Chapter 3: Theoretical Framework on Ethnic Minority Entrepreneurship

Access to finance is one of the most persistent challenges facing ethnic minority businesses (EMBs) in Scotland. This chapter explores structural, cultural and institutional factors that hinder minority entrepreneurs from securing funding. Key barriers include lack of collateral, thin or non-existent credit histories, language difficulties and discriminatory lending practices. The chapter also highlights the prevalence of discouraged borrowers – entrepreneurs who avoid formal finance due to fear of rejection. It examines how mainstream financial institutions, relying on rigid credit models, systematically disadvantage minority-owned businesses. Community-based finance, while offering temporary relief, lacks scalability and often perpetuates reliance on co-ethnic markets. The analysis underscores how financial exclusion is not simply a matter of individual shortcomings but a systemic issue embedded in wider socio-economic structures.