Grantee-led funding accompanied by support could help small charities grow faster than they do with traditional grants, according to a report from the Fore Trust.
The grant-making charity has released a report looking at the progress grantees had made as part of a four-year pilot programme.
The Fore Trust offers unrestricted grants of up to £30,000 to charities with annual incomes of less than £1m a year, and accompanies the grants with ongoing support.
It was launched in 2017 after a pilot programme run by the grant-making foundations the Bulldog Trust and the Golden Bottle Trust between 2012 and 2016.
To measure the impact the pilot grants have had, the report matches each of the 33 funded charities with 20 organisations of a similar size, location, scale, sector, age and income before the grant was awarded.
Four years after receiving a grant through the pilot programme, the funded charities each had an income that was an average of 811.1 per cent higher than the median control organisation.
The grant itself accounted for, on average, only 20.4 per cent of the charities’ income growth over the grant term, which the report says shows the grant was acting a catalyst to allow the charity to generate additional income elsewhere.
The report says: "This evaluation has demonstrated that The Fore's process is able to identify organisations with exceptional prospects for growth, and also that The Fore's support enables these organisations to significantly accelerate their growth and development."
The trust chooses charities with the potential for growth – the charities that had been awarded grants had a median compound annual growth rate of 13.6 per cent, compared with 3.1 per cent among the control organisations.
But in the four years after the grant, the grantees compound annual growth rate had increased to 29.4 per cent, whereas for the control groups it was 0.2 per cent.
The report acknowledges that the study does not conclusively prove that the grants had been the factor that made the difference to the charities that received them.
But it says the methodology used "demonstrated one possible way for multi-sector grant-makers to measure their success relative to the market".
It says: "This approach is far from perfect, but it offers a substantial development from the output measures that many grant-makers have to resort to.
"It is hoped that other funders adopt similar approaches and build upon this one, in order to create a culture of rigorous reporting and radical transparency in the sector."