Ethnic Minority Entrepreneurs and the Commercial Banks in the U.K.: Access to Formal Sources of Finance and Decision-Making by Their Bankers

Posted: 4 Nov 2009

See all articles by David Deakins

David Deakins

Massey University - NZ Centre for SME Research

Monder Ram

De Montfort University - School of Business; University of Birmingham - Birmingham Business School

David Smallbone

affiliation not provided to SSRN

Margaret Fletcher

affiliation not provided to SSRN

Date Written: 2004

Abstract

Noting that ethnic minority entrepreneurs often face more barriers than white entrepreneurs when attempting to access finance, the authors investigate the decision-making process of bank managers who are considering applications by minority entrepreneurs.The data used to examine this issue come from a major United Kingdom study that included two large scale surveys of 850 minority business owners and 220 white control group, case studies with ethnic minority entrepreneurs, and interviews with 17 business support agencies and with bank representatives. Analysis of this data indicates that minority entrepreneurs, particularly Black African Caribbean entrepreneurs, perceive discrimination when attempting to access formal finance sources and find it difficult to meet the decision-making requirements of the banks.Analysis also reveals that the supply-side bank decision-making process is influenced by corporate credit managers’ policies, bank managers’ practices (which may not conform to policy), bankers’ and entrepreneurs’ perceptions of information provided and required, and bankers’ own prejudices.The requirements and decision-making processes of bank managers, coupled with the perceptions of minority business owners, explain the low take-up by minority business groups of bank finance sources. (SAA)

Keywords: African Caribbeans, Banking industry, Ethnic entrepreneurs, Bank loans, Discrimination, Minority firms, Startups, Minorities, Early stage financing, Management decisions, Banks

Suggested Citation

Deakins, David and Ram, Monder and Smallbone, David and Fletcher, Margaret, Ethnic Minority Entrepreneurs and the Commercial Banks in the U.K.: Access to Formal Sources of Finance and Decision-Making by Their Bankers (2004). Ethnic Entrepreneurship: Structure and Process., Vol. 4, p. 293-313 2004. Available at SSRN: https://ssrn.com/abstract=1496736

David Deakins (Contact Author)

Massey University - NZ Centre for SME Research ( email )

60-62 Wallace St.
Private Box 756
Wellington
New Zealand

Monder Ram

De Montfort University - School of Business ( email )

Department of Corporate Strategy
Leicester LE1 9BH
United Kingdom
+44 116 255.1551 (Phone)
+44 116 251.7548 (Fax)

University of Birmingham - Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

David Smallbone

affiliation not provided to SSRN

No Address Available

Margaret Fletcher

affiliation not provided to SSRN

No Address Available

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