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

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.

"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.

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Lorimer said she tried to explain why the term was offensive, but the bank employee did not apologize and then ended the conversation. 

After she filed a complaint, the bank reviewed a recording of the phone call and issued a letter of apology, which CBC News has seen, and wrote the incident did not represent the financial institution's philosophy. But the damage was already done.

I think there's a banking industry that may have been built around a more homogeneous, likely white society.- Nichola Lorimer, Edmonton-based entrepreneur

Lorimer said she felt the bank fundamentally didn't understand her business case nor did it care to.

The entrepreneur said the bank did not focus on the shop's real estate.

"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."

Lorimer ended up postponing her plan for a mortgage. 

Black-owned businesses face 'rudeness and bias'

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. 

"It is just so perplexing the level of rudeness and bias that is occurring against people for simply wanting to get their projects funded," said Hossein, whose research includes financial exclusion.

"It's kind of an interrogation of questions that really does make them feel badly or feel that the kinds of business they are doing are not worthy of financing." 

Barriers to financing

While some financing barriers are cultural, others are physical.

A 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 problem was also flagged in an earlier study published in 2001, which found Blacks in Toronto were more likely to start their own businesses due to racism in the workplace.

New federal loan program

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.

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. 

Several banks, including RBC and BMO, have acknowledged the problem and announced steps they've taken to address it, including more inclusive hiring practices and funding for programs such as legal defence initiatives and community building. 

Dozens of Black-owned businesses contacted by The Cost of Living said they would like to find out more about the latest federal program.

Liberal MP Greg Fergus, who chairs the Parliamentary Black Caucus, said he expects the loans to start flowing during the first quarter of 2021.

"What happens now is that the officials go back and start working [on] how do they involve Black entrepreneurs, business owners, Black-led organizations to design the program," he said.

Passing as white and getting 'dealt with in a different way'

Black business owner Tanya Reddick said she'll conduct business on the phone as much as possible to avoid interacting with bank employees in person until alternatives such as the federal funding are available.

Reddick, who runs a burrito stand at the Halifax Forum Farmers' Market, said she gets better customer service when the representative on the other end thinks she's white — an error that she said representatives often make over the phone.

"I sound as though I'm white," said 46-year-old Reddick, who is a descendant of Africville residents, a displaced community in Halifax with roots tracing back centuries to Black Loyalists and former slaves. 

"When you sound that way, [then] you show up at the bank, literally the smile comes off a person's face, and you get dealt with in a different way."

Ben Kisimolo had a similar experience in Calgary recently when he showed up in person after booking a business loan application appointment with a major financial institution.

"She was happy when I talked to her on the phone. I can hear she was happy and excited to go through the process," recalled the 26-year-old, who runs a music and apparel startup in Alberta. "And then I got there. She said, 'Oh, are you Ben?' Yep, it's me.'

"Her vibe completely changed. I knew already I wasn't going to get anything. And for sure, I was right." 

Many people think the business is owned by a white person. They're like, 'Oh, you're a Black person who's 26? You cannot be doing something like this.'- Ben Kisimolo, Calgary-based business owner

Kisimolo, who was born in Congo and raised in Montreal, said people in Western Canada often misidentify his accent as French Canadian over the phone. 

"Many people think the business is owned by a white person," he said. "They're like, 'Oh, you're a Black person who's 26? You cannot be doing something like this.'"

Hiring 'white fixer' to get ahead

Recently, Reddick started networking with other Black-owned businesses in Nova Scotia and said one solution she's heard repeatedly is the idea of a "white fixer."

The practice involves hiring a white person to conduct business on behalf of and represent the Black entrepreneur. 

"They'll hire white lawyers, or they'll have other representatives within their company that are white and they'll send them to basically close the deal," said Reddick.

"This is what we have to do to get ahead."

For Charline Grant, 46, any trip to the bank turns lengthy with numerous lines of questioning and multiple ID verifications.

"I already know my account is going to be flagged. All my cheques are going to be held for the next six months. I'm only going to be allowed to withdraw $500 cash per day," said Grant. 

"They're not used to seeing me, a Black person like myself coming into a bank with a complex banking issue and complex business issue. Because that's not the narrative that's told about us. Therefore, I must be wrong, and they must be right."

Special rate for 'hockey clients'?

Grant runs three successful businesses with her husband, Garth, in Woodbridge, Ont., including a construction company, a human resources consultancy and a basketball academy.

When setting up an account for their latest basketball training school, Grant asked a bank employee about a special monthly rate reserved for community-based businesses. 

"He said, 'No, that is for our hockey clients,'" Grant said. "And I said, 'I'm sorry, what? When you said that, does that sound ridiculous to you? When you say hockey clients, what do you mean?'"

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Since the May 25 death in police custody of George Floyd in Minneapolis, Grant said there's been an awakening among Black business owners to the damaging effects of systemic racism in the banking sector. 

"Because banking is so personal and it's money, a lot of people don't share their experiences," she said. "We've actually started a podcast, and we're calling it Banking While Black, which we're sharing our individual experiences, and we're getting others to call in and share.

"That's what we're going to use to let others know this is what the Black community goes through when we go to the bank. This is the level on which we are treated."

Banking barriers hurt economy, innovation

Joycelyn Dottin, 43, who started a private Facebook support group for Black business owners that has 400 members, said there's a cumulative cost to all these negative experiences.

"I can say one word: tired," said Vancouver-based Dottin, who sells her graphic designs through websites such as Threadless.

"If there was a word count search that I could do in my Facebook group, the word is tired. We're tired. Tired of fighting, tired of working harder than everyone else just so that we're accepted." 

Banking barriers can also stifle innovation, and it means the economy loses out on creativity, said York University's Hossein.

"When we think about the systemic exclusion that's occurring against Black entrepreneurs and business people … we will lose talent. We're going to lose a lot of our creative people who are trying to grow an economy in new and exciting ways," said Hossein.

For more stories about the experiences of Black Canadians — from anti-Black racism to success stories within the Black community — check out Being Black in Canada, a CBC project Black Canadians can be proud of. You can read more stories here.