Developing Grant-Making Strategies to Support Small Charities

Sponsor:	Merton Connected
Sponsor Liaison:	Ali Khimji, Tony Molloy
Student Team:	Tora Ito, Vivek Jagadeesh, Jeffrey Li, Edward Zazzali
Abstract:	In collaboration with Merton Connected, a charitable organization in the London Borough of Merton, our project identified the fundraising challenges facing small charities in Merton and proposed grant-making strategies to meet these challenges. Through 56 surveys and 20 interviews of representatives of small charities and local funders, we identified the key fundraising strategies that small charities apply, the challenges they face in securing grant funding, and funders’ perspectives on these challenges. We recommend that Merton Connected increase awareness of grant opportunities, provide unrestricted grants, offer collaborative grant funds, and implement an optional digital portion in their grant application. We hope these recommendations allow small charities to continue to support the residents of Merton.
Link:	Merton Connected Final Report Merton Connected Final Presentation

Executive Summary

Background

The London Borough of Merton is characterized by the stark socio-economic divide between its deprived eastern and affluent western halves. In response to the widening gap between community needs and available resources, statutory bodies, including the Merton Borough Council and the National Health Service (NHS), have delivered essential services to the Merton Community. However, recent budget reductions to the borough council and the NHS have significantly hindered their ability to support Merton’s residents, both by reducing the services they provide and by decreasing the funding available to small charities in Merton (Anandaciva, 2025; Merton Council Newsroom, 2024).

Merton Connected is a charitable organization in Merton that seeks to improve the community by providing a range of support to over 1000 local organizations. One of Merton Connected’s primary initiatives is Merton Giving, a Place-Based Giving Scheme (PBGS) that offers grant funding to charitable organizations (Merton Chamber of Commerce, n.d.). These grants are essential in supporting small charities that are often overlooked by larger grant-makers, particularly as recent austerity measures have limited their funding opportunities and have forced charities to scale back their services.

Methodology
The overall goal of this project was to identify the fundraising challenges facing small charities in the London Borough of Merton and to develop grant-making strategies for Merton Connected to meet these challenges. We accomplished this goal through five objectives.

1. Review the literature on the fundraising practices of small charities.
2. Assess the fundraising activities, sources, and gaps for small charities in Merton.
3. Evaluate the major charitable funders in Merton and what drives their funding decisions.
4. Conduct a data collection event to further understand the fundraising landscape of small charities.
5. Develop grant-making strategies that enable Merton Connected to better support small charities.

To understand the fundraising landscape facing small charities, we administered a survey of representatives of small charities and held interviews with both local funders and representatives of small charities. Additionally, we held a data collection event with representatives of local charities to supplement our existing data. We then identified the stakeholders in small charities and presented a cohesive report with our findings and recommendations for Merton Giving to enhance its support for small charities. We accomplished our project goals and objectives in London from March to May of 2025.

Findings
Our team examined the data we collected to gain insights into the current fundraising landscape for small charities in Merton, the challenges they face, and the role of grant-making strategies in addressing these challenges.Our first finding is that small charities can diversify their fundraising streams to minimize reliance on a single source. Interviews with representatives of small charities revealed that this strategy can help organizations achieve long-term sustainability. Furthermore, our analysis of small charities’ annual reports and survey of small charities found that no single income stream accounted for a majority of the income collected by Merton’s voluntary sector, revealing the widespread use of this strategy (Figure ES1).

Figure ES1: Income for Small Charities from Annual Reports (left, N=86) and from Surveys (right, N=56)

Additionally, our research found that charities generate earned income to supplement their existing revenue streams. Of the 86 annual reports that we analyzed, we found that 73 reported that they collected revenue from earned income strategies. Additionally, we found that earned income accounted for 39.7% of total revenue across Merton’s voluntary sector, making it the largest funding source for small charities in Merton. This finding was also supported in our interviews with representatives of small charities, where 9 out of 13 charities shared that a form of earned income was one of their primary sources of income.
Furthermore, our research identified that charities often collaborate to secure immediate funding and achieve long-term growth. Our survey of small charities found that 72% of respondents’ organizations have collaborated with another charity. Among these, 53% reported engaging in resource and information sharing, while 38% stated that their collaboration involved direct partnership on projects or initiatives (Figure ES2). Additionally, interviews with funders revealed that grant-making organizations prefer to award grants to collaborative projects in an effort to prevent duplication and increase the impact of charitable endeavors. Finally, our interviews with small charities revealed that organizations can learn from their partners to secure funding in the future independently.

Figure ES2: Collaboration between Charities (left, N=47) and Type of Collaboration (right, N=34) from Surveys

Moreover, we found that reduced statutory funding has hindered the ability of small charities to secure funding. These reductions have reduced both the statutory services available to the community and the funding available to small charities in Merton. Our interviews with representatives of small charities revealed that 7 out of 13 of these charities have had their operations affected by the reductions to the Merton Borough Council budget, primarily through decreases in funding and heightened competition for grants.

Our research also identified that small charities struggle to identify, apply for, and win suitable grants due to their small workforces. Our survey of small charities found that the average respondent’s organization employed only four employees. Additionally, interviews with representatives of small charities highlighted that staffing shortages have led to unawareness of grant opportunities and difficulties in writing well-written applications. In 8 out of 13 interviews with representatives of small charities, participants indicated that time was also a limiting factor, preventing them from fostering strong relationships with grant-makers. Each of these limitations has created difficulties for small charities in securing grant funding.

Our team further identified that unrestricted funding is highly beneficial to small charities, as it allows them to cover their core operating costs and leverage their knowledge of the community to support the most impactful initiatives. However, grant-making organizations primarily provide restricted grants, creating a large gap in support for these charities’ ability to operate, deliver, and improve the vital services that they provide to the community.

We also found that securing grants benefits small charities beyond the financial support. In our interviews, where small charities discussed the long-term impacts of securing grant funding, 8 out of 9 representatives of small charities identified that grant funding enhances an organization’s credibility and makes new funding opportunities available as benefits beyond the initial grant funding.

Finally, our data collection revealed the challenges with the current grant application process. In 6 out of 13 interviews with representatives of small charities, participants indicated difficulties filling out the grant application. Furthermore, grant applications were compared to exams, with some representatives expressing concern that emphasis seemed to be placed on how well the application questions or prompts were answered, rather than the actual value or impact of the charity’s work.

Recommendations
Our team developed four recommendations for Merton Connected to meet the challenges facing small charities in Merton. We advised that Merton Connected employ a range of communication methods to inform small charities about available grant opportunities, increase the availability of unrestricted funding sources, implement a partnered grant fund approach, and adopt a digital grant application system.
To better ensure that local charities are informed about suitable grant opportunities, we recommended that Merton Connected leverage social media platforms to spread awareness. Additionally, we recommended the use of “low-tech” communication to prevent technological barriers. Finally, we recommended that Merton Connected implement a centralized grant finder tool to allow charities to identify suitable grants for their organization.

Currently, grant funding is heavily skewed towards restricted funding, leaving gaps in funding for small charities to cover their core operating costs. To fill this gap, we recommended that Merton Giving explore opportunities to offer short-term, unrestricted grants to small charities, providing them with the immediate and flexible support they need to sustain their vital work.

Collaboration between charities emerged as a recurring theme in our findings. As a result, we recommended that Merton Connected create a partnered fund to help small charities enhance operational efficiency, strengthen relationships, and access more sustainable funding sources. Recognizing that challenges are inevitable in any partnership, we also advised that Merton Connected expand its existing support services to provide a clear framework for managing potential issues and ensuring the long-term success of these collaborations.

Finally, we found that the traditional application process is overly complex, often preventing small charities from clearly communicating their needs and intentions in applications. To address this, we proposed a digital submission option that includes the choice of either a video or voice recording, which allows charities to express themselves in a medium that better captures their message.