• Wednesday, November 29, 2023

Business

Business body calls for inclusive finance to empower minority firms

Minority-led businesses were far more likely to avoid approaching financial institutions due to prejudices

Minority-led businesses face issues in opening bank accounts and applying for loans (Photo: iStock)

By: Pramod Thomas

THE London Chamber of Commerce and Industry (LCCI) has urged the government to work with financial institutions to overcome barriers around access to finance to achieve diversity in business.

The trade body made a submission to the Treasury select committee’s inquiry into SME finance with several recommendations to support women and ethnic-minority-led businesses, a statement said.

The LCCI is London’s key hub for the business community and is accredited by the British Chambers of Commerce.

It’s own research on ethnic diversity in business revealed that minority-led businesses were far more likely to avoid approaching financial institutions due to prejudices.

These businesses also face issues in opening bank accounts and applying for loans and tend to be averse to taking on debt.

To avoid this, the business body urged to create a Strategic Growth Fund to help address the funding problems of minority business leaders.

According to the LCCI, a targeted programmes to assist ethnic minority-led businesses to access finance should be introduced, and it should be promoted widely.

“Enough has been said in the public about the global nature of London business market and the manifold benefits of having a diverse ecosystem. However, very little has been done to achieve this in practical terms. SMEs are the backbone of a modern, flourishing London economy. Unfortunately, the current barriers to access finance stifle many innovative, revolutionary women and ethnic minority led businesses,” said Richard Burge, CEO, LCCI.

“We need a thorough review of lending practices to eliminate requirements that place hurdles in the path of ethnic minority and women owned businesses. We must push for change and this starts with reducing red tape and exclusionary practices that create -and sustain -barriers to raising capital.”

LCCI members have emphasised that women often face unequal treatment from financial institutions compared to their male counterparts. They have also pointed out that women may hesitate to seek financing due to a lack of guidance during the application process.

The perception of finance and debt as risky further discourages them, highlighting the need for increased outreach by financial institutions to change these negative perceptions within communities, the statement further said.

According to the Chamber, the government should collaborate with financial institutions to dispel common misconceptions about finance held by many SMEs and raise awareness about the various lenders available to help them expand and prosper.

Currently, there are no specialised support funds from the bank for SMEs in London. Hence, the London Chamber urged the British Business Bank to not overlook providing support to businesses in the capital city.

“Time has come to move away from diversity from being seen by some stakeholders as ‘nice to have’ to ‘essential to success and growth’. In our country, women and girls make up 50 per cent of the population however, reports have indicated that 53 per cent of women in the UK said they found it difficult to start a business,” said James Watkins, head of Policy and Public Impact at LCCI.

“Through its Women in Business Group, Black Business Association and Asian Business Associations, LCCI is calling on the government to support and work with entrepreneurial ecosystems, that build strong networks for capital, expertise and information for women and minority-ethnic businesses.”

According to the industry association, it is imperative to offer businesses assistance in forming robust relationships with advisors who can offer valuable insights into the utilisation of financial products to facilitate business growth, as well as alleviate some of the apprehensions associated with borrowing.

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