Access to funds holding back BAME-led companies
BUSINESSES run by people from ethnic minorities contribute £25bn a year to the UK economy but are being held back by barriers to accessing finance, new research shows.
Difficulties accessing finance are a key obstacle to growth for ethnic minority businesses, according to the study by the Federation of Small Businesses (FSB) and Aston University’s Centre for Research in Ethnic Minority Entrepreneurship.
It comes amid fears the coronavirus recession could widen the employment gap of nearly 12pc between white workers and those from ethnic minorities. This chart shows how ethnic minorities have been more vulnerable to job losses than white counterparts during the pandemic.
Researchers found that some business owners from minority ethnic groups struggle to raise funds because they do not have a network of people who can offer finance.
Khaleelah Jones, who has a PhD and an MBA, runs a digital and marketing agency in London, said: “I don’t have the option to raise money from friends and family. When I’ve gone out to raise funds it’s been difficult because we don’t have pre-existing relationships with banks to raise debt financing and to raise equity financing. I think the lack of networks is a factor in access to finance.”
The FSB called for the Government to launch a dedicated scheme to help minority-led businesses access external finance.
Despite the challenge of raising funds, the study found that ethnic minority businesses, the majority of which are run by self-employed people, were more innovative than other firms and more likely to be exporters.