The Nonprofit Sector and the ‘Shake Shack Effect’

Apr
27
2020

Written by Deepa Iyer and Frances Kunreuther

This article is cross-listed on the Philantopic blog.

These days, we’re hearing a lot about how federal legislation passed in response to the coronavirus public health emergency is bailing out big businesses at the expense of small restaurants, mom-and-pop shops, and immigrant-owned stores. When big chains like Shake Shack and universities with large endowments such as Harvard receive millions of dollars in federal loans, we shouldn’t be surprised that the news is greeted by demands the funds be returned.

Inequities in the administration of such programs aren’t just a public-relations concern for well-endowed institutions and big businesses, however. At a time when they are desperately needed, historically-underresourced organizations in the nonprofit sector led by people of color and working closely with communities disproportionately affected by the pandemic are concerned about their own survival. Indeed, the pandemic has revealed many of the long-standing structural disparities that exist in the United States. If, as a society, we are serious about addressing such disparities, then funders and donors who support nonprofits must step up to ensure the long-term survival of groups advocating for the needs of vulnerable communities.

As the COVID-19 emergency unfolds, smaller community-based and people-of-color-led organizations are serving as a lifeline for black, Indigenous, Latinx and Asian communities, undocumented immigrants, and queer and trans communities. Domestic violence agencies are supporting survivors, organizations serving Indigenous and African-American communities are ensuring their access to water and health care, neighborhood-based providers are helping people with limited-English proficiency complete government forms, and immigrant-serving groups are ensuring that undocumented people are able to secure legal advice and protections. Beyond these frontline providers, people-of-color led organizations are taking the lead in building power and making demands for structural change, ranging from universal basic income to decarceration to migrant justice.

Even before the pandemic, many of these nonprofits were facing challenges. According to a survey by the Nonprofit Finance Fund conducted in 2018, 65 percent of nonprofits who serve low-income communities were worried they couldn’t meet demands for their services, while 67 percent said that federal policies were making life harder for their clients. Our own surveys on race and leadership consistently reveal that nonprofit executives of color face more funding challenges than white executive directors and CEOs, while our 2019 survey found that more than a third of leaders of color (compared to less than a quarter of their white counterparts) reported that they never or rarely get “funding that is comparable to peer organizations doing similar work.”

For these and other reasons, community-based nonprofits working closely with those disproportionately affected by the virus should be prioritized in future federal stimulus packages, state supplemental funds, and philanthropic initiatives. Federal and state recovery packages should create carveouts for underresourced organizations working in vulnerable communities so that they do not have to compete with larger, historically-well-funded groups for a limited pool of funds. Given that many small organizations do not have relationships with banks due to historic barriers in accessing loans and because lenders tend to prioritize bigger-budget organizations, the process of accessing loans also should be opened and made more accessible. While efforts are under way in the nonprofit sector to secure expanded access to the Paycheck Protection Program for larger groups and pass a universal charitable deduction, a true racial equity framework requires us to center the needs of organizations working in and closely with the most vulnerable communities. In addition, nonprofit organizations with large reserves that don’t need an immediate loan could follow the lead of the #ShareMyCheck effort and opt not to compete with smaller nonprofits and underresourced groups with manifestly greater needs.

For their part, foundations can do more to address the racial disparities laid bare by the pandemic by scaling organizations that are most proximate to needs in vulnerable communities while increasing their support for organizing and power-building strategies. It’s also important that foundations review their grantmaking through a racial equity lens to determine whether dollars are actually going to organizations serving the communities most affected by the virus. Foundations such as the Boston Foundation, the Emergent Fund, and the Groundswell Fund have all launched initiatives focused on supporting organizations led by people from and working with communities disproportionately affected by the pandemic.

It’s true that most nonprofits find themselves overwhelmed by the scale and scope of the crisis. But not all nonprofits are created equal or have equal access to the resources they need. As a sector, we cannot ignore people-of-color led community-based groups working to meet urgent needs during this crisis. To close the nonprofit racial equity gap, we must do everything we can to ensure that these groups not only make it through this national emergency but are positioned to thrive. In doing so, we will be sustaining the communities that depend on them and helping to ensure that they, too, come out of the crisis stronger.

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