Banking barriers: How the Canadian financial sector excludes Black entrepreneurs, stifling innovation

CBC | Falice Chin | Oct 31, 2020

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As the owner of a beauty shop catering to Black hair, Nichola Lorimer is used to explaining her business to people who are unfamiliar with the products and services she offers.

But when the 37-year-old Edmonton entrepreneur, who goes by NiLo, inquired about a commercial mortgage, she didn't expect the conversation would fixate on a derogatory racial term.

See: How crowdfunding is supporting Black livelihoods and communities

"I was explaining the type of business that I do, that it's a niche market, that I work with natural hair only. He asked if this is a 'nappy hair' business specifically," she said when recalling her phone conversation with the bank representative.

"'Is this like a business for nappy girls? Like nappy hair girls?' I was stunned."

The term was used historically to describe the tightly coiled texture of Black hair and was often associated with derogatory caricatures and portrayals of Black natural hair.

"I think that it's reflective of a lack of policy," she told CBC Radio's Cost of Living. "I think there's a banking industry that may have been built around a more homogeneous, likely white society."

Poor customer service and cultural insensitivity are common barriers facing Black entrepreneurs who turn to commercial banks for financing, said Caroline Shenaz Hossein, associate professor of business and society at York University in Toronto.

See: Banking Must Take A Stand On Tough Social Issues

While some financing barriers are cultural, others are physical.

2010 geographic analysis of banks in Winnipeg, Toronto and Vancouver revealed that although commercial banks are abundant in affluent neighbourhoods, they're much scarcer and sometimes absent in low-income neighbourhoods with high concentrations of racially diverse residents.

In 2015, when asked how the City of Toronto can support Black-owned businesses, around half of Black respondents identified "accessing financing" as the top issue.

The federal government has acknowledged these systemic barriers. In early September, Prime Minister Justin Trudeau announced Ottawa would partner with eight major financial institutions to introduce a $221-million loan program aimed at helping Black entrepreneurs.

Participating lenders include RBC, BMO, Scotiabank, CIBC, National Bank, TD, Vancity and Alterna Savings. Together, those institutions committed to contributing more than half of the money to set up the new Black business loan fund.

See: Black tech founders say venture capital needs to move past ‘diversity theater’

While Hossein applauded this effort, she said she's concerned the program won't address the existing culture within banks that perpetuates financial exclusion.

"How are [the banks] going to be reformed by … coming together [with the government] to provide more money?" said Hossein.

She called it a temporary measure to "satisfy or appease the Black community" by offering loans at market rates.

A more holistic approach, according to advocacy groups such as Democracy Watch, would be for banks to track and publicly disclose their loan data based on gender, race and income, in order to better reflect the communities they serve.

 

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