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Bank finance 'less accessible for black start-ups' Black
entrepreneurs needing a loan to start a business are more likely to be
turned away by banks than people from other ethnic origins, a new report
suggests. BBA
wants the situation to be looked in to The
report, backed by the Department of Trade and Industry and the British
Bankers' Association (BBA), shows that 21% of Afro-Caribbean businesses have
obtained finance from their bank, compared with 49% of firms headed by
people of Chinese extraction. Academics
working on the report - which is the most extensive of its kind to date -
claim that the finance gap can be explained partly because many black
businesses are set up in low-profit sectors like the arts or hairdressing.
However,
researchers admitted there was also an "unexplained difference" in
the results. "The
research does not provide clear evidence of discrimination, but it does
paint a picture of diversity, and does demonstrate that African-Caribbean
businesses have particular difficulties in accessing finance," stated
the report. The
report also accused the banks of failing to communicate properly with ethnic
businesses; a problem that the BBA says must be addressed by bank managers. In
general, ethnic minorities have a happy relationship with their banks - 82%
claimed to be satisfied with the service they receive. Overall, 39% of
ethnic-owned start-ups had accessed external finance, the same figure as
firms run by Caucasians. The
BBA said banks should monitor the ethnicity of people applying for finance,
and those who are turned down for a loan. The organisation says the banks
should also make the criteria for a successful application more obvious to
candidates. Ian
Mullen, BBA chief executive, said: "The report shows that businesses
within different communities have different ways of working and varied
experience of raising finance. "The
approach that banks adopt in dealing with them must vary accordingly. It is
in all our interests to ensure that banks and businesses have profitable
relationships," he added. Ethnic
minority businesses - or EMBs - account for 9% of all business start-ups in
the UK, although non-whites account for only 7.1% of the population. In
London, about one in five businesses are owned by someone from an ethnic
minority.
Source: BusinessEurope.com _______________________________________________ Black
entrepreneurs facing problems raising bank finance, presumable because of
racial discrimination. This
is despite more black entrepreneurs having formal management qualifications
- 46 per cent - than white or Asian entrepreneurs.
Black
entrepreneurs said the findings were no surprise.
"This is what we have been saying for 20 years, " said Neil
Kenlock, a director of black music radio station Choice FM.
"It is not getting any easier.
The banks require unusually high levels of security even when you
have a track record." Choice
FM was able to obtain a start-up load only when a white director fronted the
application. It was sold last
year under an earn-out valuing it at more than £16m. Discrimination
aside, the report found other reasons for the black business finance gap.
Enterprises set up by black people have a strong bias towards serving
the relatively small black community and concentrate on areas such as
hairdressing and the arts, which rarely produce strong profits growth.
Black entrepreneurs are often able to offer poorer security against
loans. Typically
they use their own money and loans from friends and family. Source: Financial Times Newspaper - Front Page Leading Article Thursday, 26 September, 2002 _______________________________________________ Caribbean Food Emporium Response
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