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12 Reasons Why Donors Stop Funding

Aug 19, 2021 | by Yosy Christy Natalia

What stops a donor from funding an organization? 

The role of a donor is indispensable for impact organizations. Donor funding is crucial for impact projects as it provides the much-needed fillip to the campaign in terms of capital support. However, in certain circumstances, a donor may quit funding a campaign which may result in a setback to the performance and fruition of the impact program. 

In this blog, we shall understand the nature of donor funding, how and when a donor may decide to stop investing in an organization’s cause and what can be done to avert such a scenario.

As per a 2018 Bank of America report, nearly 30% of wealthy donors stopped their funding to an organization that they supported in the previous year. The factors were many, ranging from their own financial health to deviations in the organizations’ approach towards its impact goal. 

Here are some of the reasons why a donor may stop funding an organization or not fund to begin with. 

  • Change in organization’s policy, leadership, activities
  • Change in the organization’s philanthropic focus
  • Deviations in what the organization stated as its goal in its statement
  • Changes in the donor’s degree of involvement, engagement, role or stake in the organization 
  • Donor’s priorities changed or no more matched with the organization
  • Donor’s financial situation changes
  • The donor was asked for an inappropriate amount of funding
  • The donor does not feel engaged 
  • The donor does not get expected return 
  • Reporting standards of the organization don’t meet donors’ requirements
  • The organization does not provide transparent M&E
  • The organization does not have strong leadership or subject matter expertise

Frequent solicitations from the organization may also put off donors from continuing to fund a project.

The donor community faces many challenges in the process of funding an organization, therefore, it is important to throw light on steps that can be taken to retain donors and ensure that they feel valued and satisfied. 

An organization, as per its suitability, can invest in a donor acquisition and retention program. They must focus on understanding donors’ expectations, challenges and devise ways to keep them engaged consistently. 

Vision alignment 

A donor, when aligned with the organization’s vision, is likely to stay associated with the project for long. When an organization makes the donor community feel heard and shows that they matter, the latter’s interest and involvement automatically grow manifold. Establishing a personal connection with the donors is crucial. This also means looking for grants from donors who match your vision, while it can be very tempting to receive donations from anyone, if your visions don’t match, then it might not end up being a lasting relationship.

Impact Reporting

Share timely impact reports and other data with your donors to help them realize the significance of their contribution, this will spur their inclination to ensure regular funding. Many donors check the capabilities of the organization to be able to measure impact and do M&E before even donating. If your reporting is not on time &/or does not meet the requirements of the donors, the chances that they will discontinue the relationship are really high. Especially, as the younger generation is taking up leadership roles in grant-giving foundations, the importance of impact measurement & reporting is even higher. 

Past records

The more historical impact you can show to the donors, the more it acts as an assurance for them. This is especially important when trying to get funds from a new donor. Clear, transparent outcome-level reporting can help you gain trust and secure funds for your future projects. 

Financial transparency

Donors, unlike investors, don’t expect financial returns, but they do want to make sure that their money is being used for the cause & not for any untoward expenses. Having audited financial reports, clear systems in place to record expenses, & financial governance can go a long way in building a healthy relationship with your donors. 

Open communication channels, a professional code of conduct, meeting deadlines, an in-depth understanding of the problem at hand and your stakeholders, growth mindset are some of the other characteristics that can help you maintain a long-lasting relationship with your current and future donors.

Read also: Impact Investment Funds for NGOs: A Guide

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