The Montana Community Foundation (MCF) is demonstrating how philanthropy can effectively reach rural and tribal communities. Guided by the Rural Capacity Index, a free online tool that identifies where investments in staffing and expertise are needed to support projects, MCF successfully directed funding to communities that are often overlooked in traditional grantmaking. Their approach offers a model for other foundations seeking to close geographic funding gaps.
Despite distributing more than $140 billion in 2023, funding from U.S. philanthropic foundations and corporations remains concentrated in urban areas. Rural counties—home to 15-20% of the population—receive an estimated 3% of annual philanthropic dollars, and less than 0.5% of foundation funding goes to Native American communities and causes.
The philanthropic community has long recognized geographic disparities in spending and has suggested that philanthropy has a blind spot, often attributed to the concentration of grant makers in urban areas, the larger budgets of urban-based foundations, and the capacity constraints that limit rural and tribal communities’ ability to compete for funding. Factors such as persistent poverty, geographic isolation, limited broadband access, and budget pressures further exacerbate these challenges.
The philanthropic sector is experimenting with how to better support rural areas. One example can be found in how MCF used the Rural Capacity Index along with socioeconomic data from the United States Census Bureau’s American Community Survey to successfully direct grant resources to rural and tribal recipients. Their experience highlights the strategic changes that foundations can make to application processes and selection criteria to ensure philanthropic funding is distributed to lower-capacity places.
Community foundations can fill local funding gaps
With more than 900 nationwide, community foundations are tax-exempt public charities that pool financial resources and provide grants within a defined geographic area. Their place-based focus makes them critical partners in identifying and solving community problems.
In 2017, community foundations provided nearly $5.5 billion in grants addressing arts and education, health and human services, the environment, and disaster relief. Their place-based focus makes them critical partners in identifying and solving community problems.
The Rural Capacity Index helped direct resources to low-capacity communities
The Montana Community Foundation (MCF) is a statewide community foundation that manages more than $178.5 million in assets and partners with 44 local foundations throughout the state. Since its founding in 1988, MCF has reinvested more than $100 million through scholarships, grants, and programs supporting economic development, conservation, health care and more in Montana’s rural and urban communities.
In 2024, MCF was selected by the Otto Bremer Trust to act as an intermediary partner to regrant $1.5 million through the Community Responsive Fund to support programs in the state that fall under the broad categories of Basic Needs, Community Asset Building, Health and Well-Being, and Restorative and Emergency Response. Recognizing that foundation dollars often land in urban areas with higher-capacity, MCF wanted to tailor its outreach to encourage proposals from rural and tribal communities.
To support that goal, Headwaters Economics provided data on socioeconomic vulnerabilities and capacity—including its Rural Capacity Index—to help MCF target rural, vulnerable, and disadvantaged communities. MCF used the socioeconomic data and the capacity index to prioritize applications from rural, tribal, or other areas with lower capacity.
After grants were awarded and at the foundation’s request, Headwaters Economics conducted an independent analysis of the grant awards to answer questions such as: How did low-capacity counties perform in terms of proposal submissions and awards compared to high-capacity counties? What were the characteristics of counties that did not submit proposals? What was the geographic distribution of successful versus unsuccessful proposals?
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Key findings of the analysis were:
MCF succeeded at targeting rural and tribal communities. Fifty-eight percent of the applications selected for funding were from communities with 10,000 people or fewer; 28% of the selected proposals directly benefited Native Americans.
Lower-capacity counties were prioritized by MCF’s selection processes. Thirty-nine percent of funded proposals were from low-capacity counties, even though proposals from low-capacity counties made up only 25% of applications. Put another way, low-capacity counties submitted fewer proposals than high-capacity counties but were more than twice as likely to be selected.
Some places still struggled to access the program. MCF did not fund any proposals from the state’s north-central or northwestern regions. They also did not receive any funding requests from seven counties, all of which are rural, remote, and low capacity.
Demand was high for this type of community funding. MCF received 413 pre-applications requesting more than $21.3 million. Of those, 36 proposals were funded (9% selection rate). Notably, 87 proposals from low-capacity counties were not funded in 2024, representing a significant unmet demand that could benefit from new rounds of funding or alternative grant opportunities.
A complete analysis of the 2024 Otto Bremer Trust Community Responsive Fund grants administered by MCF can be downloaded here:
Closing the rural philanthropic funding gap
Rural and lower-capacity places often have a substantial need for philanthropic investments but are the least equipped to compete for them. Philanthropic organizations can adjust strategies to meet rural and tribal needs by offering flexible, unrestricted, and multi-year funding, streamlining application and reporting processes, and prioritizing locally generated solutions. These approaches recognize that long-term, sustained support is critical to overcoming the structural barriers rural communities face.
MCF stands out as a success story. Its recent efforts highlight how data-informed strategies can overturn entrenched national patterns that concentrate resources in urban areas. By tailoring their processes and criteria, MCF has demonstrated how philanthropy can better align with the needs of rural and tribal communities. Their example offers a roadmap for other foundations aiming to ensure that philanthropic dollars reach those who need them most.
