Banking on success

Britain today has around four million small firms, but how easy is it for African Caribbean entrepreneurs to start their own business? A report from Loughborough’s Business School investigates the barriers and difficulties faced by the African Caribbean community and reveals how business is thriving in spite
of the hurdles.

MORE THAN half a million people in the UK start their own business each year, inspired by a long-standing dream, belief in a groundbreaking idea or maybe even TV shows such as Dragons’ Den. But when it comes to business opportunities, are all entrepreneurs on a level playing field, or do some face greater obstacles than others?
A team of four researchers – Mike Atkins, Ron Chapman, Malcolm Cumberbatch and Professor Geoff Chivers – from Loughborough University’s Business School spent three years looking, for the first time ever, into the specific field of African Caribbean business development; previous reports on Black and Minority Ethnic (BME) business have tended to focus predominantly on South Asian business, with data on African and African Caribbean, Chinese and East Asian businesses included but subsumed into the broader picture.

The overwhelming majority – 83 percent – of business start-ups questioned as part of the study were self-financed, either out of savings or with help from family and friends. Just five percent had obtained funding from a bank.”

“Through our study we’ve tried to clear away the misconceptions and stereotypes that surround African Caribbean business and replace these with factual data,” says Professor Geoff Chivers, one of the report’s authors. “For instance there’s a preconception in society that African Caribbean-run businesses are concentrated within certain sectors, such as the music and art scenes or service industries, but our research showed this to be totally unfounded – the businesses span the same range of sectors as those run by other ethnic groups.”

The study revealed there are some 30,000 African Caribbean businesses in Britain that would appear to be doing relatively well, despite facing some serious barriers and problems. “Almost half of the businesses we interviewed had been trading for four years or more, and around 20 percent had been in operation for over ten years,” Professor Chivers remarks.

Alongside the positive, however, were some more startling findings, particularly relating to financial support. “African Caribbean entrepreneurs appear not to access financial assistance from banks and other such funding sources as much as businesses run by other racial groups. The overwhelming majority – 83 percent – of business start-ups questioned as part of the study were self-financed, either out of savings or with help from family and friends. Just five percent had obtained funding from a bank. Typically that appeared to be for one of two reasons – either their attempts to gain financial assistance from the bank had failed, or they simply hadn’t even tried, having been discouraged by the experiences of friends and family,” Professor Chivers comments.

In the study only 11 percent of respondents said their relationship with their bank was good, with 58 percent claiming it to be poor. “There appears to be very little trust between the African Caribbean business community and the banking fraternity. Having had a bad experience with a bank while trying to establish their business, many of our interviewees told us they were subsequently hesitant, or even hostile, in their dealings with the bank once their business was up and running.”

Professor Chivers believes banks have generally been slow to recognise and respond to the needs of African Caribbean entrepreneurs, which has contributed to the development of the poor relationship that sometimes now exists. Steps should also be taken, he suggests, to improve communication, so the banks become more open about the criteria they use for deciding to fund a new business. “Many of our interviewees who had approached a bank for financial support weren’t given a reason why their business proposal was rejected. Banks really do need to be more transparent so it can’t be assumed their decisions were in any way racially motivated.”

The study also revealed that African Caribbean women face a ‘double whammy’, being both black and female. “They aren’t given the same gravitas as their male counterparts and are often perceived to be ‘playing’ at business,” says Professor Chivers. “Many of the women we interviewed said they weren’t taken seriously at the outset of their business careers, even though some of them now run businesses with turnovers in millions of pounds. In actual fact African Caribbean women entrepreneurs are amongst the most successful business people in the UK, outstripping their Asian and white counterparts, both male and female, in terms of business set up, growth and success.”

Professor Chivers believes that, on the whole, the business support agencies currently in existence are failing to provide the help and assistance required by the African Caribbean community. “You can’t deny there’s a wealth of advice and information available to small businesses that are setting out, but our conclusion from the study is that there are too many sources, all competing with each other, which can be very confusing and means ethnic minority entrepreneurs don’t necessarily benefit from the support available to them.”

Again, Professor Chivers thinks the answer lies partly in improved communication. “Support agencies need to be much clearer about the services they offer and how they can be accessed. But they have to remember that communication is a two-way process. They also have to listen more to the African Caribbean community, to ascertain how they could be helping them more effectively.”

Though steady progress
is being made, more still needs to be done, nationally, locally and even by the African Caribbean community itself, claims Professor Chivers. “African Caribbean entrepreneurs need to become more comfortable about telling the world how good they are at business, if they are to alter the perceptions that have been built up regarding their business practice and acumen, and realise their potential.

“After all,” he concludes, “they’re not looking for preferential treatment, just for the opportunity to show how much they can contribute to business in the UK.”

For more information contact Loughborough University Leicestershire, UK LE11 3TU
+44 (0)1509 263171

Back to top