CIMR Debate in Public Policy: Accelerating inclusive innovation, entrepreneurship and financing to support minority SME businesses – Centre for Innovation Management Research

This debate – held on June 14, 2023 – was about much more than financing minority, particularly black, Asian and minority ethnic businesses. The panel, chaired by Jacqueline Winstanley, Universal Inclusion, was Eugene Nizeyimana, CEO of SSCG Consulting and CEO, African Business Chamber; Emma Obanye, OneTech; Monder Ram OBE, CREME Aston University; Fiona Morrill, British Business Bank; and Colette Henry, Dundalk Institute of Technology (discussant).

Each member of the panel was asked the same question: what are the key things that are required to accelerate inclusive innovation, entrepreneurship and finance to support minority SME businesses? The panel were asked to include intersectionality in their answers.

In addition to finance, key common concerns included a sense of frustration with existing understanding of differences between minority entrepreneurs from different ethnicities; understanding what “success” actually means; discrimination and the lack of action to overcome this; the need for data on differences; and for evaluations of current interventions. “Ecosystem” was a term commonly used to suggest the business landscape in which these problems occurred. Solutions require a move away from a silo approach to a more holistic approach to solving some of the problems. It is also necessary to change the narrative of marginalisation. This debate forms part of that process.

Eugene Nizeyimana identified a number of barriers to entrepreneurship.

Under-representation. The African Business Chamber is the organisation that represent the interests of the African business community in the UK. The organisation was established because there was not hitherto an organisation that represented African Community businesses in the UK economy. This organisation is intersectional. The Chamber represents all African communities in the UK including white, African, Asian and African Americans. The term “minority businesses” is very broad. Not all minority face the same challenges. Some are thriving and are doing well in the economy but those at the bottom of the pyramid remain mainly black and African.

An understanding of what innovation is more broadly should include other things such as services. This is in order to improve the representation of certain communities or technologies that empower communities such as minority or disabled people or repurposing resources or doing things differently. Specifically African minority businesses tend to operate in non-innovation driven sectors – for example food and drink transport or in certain sectors such creative industries or sectors that do not tend to adopt much technology.

Language and culture. For many entrepreneurs English is not their first language. They might have a good concept and/or good idea, but the way they present their story or package does not necessarily fit with requirements of the funding agency.

A heavy scrutinization of some ethnic groups when it comes to application of loans compounded by a lack of data in the banking sector data for minorities, particularly African and Black communities. Accordingly a challenge for minority entrepreneurs is to help develop established bankable businesses that are able to build their credit to be able to access and attract investment.

Anna Roughley from the Lending Standards Board (LSB) asked Eugene, What is it that is holding back that progress that is so needed? What is that first step? His answer was that the same problems have been identified for at least a decade. What needs to happen is taking practical action.

Next to answer the question was Emma Obanye, soon to be CEO of One Tech where she is currently Managing Director. One Tech helps connect underserved communities to the network skills and confidence needed to start and sustain their businesses. Thus, “our vision is an inclusive ecosystem tech startup ecosystem”. Capital Enterprise is a membership organisation with a key ambition to help the UK be one of the best places to start and grow businesses and be a not-for-profit that does this. When Capital Enterprise surveyed its members to identify the biggest challenges, diversity and inclusion within the tech startup ecosystem came top. At that time, the only real data that was available was around female entrepreneurship which showed that the vast majority of venture capital went to men. One Tech was born in 2018 to help address this imbalance.

A challenge was to diversify the pipeline of entrepreneurs that go on to mainstream investor readiness programmes. Many founders that were going through One Tech’s own support programmes were much earlier on and had very different needs. One Tech went through a transformation as an organisation to custom and personalise routes through navigating the ecosystem, as well as creating new programmes that met entrepreneurs where they were.

Emma’s recommendations are:

Do not provide solutions through a homogenised lens. Intersectionality is incredibly important.

Take an ecosystem approach to tackling this problem, not just looking at how to diversify the pipeline or to provide different solutions; but also challenging incumbents, for example funding investors to innovate themselves and provide different offers.

The narrative needs to change. A lot of what is pushed by the media is what success looks like. Success often about raising money, but actually that is just part of the journey. Change, “is a long-term journey that we’re on”.

For Monder Ram the framing of this webinar which talks about innovation and entrepreneurship is important. Too often when this agenda is raised, it is as if there is an “othering” effect as ethnic minority entrepreneurship. The whole debate needs to be reconfigured to look at how central diversity is to the whole process of innovation and entrepreneurship. It is about changing the narrative and getting that sort of granular appreciation.

Monder Ram runs the Centre for Research in Ethnic Minority entrepreneurship, founded over 20 years ago. He has been working on this agenda for over 30 years and during that time one of the key challenges has been bringing the evidence to bear on policy, really getting an informed perspective on the challenges and taking action that flows from that perspective. His 2022 report “Advancing the growth potential of UK’s Ethnic Minority Businesses” identified 10 recommendations. His focus in this debate was on three:

A focus on growth: Growing diverse enterprises has been a particular challenge. The black and ethnic minority entrepreneurs have not had a problem with startup or aspiration for over 2 decades. The problem lies in that after three and a half years, white entrepreneurs are twice as likely to be running an established growth business than are their ethnic minority counterparts.

Access to finance: A recurring issue for black and ethnic minority entrepreneurs is that they are probably twice as likely to be discouraged from wanting to raise finance than their white counterparts.

Intersectionality: Data on these issues are pretty poor. The government should take a lead to be at the forefront of getting a satisfactory definition of what an ethnic minority business is, that is recognised and adopted throughout the ecosystem including the corporate sector.

Fiona Morrill researches diversity and inclusion in access to finance in the economics team at the British Business Bank. Two of the Bank’s key objectives are backing innovation, so ensuring businesses can access the capital they need to start and scale and to unlock the potential of entrepreneurs regardless of who they are and where they are based. The reports, “Alone Together” and the “ Small Business Finance Markets Report” have highlighted the barriers that ambitious and innovative minority led businesses face when it comes to accessing finance. These include being discouraged from applying for finance in the first place, right through to the barriers that they face when applying for and securing the funding that they need. The reports highlight the importance of the issue of intersectionality and how that leads to recurring systemic disadvantage.

Two key things have been identified as being really crucial in investing in, and accelerating innovation amongst minority led businesses:

Organisations need to make a commitment to reflect and support diversity, equity and inclusion in their senior and decision-making teams.

Data and accountability: collecting and reporting on ethnicity data and other characteristics as well more broadly, will inform and improve decision making and underpinning policy making.

The Bank’s role as both a centre of expertise and in playing a key role in supporting lending and investment to smaller businesses, has enabled it to put these recommendations into practice through the Investing in Women Code and diversity on investment teams. These actions will be explored in more depth in the forthcoming ‘Finding What Works: Pathways to Improve Diversity in Venture Capital Investment’, due to be published on 5th July.

For Colette Henry the debate resonates with points that came out of a report in 2021 which resulted from a collaboration between the OECD and the Global Women’s Entrepreneurship Research Network. This looked at policy entrepreneurship policy through a gender lens. Points that resonated include Eugene’s point about demystifying the meaning of innovation. Then alongside that, there was the notion of demystifying the notion of growth as well which Monder highlighted. A granular appreciation of the contribution that minority groups can make to the economy is required as well as a better understanding that terms like minority innovation and growth are completely different.

There is a need to understand the intersectionality aspects and cultural differences as well as to provide dedicated innovation support and involve minorities from the outset in the design of those programmes. Stopping viewing minority groups as perhaps “the other” or lacking in something, just as the way the literature has viewed women entrepreneurs for quite some time, is essential. Colette suggested that we start to look at some way of inclusivity – proofing programmes and supports before they are rolled out.

In the discussion between the panellists and the attendees, two themes were highlighted. The first was identifying success. In response to Emma Obanye’s comments and a question by Anna Roughley, Monder suggested that it should include the social value of businesses, and that this speaks to Emma’s point about the different contributions. Also needed were data on how many and what sort of start-ups are pulled through to the growth stage.

The second was the importance of place. For Emma this is extremely important as it is another intersectional aspect that needs to be taken into account as well as the development of each regional ecosystem. One Tech has recently done some work in Liverpool and Leeds and will be undertaking some work in West Yorkshire. She finds that diversity means different things in different regions and the challenges differ. For example, in Leeds, and maybe in London there is more of a lens on different ethnic minorities, whereas in Liverpool it may be more of a lens into social, economic and other factors. This means designing programmes slightly differently or bringing slightly different programmes into an area.

A question from the audience was about whether it is better to go for tailored, dedicated programmes to tackle these issues or whether it is better to try to adjust mainstream programmes and change the way that they function. Perhaps there needs to be a set of access to finance initiatives for different sections of the ethnic minority population or go more into to making sure that all the mainstream programmes are sensitive to those factors? A response from Fiona Morrill was that this something that the British Business Bank is grappling with. Typically, the way that these market gaps for minority entrepreneurs have been addressed in the past is to create a particular programme or have targeting that audience. What the Bank has found is that take up of those programmes has been quite low and this maybe permeates the point that Monder made around seeing those groups as “the other” as well. It is being able to strike the right balance for the potential needs that would be better be addressed through targeted programmes. It is also important to ensure that more broad programmes also incorporate diversity and inclusion elements.

The recording is available here.