Barriers Related to Minority-Owned Business FinancingI. Overview of Minority-Owned Businesses1.1 Concept of Minority BusinessSonfield (2005) argues that defining the concept of a ‘minority business’ is a complex task. In a general term, the minority business can be defined as business owned solely, or at least primarily, by members of a ‘minority’ group would constitute a ‘minority business’. However, there are arguments on defining the terminology of minority business and what elements should constitute them. Among practitioners and researchers the debate on the definition has been going on for several years. In the USA ‘minority businessperson’ and ‘minority business’ are the generally used terms.
‘Ethnic’ is rarely used to describe a business, and, when used, this often refers to firms that focus very specifically on ethnic/cultural products or markets whereas ‘racial’ is virtually never used to describe a business. Some researchers classify owners of businesses who are minoirites, while others think that the conceptualizaiton should be made at community level which will become a more meaningful defiinition. In the literature, many sutdies relied on definition of the business owners who are a minority or ethnic business.
However some look into more broader conceptualization of business owners involvment in that community which is a minority business community or ethnic business community. The involvement can be heaviliy involved, less involved, or not at all invovled in the community (Sonfield, 2005)In the recent studies, the conceputalization of community has been more complex. Not only the community in which business owners involved, but also there are many other contextual factors such as culture, goegraphic locality, labor markets, institutional situation, and business sectors are considered as “mixed embeddedness” persepctive.
In addition, cultural categorization should include cultural issuesses as well as biological racial arguments (Kloosterman et al. 1999, Barrett et al. 2001, Ram and Smallbone 2003, Gunaratnum 2003, Sonfield, 2005). Therefore, there are many issues included in defining the minority businesses. The main purpose of defninig the term is that there are social and economic policies to be formulated, implemented, and evaluated. For this purpose, this requies an acceptable definition in the USA. Why there is a need for definition is that minority businesses are important and critical for sterngthening the US ceonomy.
Therefore, aiming development for such businesses in the economy is a desirable social policy in the country (Sonfield, 2005). To implment such programmes, it is necessary to know what they are and who they are. Since 1960s in the USA, the development and promotion of encouragement and supports to the miniority owned businesses has been at the core of the both public and private sectors. In the beginning, the mionoirty owned buisness referrs to mainly African- American-owned businesses. Later many large cooperations began various programmes by themselve in order to promote development and supports for minority businesses.
Later the scope of minoirty businesses were expanded to include other groups of minority businesses and women owned minoirty buisnesses. With such an aim, in 1969, the Office of Minority Business Enterprise (now called the Minority Business Development Agency. ) was established in 1969, within the US Department of Commerce as the the federal government took the lead in this effort to develop such programmes. Both direct and guaranteed loan programmes and federal contract setaside programmes have been administred by the department.
Due to the economic, ethical and political pressures, in 1970s and 1980s, many large US corporations initiated efforts to incerease minority and women-owned companies in the suppliers list for the goods and services to be purchases. In 1990s, there are both praise and cirticism mixed on these public and private programmes. There are still a variety of barriers do exist for minoirity buiensses and the programmes must level the playing filed and careate more opportunities for better development and growth of minority businesses. Others argue that the programmes are a form of ‘reverse discrimination’ and were inherently inappropriate and/or illegal (Sonfield, 2005).