By Dr Samar Verma*
The Real Crisis in Civil Society Isn’t Relevance—It’s the Funding Model
Stop Funding Projects; Start Building Institutions
Dr Ramaswami Balasubramaniam’s (‘Balu’) recent essay on Non-profits “at the crossroads” (rbalu.wordpress.com) deserves to be read less as a lament and more as a warning bell. When a scholar and development practitioner of his eminence writes that civil society risks losing relevance unless it reimagines itself- its domains, its mindsets, its methods- we should take that seriously, not defensively. His core proposition is spot on- the world has moved, and CSOs must move with it.
My own musings here are, in a sense, the mirror image of his argument- because if Non-profits stand at a crossroads, so do funders. Having spent much of my career leading and advising institutional development programmes with international funders, I have seen how donor incentives and grant architecture can quietly shape what becomes “normal” in nonprofit practice- sometimes in ways that blunt exactly the relevance and agility we now demand. It is from that funder-side vantage point that I build on Balu’s provocation.
The question, therefore, is not only why civil society must now stretch beyond its familiar comfort zones, but also why the funding ecosystem that has sustained it must confront its own settled habits. Many of us- whether we worked inside Non-profits, funded them, or built intermediaries around them- were drawn to civil society because we saw what the State could not see, could not reach, or could not do well enough, but aspired nonetheless. For decades, nonprofits built trust where institutions were thin, stitched services into fragile last-mile systems, and made “community” a real unit of action rather than a rhetorical flourish. Yet, as Balu notes, the unease of the present is that while the older agenda remains unfinished, the world has abruptly expanded around it: waste mountains at the edge of settlements, road deaths that cut through every geography and class, algorithms that decide who gets rations or credit, and geopolitical shocks that travel to village kitchens through fuel and food prices. Civil society cannot opt out of these realities; communities don’t get that luxury either.
But there is a harder, more uncomfortable addendum to this crossroads: the sector is not only behind on “new domains.” It is also stuck in old habits- habits that funders helped normalise- about how change is packaged, purchased, and proven. If nonprofits must reimagine their role, funders must reimagine their role even more urgently. Otherwise, we will keep asking cash-strapped organisations to solve 21st-century problems with 20th-century financing logic.
The real crisis is not relevance. It is the operating system.
Balu is right to say the new mandate is not a replacement; it is an addition. I argue that addition is not merely thematic. For effective non-profit leadership in the Global South, leadership should be understood less as personal charisma and more as an organisational function- an internal “operating system” of routines, decision rights, quality controls and governance that converts analysis into influence while protecting institutional integrity over time. Digital transformation and responsible AI are not optional add-ons anymore: organisations now need explicit practices for data provenance, verification, and transparency about uncertainty in an era where deepfakes and misinformation can rapidly erode credibility. Relevance today is inseparable from organisational capability- systems, ethics, and institutional reliability- not just intent or proximity to communities.
Yet the sector’s “operating system” has been built around a thin conception of delivery: short cycles, projectised outputs, underfunded overheads, and a quiet expectation that non-profits will make up the difference through hustle, goodwill, and staff sacrifice. This has created at least three widely accepted norms that are now actively harmful.
First, the fetish of the bite-sized project. Complex problems- road safety, plastic and waste systems, AI bias, climate volatility- do not yield to 12-month logframes. When we force them into short grants, we train organisations to chase activity over capability. We also shrink their “thinking time,” which Balu identifies as essential for leadership navigating a vastly more complex landscape.
Second, the moralisation of frugality. Many nonprofits have internalised the idea that investing in salaries, data systems, governance, communications, and financial resilience is somehow less “ethical” than spending on beneficiaries. This is not virtue. It is a bias- often reinforced by donor scrutiny- that treats institutions as cost centres rather than as the primary vehicles of durable change.
Third, the performance culture around impact- numbers that travel well, stories that read well, and “wins” that can be attributed cleanly. Balu calls this out bluntly- impact must be decoded, not declared. But the sector’s incentives still reward declaration, because too many grants are structured to purchase certainty in an uncertain world.
What TTI taught the field: influence comes from capacity, not just outputs
This is where the Think Tank Initiative (TTI) experience offers a surprisingly direct mirror. TTI was a decade-long, core-funded approach to strengthening policy research institutions: long time horizons, flexible non-earmarked funding, and “accompaniment” rather than compliance. Its external evaluation’s central lesson is relevant beyond think tanks. The greatest effects came from flexible core support because it created “enabling space” for organisations to act strategically- building staff quality, systems, and credibility- rather than merely delivering donor-defined products. It also emphasises that policy influence is best understood as positioning within an ecosystem, not a linear march from evidence to policy change and then to impact.
Nonprofits working on service delivery, rights, climate resilience, or digital safety face the same reality. Influence is rarely a single “win”; it is the cumulative effect of credibility, networks, communication capacity, and the ability to stay present through political and market volatility. The TTI evaluation warns against the “research hotel” trap- when organisations, under financial pressure, become a place where scattered commissioned work lands, weakening strategic direction and institutional accountability. Many non-profits recognise this as their own lived experience. The portfolio looks busy, the institution feels hollow.
If we want civil society to engage AI systems critically, build road-safety coalitions, or redesign waste practices, we must stop pretending that thin project funding can “buy” these capabilities. The funding model shapes the organisational model. And the organisational model shapes what the sector can see, learn, and sustain.
PWIT India makes the funder’s responsibility explicit- pay true costs, build resilience
This is why the Pay-What-It-Takes (PWIT) India Initiative is an important inflection point- not because it reveals a new truth, but because it names an old one out loud: chronic underfunding of nonprofits’ true costs- core costs, organisational development, financial resilience, and programmatic costs- blunts the impact that funders and nonprofits both say they want. (bridgespan.org) PWIT’s explicit aim is to shift funder mindsets and practices, not to lecture Non-profits into better proposal-writing.
That distinction matters. Too often, the sector has treated “capacity building” as something non-profits must do to become fundable. PWIT flips the lens: the primary dysfunction sits upstream, in the behaviours and incentives of funders.
Notice what this implies for the “funds-crunched, byte-sized project-driven” nonprofit. It cannot on its own normalise full-cost budgeting, multiyear risk-taking, or financing for learning and iteration, because the market punishes it for asking. In many ecosystems, the first non-profit to demand true costs is seen as inefficient; the tenth is seen as professional. That lag is a coordination problem, and coordination problems require leadership from the party with power. Funders have that power.
The Reimagine five shifts
So what does reinvention look like, beyond adding “AI” or “road safety” to the strategy deck?
It begins with a reckoning about the sector’s own biases:
Bias 1: “We are the good guys; therefore, our instincts are right.”
Moral clarity is not analytical clarity. AI systems can embed bias; so can non-profits. Who gets counted as “beneficiary”? Whose voice becomes “community”? Which failures are quietly explained away as context? Balu’s insistence on honest theories of change and evidence-based learning is also a call to humility.
Bias 2: “Field proximity equals truth.”
Proximity is essential- but it is not enough in an era of algorithmic governance and geopolitical spillovers. The field lens must be paired with systems literacy: data, policy, markets, and technology. TTI’s evaluation underscores that credibility comes from evidence and positioning within networks that shape policy conversations. For non-profits, the analogue is clear. Community trust must be paired with institutional credibility in the arenas where decisions are made.
Bias 3: “Overheads are indulgence.”
This is perhaps the most damaging internalised prejudice in the sector. It blocks investment in precisely what Balu identifies as existential: talent with both commitment and competence, and the ability to decode impact using modern tools. PWIT’s framing of “true costs” is a direct antidote to this bias.
Bias 4: “Communication is cosmetics.”
TTI’s evaluation shows that communications moved from being an afterthought to an integrated strategic function, often producing outsized returns in influence and reach. Non-profits, too, must treat communication as part of the intervention- especially when misinformation, polarisation, and platform dynamics shape outcomes.
Bias 5: “Scale is the only proof of seriousness.”
In waste systems, road safety, and AI governance, scale without learning can simply scale harm. Sometimes the most responsible ambition is depth: building models, documenting what works, and enabling others to adopt. Again, this demands funding for iteration, not just expansion.
Funders should stop purchasing certainty & start financing capability
The sector’s reinvention will fail unless funders change five “default settings” in their own practice.
First, move from projects to platforms: multiyear support that funds core capacity, not just deliverables. TTI suggests that long horizons are not a luxury; they are often the precondition for transformational change.
Second, pay true costs as a norm, not as an exception. PWIT is explicit about chronic underfunding of core, OD, resilience and programmatic costs; closing this gap is not charity- it is effectiveness.
Third, fund learning and adaptation as deliverables: financing rigorous monitoring, reflection, and course correction, not only “activities completed.” Balu’s framing- impact must be decoded- should become a grant requirement that is supported with resources, not a compliance demand imposed without budget.
Fourth, invest in talent markets: the sector needs people who can design waste interventions, analyse road safety data, audit algorithmic bias, and translate geopolitics into local program design. Funding must follow this reality: competitive salaries, long contracts, and leadership development. TTI’s evaluation puts human resources at the centre of organisational effectiveness and influence.
Fifth, shift from “wins” to positioning: funders should stop asking for tidy attribution in messy systems. TTI’s evaluation cautions against linear impact fantasies and urges recognition of the diffuse, long-term role institutions play in policy ecosystems. The same is true for Non-profits navigating today’s expanded terrain.
The crossroads is a choice about maturity
Balu ends with an image that should unsettle us: a child in a tribal school still needs teaching and care, but she also needs organisations capable of advocating in a world shaped by algorithms, trade agreements, and plastic-choked water tables.
That is not only a non-profit’s problem. It is a philanthropy problem, a CSR problem, and a governance problem. If funders continue to behave as if nonprofits are interchangeable vendors of projects, the sector will respond rationally. It will remain performative, fragmented, and underpowered. If funders behave as if nonprofits are institutions- repositories of capability, trust, and long-term social memory- then a different kind of civil society becomes possible- one that can hold the unfinished agenda, while building the competence to engage the new domains without losing its moral centre.
At this crossroads, staying relevant is not about chasing what is fashionable. It is about upgrading the operating system- especially the one funders control.
*Samar Verma, PhD, is a senior economist, public policy professional and an institution-builder, with 28 years of experience in economic policy research, international development, grant management, and philanthropic leadership. Views are personal.
