The Government says the global capital crisis is taking its toll on the voluntary sector.
Baytrust said on Thursday the world-wide financial turmoil is forcing it to stop making new grants.
In the year to March, Baytrust issued grants totalling more than $4 million to groups serving communities from Katikati to Turangi to Cape Runaway.
The announcement has prompted fears other charities may follow suit.
The new Minister of the Community and Voluntary sector, Tariana Turia, says community groups are vital and funding shortfalls will have ripple effects.
However, she would not be drawn on whether any support the Government could offer the sector would involve money.
