Directorate General for
Enterprise and Industry
Opportunities for ethnic minority
Entrepreneurs
• European week of Regions and Cities, Brussels 11 October 2005
• Mr.Albrecht Mulfinger,
• Head of Unit „Crafts, Small Enterprises, Cooperatives and Mutuals,
European Commission, DG Enterprise and Industry
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Directorate General for
Enterprise and Industry
Introduction
•
in 15-20 years ethnic minorities will have a dominant place in the population
of large European cities
•
more entrepreneurship for ethnic minorities will facilitate their integration in
the society
•
also a considerable number of ethnic minority entrepreneurs need bank
finance,
But all need a bank account
•
•
finance opportunities of ethnic minority entrepreneurs depend to a large
extend from the person, his education, business plan, track record
•
banks are not allowed by law to lend to a person that is unable to reimburse
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Directorate General for
Enterprise and Industry
Definition of ethnic minority
entrepreneurs
• an individual which is citizen of an EU 25 member state/ EEA
country but has an immigrant background ( up to the 3rd generation)
• an individual that recently came to an EU 25 member State/ EEA
Country from a 3rd non EU country and holds a valid residency
permit or had the necessary authorisation to become self-employed
or start-up business
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Directorate General for
Enterprise and Industry
Statistics for ethnic minorities
• definition used for migrants and minorities varies considerably in the
EU-member states
• in DE, AT after naturalisation immigrant are removed from statistics.
• in UK, FR, NL, DK ethnicity appears in statistics; in other member
states not recorded or forbidden
• different statistical concepts,
• statistics on ethnic minorities very different, incoherent and quite
weak
• statistics on ethnic minority entrepreneurs and self-employed in
formal or informal sector could be misleading
• citizens with Chinese, Pakistani or Turkish origin are more
entrepreneurial than those from black Africa or former Sovjet block
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Directorate General for
Enterprise and Industry
Education of ethnical minority
entrepreneurs
• majority of first generation migrants has low level of education or
qualification
• exception: migrants selected for their skills ( nurses, doctors
computer specialists)
• educational level improves for 2nd and 3rd generation including
university
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Directorate General for
Enterprise and Industry
Reasons for self- employment
• entrepreneur by necessity versus entrepreneur by vocation
• escape unemployment or risk of unemployment (simple jobs suffer
under delocalisation to low cost countries)
• escape 3d jobs- dirty, dangerous and demanding occupation, often
badly paid and almost no hope for promotion
• become self-employed : facilitate integration into the society
• reduces the risk of young people to become criminal
• entrepreneurs by necessity mostly start a small business with low
entry barriers such as
• restaurant, food shop, house cleaning and repair, health care,
nurses, gardening, textiles and clothing etc.
• main target group of clients: same ethnic community or residents
from the same urban area
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Directorate General for
Enterprise and Industry
Entrepreneurship of Ethnic minorities
• depending on countries and the mix of ethnic minorities the
entrepreneurial dynamism vary considerably.
• entrepreneurial activities of ethnic minorities have increased
•
• in SE immigrants are more likely to be self- employed than native
Swedes
• DE number of self employ persons among foreigners was 8.6%
against 10% of the total employed population
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Directorate General for
Enterprise and Industry
Access to Finance
• Warwick Business School
– no significant differences in likelihood of using external finance between
white and ethnic minority owned business- some 80% of SME have
used external sources of finance in last 3 years
– 25% of ethnic minority entrepreneur report lack of self –confidence with
finance (Average 16%)
– ethnic minority owned businesses have significantly lower overdraft
limits than white owned business (L 18 .000 versus L 35.000 )
– no significant differences in the size of term loans by gender or ethnicity
– no significant differences in rejections or discouragement rates by
gender, ethnicity or growth rate
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Directorate General for
Enterprise and Industry
Access to Finance
• ethnic minorities entrepreneurs raise funds from family, then from
the same ethnic minority community, and then from banks
• all banks say to treat finance requests from ethnic minorities in the
same way than from white citizens
• often banks are reluctant to finance start-up businesses irrespective
of gender, ethnicity or growth prospects
• bank clerks have to reach given profit targets, failure to meet them
will reduce their promotion prospects
• Basel II will increase the transparency requests by banks,
• high risk will lead to higher interest rates, lower risk to lower interest
rates
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Directorate General for
Enterprise and Industry
Access to finance
• a large number of ethnic minority entrepreneurs request microloans with less than € 25 000
• they are often unable to offer sufficient guarantees
• poorly presented business plans and moderate business situations
have an impact on the size and the cost of loans, even if they can
assure credit institutions of good market opportunities
• do ethnic minority entrepreneurs communicate efficiently with banks
clerks (language, behaviour, clothing)?.
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Directorate General for
Enterprise and Industry
Best practices for finance of ethnic
minority entrepreneurs
• all public promotional banks ( KfW, BDPME, ICO) offer their loans to
all SME irrespective of gender and ethnicity
• also Commission financial instruments managed by EIF are offered
to all SMEs
• some banks are promoting finance of ethnic minority entrepreneurs
such as
• Cooperative Banks in Italy for reason of corporate social
responsibility (in form of reduced guarantee requirements)
• Dutch cooperative banks with specific loans for ethnic minorities
• Specific measures issued by Member States in disadvantaged
urban areas
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Directorate General for
Enterprise and Industry
Business opportunities for ethnic
minorities
• by filling market gaps
– taking over small shops from native traders (retirement, decline of
turnover in depressed urban areas with high immigrant density
– creation of new shops in urban areas for citizens without car
• by creation of new markets for specific products or services
– ethnic fast food franchising with high quality service (food is safe, fresh
and low fat)
– tour operator for holidays in the country of origin (e.g. Turkish tour
operator in Germany)
– personal and health services for the ageing society in particular for
women
– arrival of highly skilled academics (financial analysts, software experts)
as employee could lead in several years to new start ups, as Asian
immigrants in California have successfully shown
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Directorate General for
Enterprise and Industry
Specific actions of the DG ENTR
• Ethnic minority entrepreneurs are a specific target group in the
entrepreneurship action plan ( 2004)
• Launch of a study on best practices for ethnic minority
entrepreneurs
• Network of member states experts on ethnic minority entrepreneurs
• Final report and conference in 2007
• THANK YOU FOR YOUR ATTENTION
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Directorate General for
Enterprise and Industry
Thank you for your attention
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