Enterprise at the Heart of the Community ; Ethnic Minority Entrepreneurs Are Launching Record Numbers of Start- Ups Thanks to Local Funding and Support
reports, Gareth Chadwick, The Independent on Sunday (London, England)
Britain's immigration policy was the focus of much media attention around election time, with Michael Howard calling for caps on numbers coming into the country. The message was often negative, yet in terms of business success, the contribution of the UK's immigrant population has been extremely positive.
Almost unnoticed amid April's electioneering, the Institute for Public Policy Research published a report revealing that immigrants to the UK, that is, those born outside the UK but who are resident here, contribute relatively more to the economy than those born in the UK.
Although the total immigrant workforce makes up only 8.7 per cent of the population, it contributes 10.2 per cent of all income tax collected and the proportion is likely to grow. Total revenue from immigrants grew from pounds 33.8bn in 1999-2000 to pounds 41.2bn in 2003-04. This 22 per cent rise compares to a 6 per cent increase in revenue from those born in the UK.
Similarly in May, research by Barclays shows that the number of black and minority ethnic (BME) business start-ups has reached record levels. They have increased by around 33 per cent in four years, from 32,000 in 2000 to 50,000 in 2004. BME start-ups now account for 11 per cent of all start-ups.
Talking about almost anything in terms of ethnic origin alone is always simplistic, but the growing success of ethnic minority entrepreneurs is no accident. While their numbers are still relatively small, the success of BME enterprises is indicative of the way that many BME entrepreneurs have turned their situation to their advantage.
Success for any entrepreneur is not easy, and BME entrepreneurs can find it even harder than usual to access funding from a market dominated by mainstream lenders who may have little or no presence in their community and little understanding of their intended market.
It's a problem recognised by the Government. Last year Stephen Timms, then minister of state for energy, e-commerce and postal services, said, 'Often the people with the money don't know what entrepreneurs know. Entrepreneurs know their own communities inside out.'
According to research from the London Business School (LBS), what typifies BME entrepreneurs is that rather than be discouraged by the lack of mainstream funding options, they often turn to their communities for financial support, particularly from family and friends.
LBS's Global Entrepreneurship Monitor found that for many ethnic groups in the UK, the main source of start-up finance was friends and family. In the Pakistani community, it accounted for 93 per cent of financing, whereas for white British entrepreneurs a bank overdraft was the most common funding source, at just under 30 per cent.
'Finance is a classic example of how the extended family can help. It's not unusual for family members to chip in with funding for a new venture, or to help in other finance-related areas, such as finding premises,' says Mohammed Ali, chief executive of QED UK, a charity which supports the economic development of disadvantaged South Asian groups.
Professor Monder Ram, director of the Centre for Research into Ethnic Minority Enterprise (CREME) at De Montfort University in Leicester, also believes that the strength of family and community networks can have an indirect benefit if businesses do try and obtain financial support from banks and other external sources.
'It's likely that they will not be seen by bank managers as an isolated entrepreneur, but as someone with a stock of commercial experience in their family that they can draw on,' he says.
BME communities often have a higher percentage of self- employment and enterprise. It means there is a larger pool of first- hand expertise on tap for entrepreneurs to turn to, over and above anything available from local initiatives, such as Business Link or chambers of commerce.
'Ethnic minority communities are often family-oriented and three- quarters of the entrepreneurs we spoke to had a recent family history of running a small business. That's much higher than the population in general,' says Louise Fowler, director of small business marketing at Barclays.
Two-thirds of BME entrepreneurs in the Barclays research cited self-confidence as an obstacle to success. It's not necessarily about confidence in the idea or the product, but confidence in throwing themselves into an unfamiliar, cut-throat commercial environment, of not having the contacts, or knowing the 'right way' to do things.
Here, too, the growing number of success stories is helping to create a virtuous circle of BME enterprise. Whether it is Lakshmi Mittal, the London-based steel magnate with a US$25bn fortune, who transformed his father's small steel business in Calcutta into the second largest steel company in the world; the Pathak family, who arrived in Britain with pounds 5 in 1955 and built up an Indian food empire worth over pounds 50 million; or a more modest example of ethnic enterprise, role models help to overcome any lack of confidence by showing that it can be done, no matter what community you are from. The more role models there are to learn from, the more achievable success seems to be.
Shaid Luqman is one of a new breed of Asian business role models. Earlier this year, the 37-year-old was listed 16th in the Asian Rich List, worth an estimated pounds 125m. Luqman's success is founded on property. He owned 24 houses by the time he left university in 1991 and the finance company he set up in 2000, Lexi Holdings, made a profit of more than pounds 20m last year.
'What's interesting is that there are more ethnic-minority entrepreneurs making their names in non-traditional sectors, now,' he says. 'In my community, it used to be restaurants and clothing. My parents had a clothing business. Nowadays it's more likely to be property, finance or technology. When I entered the short-term bridging finance market in 2000, there were no significant ethnic- minority companies. We've now got a 53 per cent market share. Not only are we proving to be a positive role model for would-be entrepreneurs, but we're involved in the process of helping to create them,' he says.
Nevertheless, the continuing success enjoyed by many BME entrepreneurs shouldn't hide the significant problems around enterprise still found in many ethnic-minority communities. For every survey that reveals a rise in BME enterprise, another will highlight the problems that remain. For instance, a CREME study in 2002 found that ethnic-minority companies had a lower propensity to use ICT (Information Communication Technology) than their non-BME counterparts.
There is also considerable disparity between different ethnic communities, each with their own distinct mix of challenges. The British Pakistani community, for example, has a self-employment level of 22 per cent, whereas the rate for African-Caribbean self- employment is considerably lower, at seven per cent. There are numerous initiatives which try such disparities, both directly and indirectly. There are pilot schemes in the North-west and the West Midlands to boost ICT usage. Business Links nationally are now required to collect data on clients in relation to ethnicity in order to monitor the take-up of services by different communities. There have been pilot schemes in the West Midlands and North London aimed at helping BME businesses tender for public sector contracts. And in East London, the Muslim Loan Fund aims to provide financial support to Muslim entrepreneurs whose religion does not allow them to secure interest-bearing loans.
Ram says that it's a question of targeting support to those communities that need it most. 'Certain communities continue to be economically disadvantaged. It is those communities where enterprise most needs to be encouraged. The general picture of ethnic-minority enterprise in the UK is a positive one, but you've got to read the small print, too,' says Ram.
'The main problems for me were around finance and confidence'
Lydia Montoute's main worry when planning her business was not the idea itself, but having the confidence to make it work. As a busy TV editor, Montoute was forever dashing between work, external meetings, her home and various evening functions.
With such a hectic schedule, it was a struggle to maintain the immaculate appearance she prided herself on.
She came up with the idea of a simple, elasticated mesh face- mask which could be slipped on to protect her make-up when changing outfits. It worked so well, she started using it when shopping for new clothes.
'It got to the stage where if I was out shopping and didn't have my mask with me, I wouldn't try on any clothes and was unlikely to buy anything. It struck me that there must be millions of other women out there who have the same problem,' she says.
She spent years gradually researching her idea. She then switched jobs and became a teacher, all the while refining the product, sourcing fabrics, contacting manufacturers and retailers. Finally, in late 2003 she gave up teaching to devote herself to Kim Mask full- time. She set up the company six months later and launched the product in September 2004.
'The main problems for me were around finance and confidence. I strongly believed in my idea and I knew there was a demand, but I didn't see myself as someone who 'd ever approach a bank. I'd never done it and had no idea of how to. I had no contacts, no networking experience and limited market knowledge,' she says.
Her answer was to downsize her house to free up some equity and to ask her family to support her if anything went wrong and she managed to raise the pounds 30,000 investment needed to get the business up and running.
'It was entirely self-funded. I didn't regard that as being at all entrepreneurial, just something I needed to do if it was ever to work. I didn't really consider external funding. It just wasn't part of the world I was familiar or comfortable with. I also found it difficult learning about an entirely new culture; how to do business, be a saleswoman. I had to learn about all those things myself,' she says.
Her expertise as a teacher obviously paid off. Earlier this year, she won the British Female Inventor of the Year award and Kim Mask is right on target to exceed it's first year turnover target of pounds 40,000.
'It was a modest target, but my ambitions for the company are big,' says Montoute.…
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Publication information: Article title: Enterprise at the Heart of the Community ; Ethnic Minority Entrepreneurs Are Launching Record Numbers of Start- Ups Thanks to Local Funding and Support. Contributors: reports, Gareth Chadwick - Author. Newspaper title: The Independent on Sunday (London, England). Publication date: June 19, 2005. Page number: 2,. © 2009 The Independent on Sunday. Provided by ProQuest LLC. All Rights Reserved.
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