Baking a difference: Why ‘unrestricted funding’ matters for non-profits

Too often, philanthropic funding for non-profits focuses only on the ends and not the means to achieving success. Imagine you want to start a bakery to make delicious bread. You’ve bought all the necessary ingredients – flour, oil, yeast, salt. But you don’t have money to rent a space or an oven, pay for electricity, or hire a baker. You will never make a single loaf of bread.

Just as a bakery requires more than raw ingredients, non-profits must cover operating costs. Staff salaries, energy bills, office rent, maintenance, and equipment are what keep a non-profit going. Non-profits, like the bakery, need funds to keep the lights on.

The Bake a Difference campaign seeks to raise awareness of this. It is led by the Voice for Social Good (VSG), which was set up by an inspiring group of non-profit leaders in Hong Kong. They want funders to adopt a more flexible approach to supporting charities. To channel more philanthropic money to support the operations, not just the outputs. They want us to give more “unrestricted” funds.

As chairman of the Chen Yet-Sen Family Foundation (CYSFF), I support a strategic approach to philanthropy. I believe it is crucial to consider the risk profile of non-profits and seek asymmetric returns. This principle guides my philosophy of ‘Moonshot Philanthropy’. Typically, I invest in high-risk, high-reward endeavours aimed at solving major societal challenges.

However, the unrestricted funding model, exemplified by Mackenzie Scott, also has its place in a philanthropic toolkit. It is invaluable in times of crisis, building trust with the grantees and driving innovation, ultimately enabling foundations to make a significant positive impact on society.

Here, I am going to look at why both of these approaches matter and why they, in fact, complement one another.

Ensuring Survival and Resilience

Hong Kong non-profits, like so many around the world, struggled when COVID hit. We saw this first-hand at the CYSFF. Non-profits tend to rely on fundraising events – gala dinners, fun runs, etc. None of this was possible during the years of the pandemic.

Recognising the danger to non-profits when their funding mechanism was suddenly blocked due to COVID restrictions, we stepped in. Our team initiated the #BridgetheGapHK campaign, encouraging the public, corporations, and family foundations to donate to non-profits so that they could continue to serve their beneficiaries.

The pandemic demonstrated the critical importance of unrestricted funding. When traditional fundraising events were disrupted, non-profits with flexible budgets were better positioned to weather the storm. They could adapt their operations, support their staff, and continue serving their communities.

By adopting this type of funding, the CYSFF managed to prevent the potential collapse of well-functioning NGOs in Hong Kong during the pandemic and thus provided a high return on investment. Such a collapse could have had detrimental effects on Hong Kong’s civil society in the long term.

Trust and Collaboration

Trust between donors and non-profits is the key to successfully allocating unrestricted funding. Trust takes time and is built on transparency and honesty.

The five non-profits that received our matching donation via the #BridgetheGapHK campaign were existing grantees. We had confidence that our unrestricted funding was well placed. We kept the paperwork small – no grant applications were required. We acknowledged that those closest to the issues often had the best solutions.

The Freedom to Innovate

The most impactful non-profit organisations are engines of innovation. But as with private companies, they need room to breathe. They need funds to take risks, adapt to changing circumstances, and experiment with new ideas.

I have worked for 20 years in the non-profit space for my family’s philanthropic foundation. We have funded a range of causes dedicated to improving vision for those in underserved communities.

At that time, we faced a trade-off between funding short-term projects with immediate benefits and funding the organisations for the longer term so they could adapt their strategies and grow.

Through our Vision programs, we have funded teams to deliver eye tests and dispense solutions, including eye drops and/or glasses, while advocating for changes in government funding, education programs, and awareness-building of the need for a clear vision for everyone.

If it were only about the first route – direct provision of vision correction tools – it would take a millennium to serve everyone on Earth who requires treatment. You cannot restore sight to people one by one, certainly not effectively or quickly.

And so, while that work has always been central to our cause – particularly through our work in Rwanda. Through on-the-ground training for nurses, we made significant progress in delivering universal, affordable eyecare across the country. However, our focus shifted to long-term advocacy and campaigning for a broader and lasting impact.

Using Rwanda as an example, we campaigned globally for policy change, stressing the importance of “the right to clear vision.” This effort resulted in a significant win – the United Nations resolution in 2021, aiming for “Quality Eyecare for All by 2030”, which was supported by all 193 member nations.

The Importance of the Long View

Effective social change takes time. It requires sustained effort, learning from mistakes, and iterative improvement. Unrestricted funding provides non-profits with the stability needed to take the long view. It allows them to invest in capacity-building, talent development, and infrastructure – elements often overlooked but essential for long-term impact. It can set strategic goals beyond short-term project outcomes.

This long-term perspective allows non-profits to address the root causes of social issues, ultimately creating more sustainable change.

In essence, the Bake a Difference campaign, endorsed by the CYSFF, demonstrates the valuable role that unrestricted funding can play in building trust and collaboration between non-profits and their funders, allowing for streamlined processes and a focus on solutions.

It empowers non-profits to innovate, take calculated risks, and address the root causes of social issues, ultimately contributing to lasting, positive change.