EMB SME Finance Monitor Report

In today's diverse and dynamic business landscape, ethnic-minority owned businesses (EMBs) play a crucial role in fostering inclusive economic growth.

The UK, with its rich tapestry of cultures and ethnicities, is home to a growing number of EMBs, though it is clear that their appetite for growth is not always matched with the support they require.

EMBs face many challenges, from limited access to finance and need for greater support with financial illiteracy, to contending with the impact of groupthink, geo-politics, economic disruption, cost of living crisis, health crisis and the acceleration of technological developments, all of which influence both the regulatory and financial models deployed by finance providers.

My own decades of experience working in the convergent spaces between responsible finance, technology and professional services, have highlighted to me that EMB founders are often driven by a deep-seated ambition to succeed with a determination to overcome obstacles. They are, by nature and culture, higher risk takers due to their historical and lived experiences – a trait that is invaluable in entrepreneurship. This is reflected in the findings of the EMB SME Finance Monitor Report.

However, this inherent ambition can sometimes become a double-edged sword - the risk-taking spirit, while essential for growth, can make EMBs appear too risky to conventional lenders, who often rely on traditional financial metrics to assess creditworthiness and monetary risk. Some entrepreneurs, despite their potential, often find themselves on the fringes of the financial system, facing difficulty in securing funding to fuel their ambitions.

One of the challenges facing EMB founders is a lack of financial literacy, with many of these entrepreneurs coming from backgrounds where access to quality financial education can be limited. Despite having the innate drive to overcome these challenges, a lack of financial literacy coupled with a lack of trust can increase the perceived risk associated with EMBs and further deter lenders from offering inclusive financial support.

Another issue is the impact of groupthink within the financial industry. When decision-makers within financial institutions are largely homogeneous in terms of background and experience, they tend to follow conventional wisdom and adhere to established norms. To create a more equitable lending environment, it is essential to foster diversity within financial institutions and encourage a more inclusive approach to risk assessment.

We have seen a lot of progress by lenders in tackling the issues faced by EMBs.  Lenders are delivering a wide range of schemes and activities to tackle financial literacy and improve investment readiness, for example.  The EMB SME Finance Monitor Report helps us to benchmark progress in improving outcomes.

While challenges persist, it is crucial to recognise the significant potential and resilience of EMBs in the UK. The ability to harness this potential lies in addressing the barriers they face and creating a more inclusive business environment. To achieve this, collaborative and strategic efforts between governments, financial institutions, and the business community with measurable and accountable outcomes, are essential.

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