Deputy Prime Minister Nick Clegg today called on Britain’s banks to do more to ensure that everyone who wants to start a business is given the opportunity to turn their ideas and aspirations into successful enterprises.
Speaking at a meeting in Manchester with senior banking figures and entrepreneurs from ethnic minorities, he said, “It is vital that all businesses have fair access to viable finance as the country looks to rebuild the economy.”
Report on access to finance for ethnic minority business
The Deputy Prime Minister’s words come as a new report he commissioned found that although the banking industry is working hard to ensure ethnic minority businesses have access to finance, there is more to be done to help under-represented groups reach their goals.
As a result of the findings, the government has agreed with the British Bankers’ Association that the banking industry will commit to a series of measures to improve access to finance for ethnic minority business groups. This includes collecting data through independent research, for the first time, on the experiences of ethnic minority businesses seeking finance.
Speaking in Manchester, where he met representatives of the banking industry and the ethnic minority business community, the Deputy Prime Minister said that while there is no evidence that the challenges ethnic minority businesses face are due to racial discrimination, they do still have problems accessing loans.
The Deputy Prime Minister said:
This is a tremendously valuable report, and I would like to thank everyone who has worked so hard to get us to this point – officials, businesspeople from ethnic minorities and the British Bankers’ Association. I welcome the fact that the report finds no evidence of racial discrimination, and I am pleased to see the banking industry has agreed to a range of measures to address the various factors that have prevented some entrepreneurs from getting loans. I am particularly glad to see the banks commit to independent research on ethnic minority businesses and their experience of accessing finance so that they can monitor the situation.
This report is a good start, and a valuable statement of intent, but there is much more to be done to make sure that entrepreneurs from ethnic minorities have a fair chance to achieve their goals.
The Ethnic Minority Businesses and Access to Finance report is published today by the Communities Minister, Don Foster, following detailed discussions between the British Bankers’ Association, government and business representatives. The report finds that, while there is good work already underway by the banks - including improved data collection on the experiences of ethnic minority businesses - there is more that the banking industry can do to ensure that those who are under-represented are given every opportunity to succeed.
Don Foster said:
We are determined to help people who want to work hard and get ahead, make the most of their untapped talents and realise their full potential, irrespective of their background.
All too often, people from ethnic minority communities don’t get the chance to meet their aspirations to start up their own business, with those from a black African or Caribbean heritage particularly underrepresented among our entrepreneurs.
We all have a shared stake in this country’s economic future. So I want today’s report to be a catalyst for change, to ensure that the necessary support is in place to turn ideas into successful businesses for the future.
Small and medium-sized enterprises (SMEs) account for 99.9% of all enterprises, 59% of private sector employment and 49% of the UK’s economic output. The ability of these SMEs to access finance is important for funding business investment, ensuring businesses reach their growth potential, and for entrepreneurs facilitating new businesses.
Measures to support ethnic minority business
- calls on the British Bankers’ Association, the banks and professional advisers, including accountants, to improve their efforts to ensure that business support and advice reaches the widest range of ethnic minority businesses, by working with a broad range of ethnic minority businesses and local and national ethnic minority business groups
- encourages ethnic minority business groups to make full use of initiatives like Mentorsme.co.uk to raise awareness of, and demand for, mentoring and other sources of business advice
- calls for “systemised referrals” between banks and Community Development Finance Institutions (CDFIs) to be rolled out in all areas where there is a demand for alternative sources of finance, including in deprived ethnic minority communities, across the country; a pilot has already taken place where banks referred small businesses who were declined finance to CDFIs, who may have been able to help
Dr Omar Khan, Head of Policy Research at the Runnymede Trust, said:
Runnymede welcomes this review in access to finance for black and minority ethnic entrepreneurs, especially the agreement of banks to fund independent research into the experiences of BME businesses in accessing finance. We also welcome the recent announcement by the Chief Secretary that the banks will reveal how much they lend at a postcode level. Black and Asian business have long felt that they are not treated fairly by lenders and these changes could improve the economy across a variety of sectors. We hope that government also engages in further initiatives to understand better why racial inequalities persist, not only to improve the lives of ethnic minorities in the UK, but also to grow the UK economy.
Following detailed discussions, the British Bankers’ Association has agreed to a set of immediate actions which involve promoting existing initiatives aimed at helping SMEs more widely, so that ethnic minority businesses are fully aware of the support and finance schemes available to help them access finance.
Anthony Browne, Chief Executive of the British Bankers’ Association, said:
We have been working closely with the government on this report and are pleased that it concludes that ethnic minority businesses are not discriminated against by finance providers in the UK. Banks are committed to tackling any perception that ethnic minority-led businesses are less able to access finance and to ensuring that all entrepreneurs feel confident about approaching their bank for finance. We are working with a range of business groups to support ethnic minority led businesses on how to access finance, providing mentoring support through Mentorsme.co.uk and further guidance through betterbusinessfinance.co.uk and its initiatives.
At the same time banks are also monitoring ethnic minority led business needs closely through the independent SME Finance Monitor research on ethnic minority led businesses that will be published for the first time later this year. Our aim is that every business should approach their bank with confidence to discuss their financing needs.
The British Bankers’ Association has agreed to:
- fund the independent research group BDRC Continental to extend the small and medium sized enterprise finance monitor research on ethnic minority businesses’ experience of accessing finance and, through funding from Barclays, HSBC, Lloyds and RBS, create the new Enterprise Research Centre with a research strand focused on business diversity
- establish a British Bankers’ Association-chaired committee comprising ethnic minority business groups to look at the findings from the small and medium sized enterprise finance monitor so that it informs future work in this area
- organise and deliver a series of road show events across the country, with its partners, focusing on areas with a high ethnic minority population, on issues around access to finance and ‘investment readiness’
- ensure that mentoring support provided by Mentorsme, the national online portal hosted and operated by the British Bankers’ Association, allows mentoring organisations to highlight where specific ethnic minority business support is offered
- expand the CDFI pilot project nationally ensuring that referrals from banks to alternative providers of finance takes place across the country
- engage with ethnic minority business groups to ensure a continued dialogue on issues around access to finance, and include ethnic minority business representation on the Association’s Business Finance Roundtable. This will be through representation from the Enterprise Diversity Alliance and the Enterprise Research Centre.
Notes to editors
- In November 2011 speaking at the Scarman memorial lecture the Deputy Prime Minister commissioned the then Communities Minister, Sir Andrew Stunell, to lead the review into the barriers preventing black and minority ethnic groups from accessing business loans and whether the banks were doing enough to address these problems. The final report is published today.
- Ethnic minority businesses are already highly successful and contribute £25 billion to the economy. There are higher aspirations to start-up in business amongst ethnic minority groups, especially black African (35%) and black Caribbean (18%) groups (compared with 10% for white British counterparts), but ‘conversion’ to start-ups remains very low.
- The definition of ethnic minority businesses used in the Small Business Survey, and in this report, refers to businesses where at least half their management team are from an ethnic minority group. According to the Small Business Survey 2012, 7% of all small and medium sized enterprise employers fit this description.
- Evidence from the Black Training and Enterprise Group (BTEG) from September 2011showed a gap between the aspirations of minority ethnic groups to set up their own businesses and the actual numbers who achieve this. According to the research, black Caribbean and black African people were more likely than other minority ethnic groups to have ‘recently thought about starting a business’ (28% and 35% respectively) and more likely than white people (10%). However they were less likely to be self-employed or own their own businesses than white people (6% and 15% respectively).