Discrimination in the credit market? : survey based evidence of access to financial capital among self-employed immigrants

We present results from a survey regarding access to financial capital conducted among immigrants who are self-employed in private firms in Sweden's retail, trade or service sectors. The results show that non-European immigrants consider access to financial capital as a more serious impediment to their self-employment activities than do native Swedes and European immigrants. Self-employed non-European immigrants report more discrimination by banks, suppliers and customers than do natives and immigrants from European countries. Immigrant owned firms apply for bank loans to a larger extent than do firms owned by natives. Non-European immigrants are more likely than natives of having a loan denial and they are also charged higher interest rates on their bank loans than natives are. The occurrence of ethnic discrimination in the market for bank loans is put forward as an explanation for these results. Limited or no access to financial capital is an obstacle for self-employment among certain immigrant groups. This obstacle may be one explanation for the high exit rates from self-employment among immigrants that has been documented in several countries including Sweden