ISSUES
: Business and Trade
Chapter 1: Business today
21
Supporting ethnic minority and female
entrepreneurs
E
thnic minority businesses are estimated to
contribute £25–£32 billion to the UK economy
per year, and women-led enterprises contribute
around £70 billion. However, ethnic minorities
and women are seen to be under-represented as
entrepreneurs, and to have lower levels of business
performance.
While policymakers usually regard these two groups
separately, policy initiatives have often occurred in
tandem. The similarity in core concerns and business
outcomes suggests potential benefits from exploring
the connections between ethnic minority and women-
led (EMW) businesses.
Potential business barriers include actual or perceived
discrimination, the quantity and quality of businesses,
market failure in business support and the uniqueness
of EMW enterprises. Recent efforts towards
boosting this sector have only returned modest
changes, suggesting that policy in this area remains
underdeveloped and problematic.
The paper
Barriers to Ethnic Minority and Women’s
Enterprise
, published by the Enterprise Research
Centre, reviews the research evidence on enterprise
diversity. The research review focuses on key issues
including access to finance, market selection and
management skills.
Key findings
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Particular ethnic groups find it more difficult to
obtain credit for their businesses. Rather than
direct discrimination, this is largely due to a greater
prevalence of risk factors such as business age
and financial track records.
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A perception of ethnic discrimination discourages
some ethnic minority businesses from applying for
bank loans.
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Under-resourced immigrant entrepreneurs tend
to focus on the same low-cost business niches
such as small-scale retailing and catering, risking
market saturation.
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Female entrepreneurs perceive higher financial
barriers for their business. There is almost no
evidence of supply-side discrimination, but there
are indications of pronounced debt aversion
among women.
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Women-led firms are typically smaller and
overrepresented within service sectors.
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Although business performance by gender does
not differ, women-owned enterprises typically
start with lower levels of resources.
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The actual prevalence of female entrepreneurs can
be masked by dual ownership: joint male/female
partnerships account for about 20 per cent of all
small and medium-sized enterprises.
Policy relevance and implications
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Narrow-focused policy support for self-
employment should be avoided. High levels of low-
quality entrepreneurship amongst EMWs does not
automatically indicate upward social mobility, and
encouraging further entry into already crowded
low-quality sectors may be counterproductive.
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UK enterprise policy should consider following the
US ‘quality versus quantity’ model of encouraging
minority entrepreneurs with good credentials in
high value-added sectors.
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Policies aimed specifically at encouraging ethnic
minority start-ups could lead to an increase in
enterprise within ethnic enclaves only – without
contributing to a social integration agenda.
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The increasingly differentiated group of ‘minority’
entrepreneurs makes a simple intervention policy
difficult. Local-level targeted enterprise support is
likely to be more effective than a national ‘one size
fits all’ policy of intervention.
Further information
The Enterprise Research Centre (ERC) is an
independent research centre for research, knowledge
and expertise on SME growth and entrepreneurship. It
is funded by the ESRC, the Department for Business,
Innovation and Skills, Innovate UK and the British
Bankers Association.
The views expressed in this evidence briefing are
those of the authors and not necessarily those of
the ESRC.
February 2015
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The above information
is reprinted with kind
permission from the
Economic and Social
Research
Council.
Please visit www.
esrc.ac.uk for further
information.
© ESRC 2016
