The Lending Standards Board (LSB) has released its latest inclusion report, ‘Increasing Access to Finance for Ethnic Minority Led Businesses’.
Launched at an event in London, the report represents the third instalment of the LSB series on inclusion. It highlights the barriers faced by ethnic minority-led businesses. Additionally, it underscores the crucial role that financial institutions play in unlocking the untapped potential.
“The goal is to improve access to finance to enable these communities to maximise their economic potential for the benefit of all.” – Diana Chrouch
The LSB’s previous inclusion reports have focused on the accessibility of business banking for those with disabilities; and how firms can meet the needs of the d/Deaf community and those with hearing loss.
Ethnic minority entrepreneurs, including those from Black, Asian, and other minority groups, contribute an estimated £25billion to the UK economy annually. Sifted has estimated that one in three UK unicorns are founded by someone from an ethnic minority community. But despite their significant economic impact, some business owners face formidable barriers when seeking access to financial support. It impedes their ability to grow and thrive.
The LSB’s report serves as a clarion call to financial institutions to adopt a proactive and strategic approach. One that avoids the detrimental consequences of a ‘one size fits all’ model.
LSB chief executive Emma Lovell comments: “Ethnic minority-led businesses have a significant contribution to make both as business banking and lending customers and to the economy as a whole. However, research shows that some ethnic minority-led businesses are dissuaded from accessing finance. In part, this is due to the cumulative effect that being hindered in accessing finance has had.
“I hope this report marks a significant step forward in addressing the long-standing challenges faced by ethnic minority-led businesses in accessing finance. By promoting a fair and inclusive business lending environment, the sector can deliver better outcomes for all business customers. Regardless of their background.”
Greater understanding of cultural differences
Recommendations in the report include the need for a greater understanding of the cultural differences within ethnic minority communities. It also highlights the importance of understanding how these interact with lending eligibility requirements. It encompasses diverse lending practices, and provides alternatives for applicants who are denied financing.
Acknowledging religious and cultural differences that may impact the confidence ethnic minority-led businesses have in the banking and lending sector is pointed out too. This is in addition to the need for better signposting and explanations. Not to mention the availability of relationship managers, and tailored approaches to underwriting too.
The LSB engaged with a number of individuals who were experts either by experience or profession, but usually both. These contributors shared their experiences of business lending. The LSB also spoke with one of its registered firms, NatWest, about the work it has done to support ethnic minority led businesses.
Diana Chrouch OBE, special advisor to APPG for ethnic minority business owners and chair of national ethnic minority business policy for FSB, was a key contributor to the research. She comments: “This report aims to drive the development of more inclusive lending standards across the banking industry to better serve the UK’s diverse multi-ethnic business communities. The goal is to improve access to finance. In turn, enabling these communities to maximise their economic potential for the benefit of all.”