ACCESS TO FINANCE BY ETHNIC MINORITY OWNED BUSINESSES IN THE UK
David
Smallbone, Middlesex University Business School
Monder Ram, De Montfort University
David Deakins, University of Paisley
Robert Baldock, Middlesex University Business School
Principal Topic
The aim of this paper is to present some findings from a large scale study of access to financing and business support by ethnic minority businesses (EMBs) in the UK. Sponsored by the British Bankers Association, the Small Business Service and the Bank of England, and supported by the Commission for Racial Equality, the project is a two-year study due to end early in 2002. The study was commissioned following the publication of a report on finance and ethnic minority owned firms by the Bank of England, in which a recurrent theme was the need for further research into the nature of the relationships between banks and EMBs, (Bank of England, 1999).
Method
The methodology employed in the study includes two large-scale telephone surveys of EMB owners drawn from five ethnic minority groups (Chinese, Indian, Pakistani, Bangladeshi and African-Caribbean, together with a control group ‘white’ owned small firms. The baseline survey was completed in July/August 2000 and the second survey will be complete by the end of September 2001. With more than 850 EMBs in the first survey and 700 in the second, the study is the largest and most comprehensive investigation of EMB financing issues in the UK. Other elements in the methodology include case studies of new starts and established EMBs, interviews with bankers, concerned with processing applications from EMBs, interviews with business support providers, who deal with EMB clients and aggregate analysis of lending data supplied by the banks.
Results and Implications
This paper will focus on analysing the results of two telephone surveys of approximately 700 EMBs and 200 white control firms, undertaken in 2000 and 2001. Since the sample includes more than 300 EMBs and 140 white control firms that were previously interviewed in the baseline survey in 2000, it is possible to undertake some longitudinal analysis. The key question to be considered in the paper is the extent to which there is evidence that EMBs are disadvantaged in terms of accessing finance compared with similar white-owned firms, both at start-up and once the businesses are up and running. In this regard, the paper will compare EMBs as a group with white owned firms, as well as seeking to identify any difference between ethnic minority groups. For those firms, that participated in both surveys, analysis will focus on their experience during the 12 month intervening period, in seeking and obtaining finance, including sources approached, those sources from which finance was actually obtained and the type of finance secured. For all firms, analysis include the experience of respondents in seeking and obtaining finance at start-up, including sources approached and those from which finance was actually obtained and the type of finance obtained.
CONTACT: David Smallbone, Centre for Enterprise and Economic Development Research, Middlesex University Business School, The Burroughs, Hendon, NW4 4BT, UK; (T) ++44(0)208 411 5337; (F) ++44(0)208 411 6607; d.smallbone@mdx.ac.uk
2002 Babson College. All Rights Reserved. Last Updated March 2003.