded Communities

Access to funding has long been a challenge for nonprofits serving underserved and historically excluded communities. While these organizations often operate on the frontlines of social justice, equity, and community transformation, they frequently face systemic barriers to securing the financial resources needed to sustain and scale their work. Despite the increasing focus on equity in philanthropy, the funding gap persists, leaving many critical initiatives under-resourced and vulnerable.

This funding gap is not due to a lack of impactful work or organizational capacity; it is a consequence of long-standing inequities within the philanthropic sector itself. Historically, funding has disproportionately flowed to large, white-led organizations, while grassroots organizations, often led by Black, Indigenous, and People of Color (BIPOC), continue to struggle for equitable investment. This imbalance limits the ability of smaller, community-rooted organizations to drive transformative change and fully realize their missions.

Understanding the Root of the Funding Gap

The funding gap for BIPOC-led and community-based nonprofits is not incidental—it's systemic. According to a 2020 study by Echoing Green and The Bridgespan Group, Black-led nonprofits receive 24% less revenue and 76% less unrestricted funding than their white-led counterparts. This disparity significantly hinders these organizations' ability to innovate, scale, and drive long-term change in the communities they serve.

The root of this funding gap lies in several intersecting factors:

• Implicit Bias in Philanthropy: Funders often view white-led organizations as more capable of managing large grants, despite the proven impact of BIPOC-led organizations.

• Relationship-Driven Fundraising: Many funders rely on their existing networks, which are often predominantly white, to identify funding opportunities. They exclude smaller, grassroots, and BIPOC-led organizations from critical funding streams.

• Restricted Funding Models: When BIPOC-led organizations do receive funding, it often comes with heavy restrictions on how the money can be spent, limiting organizational flexibility and long-term sustainability.

Why Investing in Underserved Communities Matters

The organizations that serve historically excluded communities are often the most innovative and impactful because they are deeply embedded within those communities. They understand systemic issues, cultural dynamics, and real-world needs better than anyone else. However, without sufficient and sustainable funding, these organizations are often forced to operate in survival mode, limiting their ability to innovate, grow, and scale their impact.

Investing in these organizations is not charity—it’s strategy. It means directing resources toward solutions that have already proven effective and allowing them to grow. It also means shifting from a scarcity model to an abundance model, where organizations are resourced to go beyond survival mode.

Practical Strategies for Bridging the Funding Gap

While the challenges are clear, there are practical steps that funders, philanthropists, and nonprofit leaders can take to bridge the funding gap for nonprofits serving historically excluded communities:

Shift from Project-Based Funding to General Operating Support

One of the most impactful ways to support BIPOC-led organizations is by providing unrestricted, multi-year funding. This allows organizations to cover essential operational costs, invest in staff capacity, and make long-term strategic plans without the constant pressure of securing project-specific funding. General operating support enables organizations to be more responsive to community needs and expand their impact.

Build Trust-Based Partnerships

Philanthropy has often operated on a model of power imbalance, where funders dictate how funds should be spent. A trust-based philanthropy model shifts the power dynamic by centering relationships, mutual accountability, and shared goals. Funders should invest time in understanding the vision, work, and needs of BIPOC-led organizations and trust them to lead the way in creating meaningful change.

Simplify Application and Reporting Processes

Traditional grant application and reporting processes can be unnecessarily burdensome—particularly for smaller, community-based organizations with limited staff capacity. Funders can reduce these barriers by simplifying applications, minimizing reporting requirements, and streamlining decision-making processes. This not only makes funding more accessible but also allows organizations to spend more time serving their communities rather than managing paperwork.

Moving From Scarcity to Sustainability

Bridging the funding gap is not simply about cutting more checks. It’s about shifting power and investing in long-term solutions led by those closest to the problems. It means moving away from scarcity-based philanthropy and giving change-making organizations the resources to scale and transform communities.

For nonprofit leaders, advocating for funding practices that promote equity, trust, and sustainability is essential to closing the gap and ensuring that historically excluded communities receive the resources they deserve.

Interested in learning how we support organizations in securing sustainable funding? Contact us to learn more.