Finklusiv, bridging the gap between migrants and the banking system

Business owners, and especially those with a history of migration, face barriers to access corporate banking services in Denmark. Without a corporate account, it is difficult for them to receive payments from their clients, which in turn limits their turnover and their possibility to earn a decent salary. 

We dream of a world where everyone has the opportunity to achieve their full economic potential. Finklusiv is a social enterprise that creates financial inclusion by bridging the gap between underbanked business owners and banks.

In Denmark, approximately 30,000 new businesses are established annually, and 12% of them face difficulties when trying to open a business account. Obtaining a business account is crucial to access the financial infrastructure necessary for the efficient operation of their businesses.

There is a growing trend of banks rejecting emerging small businesses. Finklusiv’s experience suggests that this phenomenon particularly affects refugees and immigrants entering sectors with low barriers to entry and limited growth potential, such as bicycle shops, hair salons, pizzerias, cleaning services, kiosks, and freight transport.

These activities play a significant role in the functioning of Danish society. Entrepreneurs in these sectors are often not motivated by dreams of wealth and rapid growth but rather by a burning desire to support themselves and their immediate families. Many refugees bring entrepreneurial experience from their home countries, where self-employment is a source of pride and a significant value for individuals and families.

Entrepreneurship emerges as a viable path to employment, but realizing this dream is impossible without access to a bank. As of November 2023, Finklusiv has successfully assisted 100 entrepreneurs in gaining banking access, resulting in an 85% success rate in our recommendations to banks.

Finklusiv has forged partnerships with socially responsible banks committed to extending their services to underserved populations. They equip these banks with comprehensive recommendation files for business owners who have undergone our meticulous screening process. Moreover, they provide substantial support, including administrative assistance in constructing compelling request files and training on navigating the Danish financial system effectively.

 

Identifying six common barriers faced by business owners seeking to open a business account, they have outlined specific challenges:

1. Legislation: Strict financial regulations, influenced by heavy legislative requirements, directly impact approval criteria, leading to increased rejection rates, especially for industries deemed high-risk.
2. Documentation: Business owners struggle to meet banks’ stringent documentation requirements due to high complexity and inadequate financial planning.
3. Performance: Businesses with no or limited history, low and unpredictable income, limited liquidity, few assets, and low equity are not considered attractive by banks.
4. Digitalization: The increased digitization of banking services, including onboarding and communication, excludes business owners with inadequate digital literacy and lack of experience with IT.
5. Communication: Cultural misunderstandings, language limitations, and low financial understanding often result in poor communication between business owners and banks.
6. Lack of Trust: Mutual distrust hampers successful collaboration between business owners and banks.

 

Finklusiv addresses these barriers through a comprehensive approach:

• Information and Support: Providing courses on best practices and easy access to information on relevant legislation to improve business owners’ understanding of and ability to meet banks’ approval criteria.
• Screening and Assistance: Offering assistance with business planning, budgeting, and application preparation, combined with screening, data verification, and quality checks to ensure businesses meet banks’ documentation requirements.
• Business Coaching: Providing coaching, mentoring, and advice on financial management and business development to enhance businesses’ attractiveness and financial results.
• Improving Digital Skills: Offering practical technical support, access to IT equipment, and customized tutorials to develop business owners’ digital skills.
• Upgrading Financial Literacy: Improving business owners’ financial and economic competencies through tailored courses aimed at building intercultural know-how and addressing common cultural misunderstandings.
• Building Trustful Relationships: Fostering trust through committed relationships to bridge the gap between business owners and banks, ensuring successful collaboration.

Since its inception, Finklusiv has supported 100 business owners with a refugee or migrant background to get access to a bank. These entrepreneurs have in turn created 207 jobs with an expected turnover of 107 million DKK over the following year (eur 14 m). Given that one-third of them were receiving social assistance before becoming self-employed, Finklusiv estimate that these 33 business owners alone have generated a societal gain of 4.3 million DKK annually. This gain is achieved through savings in public expenditures and an increase in tax revenue.