By Mohit Raj, Co-Founder at Fundable

In India’s vibrant social sector, grassroots nonprofit organisations are often hailed as the backbone of transformative community work. These organisations are often led by individuals from marginalised communities, who possess a deep understanding of the issues facing their communities and craft solutions that are culturally relevant and contextually sound. Despite the critical role they play, these founders face invisible yet immense challenges, many of which stem from outdated laws and widespread misconceptions about compensation in the nonprofit world.

A closer look at the nonprofit ecosystem reveals how India’s policies and donor attitudes systematically disadvantage these grassroots leaders, stifling the potential for real, sustained social change. It is time for us to rethink these barriers.

The Founder Salary Problem

One of the most significant challenges facing grassroots nonprofit founders is the widespread belief—both within India’s legal framework and among donors—that they should not be paid substantial salaries. While the intention behind such policies may be to ensure that donations go toward programmatic efforts, this restriction fails to account for the operational realities of running a successful nonprofit.

A study conducted by Bain & Company in 2021 showed that India’s philanthropic giving totaled $10 billion, with private individuals contributing about 60% of this amount. However, only a fraction of this giving reaches grassroots organizations, especially those based outside major cities. The study also found that Indian donors tend to favor well-established organizations, often neglecting smaller, community-based initiatives. One of the reasons for this is the widespread concern over how funds are used for operational costs like salaries, leaving grassroots founders struggling to pay themselves a fair wage.

Real-Life Impact: The Cost of Survival on Founders

In 2010, I was 21 years old when I founded a grassroots nonprofit in India, driven by a passion to create real change. But what I didn't anticipate was the immense pressure of survival. Securing funding to cover my salary as the founder was next to impossible. Every donor conversation circled back to the same question: How much of the funding will be used for programs versus operational costs? Implicit in this question was the expectation that nonprofit founders should not be paid a fair salary, or any salary at all, as if passion alone would pay the bills.

My experience is far from unique. Many grassroots leaders, particularly those coming from underrepresented or economically disadvantaged communities, find themselves in a similar position. They are passionate about their work but are forced to spend a disproportionate amount of time worrying about their personal financial survival. This constant firefighting prevents them from focusing on the long-term growth and sustainability of their organizations.

Take the example of a small nonprofit in rural Odisha, where the founder, a young woman working on gender-based violence, found herself in a similar bind. She had built an impressive network of community volunteers and impacted hundreds of women. Yet, despite her success, she had to dip into her savings to support her living expenses because donors refused to allocate funds for her salary. Her financial instability eventually led to burnout, forcing her to step down from her leadership role, and the organization’s momentum came to a halt.

These anecdotes are not just isolated incidents. A 2022 survey by the Indian School of Development Management (ISDM) found that 73% of nonprofit founders from rural and marginalized backgrounds struggled with financial insecurity, with many reporting that they could not afford to pay themselves a salary. This insecurity not only affects the personal well-being of founders but also severely limits the capacity of their organizations to scale.

Donor Misconceptions: Negotiating Away the Livelihoods of Founders

Donors themselves often perpetuate these challenges by misunderstanding the role and needs of nonprofit founders. Many donors, especially those new to philanthropy, insist that funds be allocated solely to direct programmatic costs, often at the expense of operational stability. This includes asking founders to accept piecemeal, project-based compensation rather than consistent, full-time salaries.

The reality is that grassroots founders wear many hats—they are not only the visionaries but also the program managers, fundraisers, and community liaisons. Expecting them to manage this without paying them adequately is not just unrealistic—it’s a recipe for burnout and organizational failure.

A donor I worked with once insisted on breaking down my salary into project-based components, arguing that operational costs should be minimized. The result? I found myself juggling multiple contracts, none of which fully covered the time or energy I invested in the organization. Worse, when one project ended, so did that portion of my income. This constant negotiation erodes the stability of grassroots organizations, forcing founders to focus on short-term survival rather than long-term strategic growth.

Global Comparison: Why We Need to Rethink Founder Salaries

The issue of fair compensation for nonprofit leaders isn’t unique to India. Globally, nonprofit founders and staff often face scrutiny over their salaries. However, countries like the United States have begun to shift their thinking on this front. A report by the Bridgespan Group showed that high-performing nonprofits in the U.S. invest significantly in leadership development and compensation, recognizing that organizational effectiveness hinges on the well-being of its leaders.

In contrast, India’s nonprofit sector is still lagging behind. The lack of investment in grassroots leadership perpetuates cycles of inequality, where only those with personal wealth or family support can afford to work in the sector long-term. The result is a nonprofit ecosystem that disproportionately favors metro-based, well-connected organizations, leaving grassroots founders struggling to make ends meet.

What Needs to Change?

Policy Reforms for Fair Founder Compensation: Indian laws governing nonprofit salaries need to be reformed to reflect the real costs of running a successful, sustainable nonprofit. Founders should be compensated fairly, as their well-being directly impacts the long-term success of their organizations.
Donor Education on Founder Salaries: Donors need to move beyond the myth that nonprofit leaders should work for free or for minimal pay. Founders are not just implementers—they are the strategic minds behind the organization. Donors should offer unrestricted or flexible funding that allows organizations to allocate resources to where they are most needed, including founder salaries.
Flexible Funding Models: Grassroots organizations need unrestricted, multi-year funding that gives them the flexibility to plan for the future. Long-term financial stability is essential for nonprofit leaders to focus on growth rather than survival.
Support Beyond Funding: Beyond money, grassroots leaders need mentorship, networking opportunities, and capacity-building support to navigate the complexities of the nonprofit world. Donors can play a critical role in connecting grassroots leaders with the resources they need to thrive.
Equitable Funding Criteria: Funders should evaluate organizations based on their impact and potential, not the social capital or connections of their founders. Grassroots leaders often have deep, community-based insights that make them uniquely qualified to lead change, yet they are often overlooked in favor of larger, more established organizations.

Conclusion: Building a More Inclusive and Sustainable Nonprofit Sector

The nonprofit sector is at a critical juncture. To truly create an equitable and inclusive ecosystem for social change, we must dismantle the outdated legal and cultural barriers that prevent grassroots leaders from thriving. By reforming policies to allow fair compensation for nonprofit founders and educating donors on the importance of unrestricted funding, we can unlock the full potential of grassroots organizations.

If we continue to neglect the needs of nonprofit founders, particularly those from marginalized communities, we risk losing the very people who are most capable of driving transformative change. It’s time to invest in these leaders—not just their ideas—and ensure that they have the financial stability and support they need to succeed.

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The Untold Struggles of Grassroots Nonprofit Founders