It may come as a surprise, but for an industry that exists to fight for the underdog – one of the greatest challenges facing the sector today is its inability to promote potential. This is bad news, but we can all can help make change happen.

As a society, it is crucial that our civil sector is able to champion the most compelling and cost-effective solutions. The issues we face are constantly evolving whether it’s fighting the burgeoning homelessness challenge, improving community cohesion after the violence in August or addressing the mental health crisis. We need to make sure that the people with fresh ideas for how to solve our problems, can access the support they need to scale the solutions that work.

The business sector prizes innovation and recognises that it is rare without the presence of competition from smaller, newer players, but in the charity sector things are very different. And as a result, mobility has long been stagnating. Eighty-seven per cent of the 167,000 charities in the UK have an income of under £500,000 but the largest seven per cent receive 90 per cent of the income. Big charities are getting bigger and smaller organisations are struggling to survive, let alone provide the ideas and the challenge the established players need.

So how has this lack of social mobility in the sector come about? In business, returns organically lead to investment and scaling. It is different in the charity sector because it is generally still the charities with the best brands and the best fundraisers, not the best operations, which end up with cash. How good a charity is at doing its job often has no relation to its ability to raise funds. 

This shouldn’t be the case. There are over a hundred thousand smaller charities, many with exceptional ideas and solutions. And loads of them are doing a great job in showing their impact. But as funding is increasingly scarce – competition for trust and foundations is at an all-time high, local authorities are cutting budgets and corporate giving by FTSE 100s is down a staggering 26 per cent since 2013 – the situation is only getting tougher for the smaller players. 

The route of the problem for small charities lies in two areas: the lack of public trust and the current funding system. Smaller charities are hit the hardest by the repeated charity scandals, despite rarely being the culprits. It is a harsh irony the less trust people have, the more they give to the familiar brands rather than local projects.

The established trust and foundation grant-making system has inadvertently strengthened the march of the mega-charity. Funders like to have clearly defined purposes to show they are affecting change in specifics areas — for example, homelessness or child literacy in Yorkshire. Funders now expect all charities to articulate why they most closely meet these purposes.

Small-scale, local social entrepreneurs don’t stand much of a chance. Big charities have fundraising departments designed to navigate the system while start-up organisations operating on shoe-string budgets simply don’t have the manpower. Even more worrying is the fact that, by default, this system often discriminates against those with fewer formal qualifications or where English isn’t a first language. Funders may say otherwise but the system is stacked against solutions and ideas from community-led grassroots organisations. 

For a start-up charity with a turnover of less than six figures it is even harder to get the investment needed to scale, no matter how great your work is. Funders may fund specific project work within small charities but most do not think it is worth undertaking due diligence for unrestricted, ‘investment’ funding unless the grant is going to be at least £50,000. And the same funders will rarely consider giving this level of core-cost funding to a small charity.

There is huge potential for both individual and corporate philanthropy to fill some of these gaps. Businesses are looking to differentiate themselves both through their giving and by offering up the skills of their staff. And individuals are often much happier to invest in people without the need for reams of paperwork. But often the perceived risk of working with smaller organisations and the difficulties of differentiating between good and bad get in the way. 

We are calling for businesses and philanthropists to take the time to support early-stage charities, build confidence and skills in small organisations with high potential and put them on a path to recognition and future success. We know it’s not easy to find the best but we can help. We have a portfolio of over 500 small charities in the UK whose leadership and management have been through our rigorous assessment process. They are the best in class across all sectors, from youth opportunity, mental health and well-being, social equity and inclusion to the environment and sustainability. Anyone can search for them for free on our website and make unrestricted donations. Giving the best small charities the freedom to decide where they want to end up is one of the best ways to improve the impact of your support. And it also means our society will have a much greater chance of solving its own problems.

Mary Rose Gunn is CEO at the Fore, a venture philanthropy fund for small charities.