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It’s important to understand and sufficiently value the role that grassroots NGOs play in responding to crises. While the support of large international organizations can be paramount in a crisis response situation, more philanthropic funds should be prioritized for these local organizations. Grassroots NGOs are embedded in their communities, they have been working there for some time and will continue to do so well beyond the crisis. This means several things:

1. They have a real-time, first-hand understanding of the needs on the ground;
2. They are trusted; and,
3. They have longevity and the ability to meet the communities’ needs as they evolve over time, from basic humanitarian needs to longer-term recovery and resilience.
   

But how do we do this, given that it can be challenging to identify grassroots organizations with a strong track record? And given that providing funding to grassroots organizations—which often are small and less well-resourced—carries a fair amount of risk, especially in an active conflict situation?

One approach that our team has been testing in the context of Ukraine is using outcomes-based funding. Such marketplaces bring efficiency and the customer experience of capital markets to the impact sector to drive increased private sector funding for social impact aims, which aligns with our vision of contributing to the formation of an impact economy.

By paying for outcomes, rather than activities or inputs, we transfer some of the risk to the implementing organizations and can have greater confidence that our funding actually is delivering the intended impact on the ground. And by providing some upfront funding, we ensure that the organizations still have the capital they need to carry out their programs.

Working with , a social outcomes marketplace, we recruited 63 Ukrainian NGOs working on two outcomes that our Foundation sought for Ukrainian children: improved learning and improved mental health. Then, Impact Genome Registry rated the quality of the NGOs’ uploaded data based on rigor of collection method, relevance to the outcome and validity, ultimately selecting a portfolio of 24 organizations which were positioned to achieve the most impact in learning and mental health outcomes.

Thus far, our Ukraine Relief Fund has contracted USD 2 million worth of outcomes from these 24 grassroots NGOs, and they have started to deliver mental health and education outcomes and benefitted over 7,500 children in Ukraine.

Another way we can ensure more funding reaches local grassroots organizations is by enhancing transparency, both in terms of funding and impact. Purchasing outcomes through a social outcomes marketplace allows us to accomplish these aims simultaneously.

Social outcomes marketplaces aim to measure impact using the highest quality standards and make information about impact and cost available publicly for the benefit of all. By providing this transparency, these innovative marketplaces allow us to track how much funding is going to local organizations as well as how much and what type of impact the organizations are generating. They also reduce the potential for impact washing.

This allows companies and corporate foundations to get proper credit for the social impact they are supporting and increases consumer and investor confidence in the social impact reported by these companies. This in turn drives increased private sector funding for social aims—a virtuous cycle.

Additionally, marketplaces reward small, local non-profits’ performance instead of fundraising capabilities thus levelling the playing field and helping to ‘democratize’ philanthropy by allowing a broader range of implementing organizations access to funding to deliver specific social outcomes/results.

Paying for outcomes is not a new concept—we have been supporting this approach for years through outcomes contracts (referred to as Development Impact Bonds). Since our first Development Impact Bonds in India in education and health, our Foundation has had a positive experience valuing outcomes. Now, we’re doing what we can to accelerate the ecosystem for outcomes-based financing through partnerships like the one with OutcomesX.

Our longer-term vision is to contribute to the formation of an impact economy that values both social and financial return, and where solving social and environmental challenges is part of how finance works and businesses grow. We see outcomes-based financing as an integral part of the impact economy, and the development of social outcomes marketplaces is a natural progression on that journey and key for a well-functioning impact economy.

Interested in learning more about how we maximize impact through innovative initiatives like outcomes-based funding? Contact our team of philanthropy experts today.