The Lending Standards Board has highlighted the barriers faced by ethnic minority led businesses. A report from the LSB, entitled ‘Increasing Access to Finance for Ethnic Minority Led Businesses’ underscores the crucial role that financial institutions play in unlocking untapped potential of ethnic minority entrepreneur. This market segment, including those from Black, Asian, and other minority groups, contribute an estimated £25bn to the UK economy annually.
Specifically, the LSB references research 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. This includes impeding their ability to grow and thrive.
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The LSB’s report serves as a clarion call to financial institutions to adopt a proactive and strategic approach to avoid the detrimental consequences of a ‘one size fits all’ model.
The need for better signposting and tailored approaches to underwriting
Recommendations in the report include the need for a greater understanding of the cultural differences within ethnic minority communities. It references how these interact with lending eligibility requirements, encompassing diverse lending practices, and providing alternatives for applicants who are denied financing. In addition, the report acknowledges religious and cultural differences that may impact the confidence ethnic minority led businesses have in the banking and lending sector. The report calls for better signposting, explanations, greater availability of relationship managers and tailored approaches to underwriting.
LSB Chief Executive Emma Lovell said: “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.
“By promoting a fair and inclusive business lending environment, the sector can deliver better outcomes for all business customers, regardless of their background.”
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