When you design the project budget, sometimes the donor asks you for matching funds. In some proposals, it is even required to have a specific percentage of a match. But what does the term matching funds actually mean? In this article we will explain everything you need to know about it.
Matching funds are funds from the side of your organization that supplement the grant. They are similar to co-payments. They do not always have to be money, they can be in-kind contributions as well. In this case, the in-kind contributions are given a monetary value to be displayable in the budget.
There are two main reasons why a donor wants you to show matching funds. The first is, that this way the grant money carries longer. If your organization commits to a specific amount of an own contribution, the total amount disposable for the project increases. This way, the impact of the project can be bigger.
The other reasons donors have to ask for matching funds is the fact, that people who payed money themselves or contributed something to a project are much more likely to feel responsibility for the project and support it in the long term. Co-payments and matching funds are a factor that can influence project sustainability to a very high degree.
If the donor requires you to have matching funds, they normally also point out the section of the proposal in which you should describe these funds. The budget narrative is also a good place to tell the donors about your matching funds. When the matching funds are given through in-kind contributions, you can put a monetary value to them. If it is material, you can quote the market value, if it is work, you can give the normal rate that you would need to pay for a worker.
It depends a lot on the project and the scope of work where matching funds come from. They can be another grant from a different donor, they can come from the capital base of the organization or from the beneficiaries.
If you have more questions about the project budget and its parts, make sure to check out this article: Everything you need to know about the project budget.
Eva is based in Germany and has worked for nearly a decade with NGOs on the grassroots level in Nepal in the field of capacity development and promotion of sustainable agricultural practices. Before that, she worked in South America and Europe with different organizations. She holds a Ph.D. in geography and her field of research was sustainability and inclusion in development projects.
very helpful article