Why Bridging Lenders must do more for Black Employees

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black lives matter

Stroll around the bustling streets of London, and you’ll likely find that around one fifth of the people you encounter are Black or Mixed Race. 18%[1] of the city’s 9 million strong population sit in this group, according to the latest government figures.

But if you stepped off the pavement and glided up to the top floors of the gleaming Canary Wharf offices, it’s a completely different story. Barely even 1% of Britain’s senior financial leaders are Black[2].

It’s overwhelmingly White people making the decisions that direct the flow of capital.

Black borrowers suffer unfair disadvantages

This has led to disastrous social consequences. A meagre 20% of African-British households in the UK own their home. For Mixed Race households, this figure rises to 34%. But it’s nothing compared to the 68% of White British households who are homeowners[3].

Time and time again, studies show that it’s harder for Black people to secure a mortgage. Firstly, because Black employees – particularly women – are less likely to be promoted to high-paying senior roles. And secondly, because of the unconscious bias prevalent in lenders’ daily decision-making and even technological algorithms.

But it’s not just mortgage lending that’s letting Black communities down. Across almost every area of personal finance from business loans to credit cards, it’s much tougher for Black people in the UK to access finance than it is for White people.

Of course, this restricts Black-owned business growth, widening the wealth gap even more. With UK university fees at unprecedented highs, and unemployment levels at record lows, financial illiteracy and wealth gaps will only compound, unless action is taken.

Lenders themselves can help to even out this divide. By promoting more Black employees to decision-making roles, the unconscious bias at the heart of so many problems can be levelled out.

People need relatable role models in finance

Lenders need to ensure that their leadership team is diverse. Importantly, Black managers at the helm of strategic decisions must be visible for all – especially junior employees.

Because, when we have a role model who looks like us, and we can relate to, incredible things happen. We become motivated and start to believe that we can reach the same heights. A dozen years ago, psychologists and teachers witnessed this first-hand, in a phenomenon now known as the “Obama effect” [4].

When Barack Obama won his place as President of the United States of America, something incredible occurred across the nation’s schools and colleges. The grades of Black Americans began to shoot up. The more Obama succeeded, the better the grades got.

Nobody could fail to notice the power of positive role models in the exam scores. What’s more, record levels of Black Americans then entered the world of politics, following the inspirational footsteps of Obama. Recently Kamala Harris joined the ranks, earning her place as Vice President.

Financial News recently uncovered that of the 650 senior investment bankers in London, just three are Black[5]. This is just not enough, and it sends the wrong message to young people deciding on their career.

Mike Corbat, chief executive of Citigroup commented, “Black talent wants to see other Black talent … They want to know that in the firms they are working in that they are treated fairly and equally. That they have mentors, and people to look up to.”

There is a lot to be learned from the Obama effect. One of the lessons is blindingly obvious. To encourage more diversity in bridging finance, the industry must nurture strong Black role models.

Achieving this requires some serious strategic planning. Especially as we navigate out of the pandemic. Historically, diversity and inclusion have always taken a corporate hit after a crisis, according to 2020 research by McKinsey[6]. But encouragingly, firms with more diversity bounce back and perform overwhelmingly better too.

Having Black leaders on your board – especially women – is better for business

The McKinsey study[7] is clear. Companies who strove to include more women, ethnicities and orientations over the past five years performed better. There was no doubt there.

Including more women in senior positions – so that they make up at least 30% of the senior roles – increased profits by a whopping 48%[8] in some cases, compared to those who didn’t. This is an insanely compelling business argument to employ, retain and promote more women into leadership roles.

But according to the McKinsey research, it was the firms who prioritised ethnic diversity who enjoyed the highest business returns. The trends of outperformance are much starker, leading to 36% growth on average. “As we have previously found”, the study mentions, “The likelihood of outperformance continues to be higher for diversity in ethnicity than for gender”.

So, just imagine the rewards if many more Black women had seats in board rooms. Businesses are missing out.

In the UK, Black women have the lowest probability of being a big earner. Just 0.091% of top percentile jobs are held by Black women. Not in finance. Across all professions. It’s not ok. It’s terrible for society and it’s stupid of our businesses too, the studies prove that Black women have the most to offer.

Different backgrounds mean different skillsets, and lending companies today need every advantage to survive.

To benefit from a better corporate culture and higher returns. Lending firms need to work on their recruitment practices, increase employee retention and focus on talent development with an aim to promote.

In many cases, it will probably require measurable quotas and new corporate cultures. But for those firms who nurture and promote strong Black leaders, the rewards will be immense. Not only for corporate profitability, but more importantly for social progress.

We need bridging lenders to step up and support the transition to a multi-cultural board room, and we needed it yesterday.

Less conversation and more action.

[1] Source: https://www.ethnicity-facts-figures.service.gov.uk/uk-population-by-ethnicity/national-and-regional-populations/regional-ethnic-diversity/latest

[2] Source: https://www.theia.org/sites/default/files/2019-06/20190611-blackvoices.pdf

[3] Source: https://www.ethnicity-facts-figures.service.gov.uk/housing/owning-and-renting/home-ownership/latest

[4] Source :  https://www.sciencedirect.com/science/article/abs/pii/S0022103109000742

[5] Source: https://www.fnlondon.com/articles/revealed-the-stark-lack-of-senior-black-dealmakers-in-the-city-20200720

[6] Source: https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-still-matters

[7] Source: https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters

[8] Source: https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters