Faith-based charities are "viewed with suspicion" and "under-appreciated" due to fears they will use their work to proselytise, according to a new report launched today.
"A lack of understanding about faith" means religious charities are seen as only wanting to help those with similar beliefs. But despite negative perceptions, more than a quarter of charities in England and Wales have a religious association and contribute £16.3bn to the sector each year," the report says.
"Although some faith-based charities may work with just those of their faith, the majority work with everyone, regardless of religion."
Think-tank NPC (New Philanthropy Capital) commissioned the research over 18 months.
The results found "low religious literacy" exacerbates the problems for faith-based charities and poor perceptions were "generally unfounded".
But the report also said religiously linked charities needed to improve how they communiciate their beliefs to avoid misconceptions.
"Although some faith-based charities may want to share their faith, they do not see this as a means to convert," said the report.
"However, proselytising is still a concern. Faith-based charities should be aware of this and, if necessary, should spend time considering and clarifying their position on this issue."
Problems were largely caused by a "misunderstanding around faith values and a lack of awareness of different beliefs" in the wider public, the report found.
"Alongside the challenges faced by many charities, an additional factor for faith-based organisations is the lack of understanding of faith," said the report, adding it was "a barrier to working more effectively."
But despite the difficulties, report author Rachel Wharton said faith-based charities have "unique characteristics and resources" to offer.
"For some people, faith is an integral part of their identity; recognising this and incorporating it into service delivery could create greater impact for beneficiaries.
"This lack of consideration at the moment means the sector is missing out on a vital opportunity to deliver better services, often to the most vulnerable."
Dan Corry, Chief Executive of NPC, said: "In the aftermath of Brexit, faith-based charities may have an important role to play tackling divisions in our society - particularly building understanding and cohesion through inter-faith work."
Nearly half of charities working overseas are faith-based as well as 39 per cent tackling poverty and 33 per cent who work to improve housing. But despite this wide reach religious charities are still viewed as only helping their own.
"Policy makers, commissioners and other charities need to fully grasp the qualities of faith-based charities, their assets and the ways in which they work," said Wharton.
"We recommend that the sector recognises the unique characteristics and resources that faith-based charities have, learn more about different faiths and think about how faith might impact their work."