Small Charities, Big Impact: Why Grassroots Organisations Need Fair Funding

Small Charity Week, running from 22^nd to 29^th June 2026, is a moment to celebrate the grassroot organisations holding communities together across the UK. Real change happens closest to the community, and small charities are often the most trusted, most accessible, and most effective way to reach the people who need support the most. Yet too many of these organisations lack the sustainable, long-term funding they need to keep delivering, which is why addressing the structural inequities in how funding is distributed, ensuring smaller organisations can access resources on an equitable basis, and shifting toward multi-year unrestricted core funding remains an urgent priority for the sector. 

The charity sector is facing a perfect storm right now, with a ‘triple crunch’ of increased demand, rising costs, and falling income pushing small charities to the brink at the very moment communities need them most. According to Lubbock Fine’s analysis of Charity Commission data, the number of UK charities shutting down jumped to 151 in 2024/25, up from 87 the year before, primarily due to the triple crunch. At the same time, as rising inflation and the prolonged cost of living crisis continue to place severe financial pressure on households and communities across the UK, demand for essential services such as food banks and mental health support has reached unprecedented levels. However, the small charities best placed to provide that support are under severe strain, and with restricted funding opportunities, many are being forced to fight for their survival, leaving behind disadvantaged communities that rely on them the most. 

The impact of small charities in addressing pressing challenges and delivering essential support within local communities is significant and well-documented. According to new research released by NCVO to mark Small Charity Week 2026, small charities have been named Britain’s second most trusted support system, with four in five people agreeing that they are vital to society and make a real difference in their communities. They are valued for providing personal and immediate support in times of crisis, with over half of respondents stating that if a small charity in their area closed tomorrow there would be a negative impact on the welfare of their local community. Small charities are often founded by the very communities they serve and are present on the ground, giving them a first-hand understanding of the challenges people face that larger charities, without that local presence, may be unable to replicate. 

As reflected in last year’s edition of MCF’s annual magazine, The Forum, small charities act as first responders, both at times of crises and in tackling systemic challenges.  Muslim-led charities and grassroots organisations are uniquely positioned to understand the nuances and sensitivities of the challenges facing Muslim communities, providing culturally competent and faith-sensitive support that removes barriers to engagement. When an organisation reflects the background and lived experience of those it serves and understands the role that faith plays in how people navigate hardship, individuals are far more likely to seek help, trust the support on offer, and engage meaningfully with the services available to them. It is therefore vital that these organisations receive sustained financial backing to remain viable. 

However, the distribution of funding across the sector reveals a profound and structural inequality, with the vast majority of charitable income concentrated among a small number of large organisations, leaving smaller charities chronically under-resourced and financially precarious. The Centre for Social Justice found that just 1% of charities in England and Wales make up 75% of the sector’s annual income, and the largest 16 registered charities have a bigger combined income than all 160,000 charities earning under £1 million put together. Most small charities are consequently trapped in short-term project funding cycles, unable to plan ahead, retain experienced staff, or build organisational capacity, leaving many relying almost entirely on volunteers to sustain their operations. 

As the Association of Charitable Foundations has highlighted, core funding, which covers essential operating costs such as staff salaries, rent, and administrative functions, is what small charities actually need and what they rarely receive. Without it, organisations cannot function sustainably regardless of how much project-specific funding they secure. What small charities require above all else is long-term, unrestricted core funding that is equitably distributed across the breadth of the sector, including organisations working on faith, women’s programmes, mental health, and other areas that have historically struggled to access mainstream funding streams. A funding landscape that concentrates resource among a narrow set of organisations and issue areas will inevitably leave the most marginalised communities without the support they need. 

Small Charity Week is a moment to celebrate the grassroots organisations holding communities together, but celebration alone is not enough. The unequal distribution of funding across the sector, and the structural barriers that disproportionately affect Muslim-led charities, must be addressed as a matter of urgency. MCF urges both government and funders to expand dedicated funding streams for small and grassroots charities, create simpler and more accessible application processes, and increase provision of multi-year unrestricted core funding for organisations that need it most. Real change happens closest to the community, and it is time our funding system reflected that.