The UK is one of the most powerful financial centres in the world, yet financial exclusion remains a significant issue. At the same time, a recent report into racial prejudice in Britain today shows that despite increasing social liberalism in many areas, racial prejudice is not undergoing a similar trend. For the past 35 years, while the percentage of the population describing themselves as racially prejudiced has varied, it has never fallen below 25%.[i]
The populations of some ethnic groups are more highly concentrated in particular regions of the country.[ii] Awareness of where these communities are located throughout the UK and whether they have access to appropriate finance is important for understanding the magnitude of disparities.
Mechanisms of inequality and discrimination may adapt over time but their effect on Black, Asian, Minority Ethnic (BAME) people has remained similar for decades. A recent Cambridge University study revealed figures showing ethnic minority victims of fraud are more than twice as likely to be denied a refund by their bank as White customers, despite clear rules.[iii] The figures show more than a fifth of people who complained about not having their money returned to them were from ethnic minorities, even though they only make up around 10% of the population.
According to the research, Black customers are the least likely to get their money back and White customers are most likely. An implicit prejudice could make banks intrinsically discriminatory of ethnic minorities. Another possible reason could be the income level of the claimant; wealthier customers are more profitable for banks, therefore staff are less likely to refuse a claim.[iv] Even if this is the case, discrimination in the labour market impacts earnings; whether discrimination is direct or indirect, it is still inequality. A recent pay audit found that London’s Black and Minority Ethnic public employees were paid up to 37% less on average than their White counterparts.[v]
Research from the past 20 years has shown varying levels of disparity between White and BAME communities and their access to financial services. 33% of White people have no savings, compared to 60% of Asian or Asian British people and 63% of Black or Black British people.[vi] 37% of White groups have contents insurance, whilst 16% of Black groups and 19% of Asian groups have insurance at half the level of their White counterparts.[vii] Studies on access to consumer credit have shown that non-White households are less likely to have financing than White households, despite controlling for income levels and other demographics.[viii] Research has shown that Ethnic Minority Businesses are significantly more likely to exhibit discouragement in applying for finance,[ix] and a report from the Department for Communities and Local Government found evidence that people from ethnic minority groups are more likely to have their loan applications rejected than Indian and White businesses.[x]
There are however initiatives that are positively impacting the experiences of ethnic minorities in access to financial services and support. For example, the Enterprise and Diversity Alliance (EDA) is the only nationally acclaimed knowledge exchange network for ethnic minority entrepreneurs. Launched in 2010 by Professor Monder Ram and informed by his research on supporting minority networks, the alliance works to ensure that minority businesses can become mainstream enterprises through better access to money, markets and management skills.[xi]
Our review scratches the surface of some of the existing research available on issues relating to ethnic minority access to financial services. Research is needed to ascertain the persistence of ethnic inequality in financial services, and an up to date assessment needs to be conducted on what has been done with the previous evidence of inequality in access to financial services, and whether there has been any tangible impact or what the barriers to change have been.
It is also essential that banks, payday loans companies and other lenders release granulated postcode-level lending data to enable a full picture to be built up of patterns of financial exclusion across the UK, and where necessary allow for precise policy interventions to bring fair and affordable finance to all communities.
You can read the full review here.
[i] Kelley, N., Khan, O. & Sharrock, S. (2017) Racial prejudice in Britain today.
[ii] Gov.uk – Ethnicity facts and figures.
[iii] Ellison (2017) Banks biased against black fraud victims, The Times
[iv] Ellison (2017) Minorities are victims of ignorance, The Times
[v] Walker (2018) London’s public workers face ‘ethnicity pay gap’ of up to 37%, The Guardian
[vi] Khan (2008) Financial Inclusion and Ethnicity, The Runnymede Trust, p.37
[vii] Khan (2008) Financial Inclusion and Ethnicity, The Runnymede Trust, p.34
[viii] Deku, Kara & Molyneux (2015) Access to consumer credit in the UK, European Journal of Finance
[ix] R. Owen, T. Botelho, O.Anwar (2016) Exploring the success and barriers to SME access to finance and its potential role in achieving growth. Enterprise Research Centre, p. 31
[x] Ethnic Minority Businesses and Access to Finance (2013) Department for Communities and Local Government, P.7
[xi] Economic & Social Research Council (2017) Network boosts ethnic minority businesses.