People of color are underrepresented as business owners compared with their share of Rhode Island’s population, but getting a clear picture on the depth of the problem is difficult.
The lack of minority-owned businesses in Rhode Island, commonly acknowledged by state leaders and the business community, was reiterated in a recent economic report commissioned by R.I. Commerce Corp.
Racial and ethnic minorities comprised just over 28% of the state’s 1.1 million residents in 2018, according to the U.S. Census Bureau’s American Community Survey. The R.I. Department of Labor and Training, which uses data from the U.S. Bureau of Labor Statistics, estimated that 10.5% of the 34,115 state businesses in 2018 were owned by minorities.
However, DLT data only encompasses businesses with at least one paid worker – not including the owner. That leaves out a large chunk of the state’s minority enterprises.
“I would say 99.99% of minority-owned businesses are microbusinesses [meaning those with five or fewer employees],” said Cynthia Scott, vice president for the Rhode Island Black Business Association.
Even the R.I. secretary of state’s database, which tracks all registered corporations and limited liability companies, might not encompass the microbusinesses common among people of color, according to Oscar Mejias, CEO of the Rhode Island Hispanic Chamber of Commerce.
A separate census survey that does include so-called “solopreneurs” estimated that 11.7% of minority-owned small businesses in Rhode Island had no paid employees, but those numbers haven’t been updated since the survey was last conducted in 2012.
Mejias said it was important to have accurate data to determine whether programs for minority-owned businesses are working. “How can you measure if the program is successful ... if you don’t know how many people it’s reaching?” he said.
Data sources also don’t account for the fact that minority business owners, particularly immigrants, might be reluctant to self-identify for fear of retribution in the current political climate, even if they are here legally, Mejias said.
Rhode Island is not alone in its failure to capture the full landscape of minority-owned businesses; states nationwide are also struggling, said Bruce Katz, who authored the report for Commerce RI. Katz, who co-founded the urban development consulting firm New Localism Advisors, is also working in conjunction with Accelerator for America to gather data that would more accurately reflect the number and percentage of minority-owned businesses nationwide.
The absence of that data for now should not preclude the state from continuing to address the struggles faced by minority business owners, Mejias said.
National research indicates people of color have a harder time accessing funding, both in venture capital and loans. Even when they do, they are often charged higher interest rates. They may also struggle with the skills and training needed to start a business, and language barriers.
The Commerce RI report recommends creating a minority-business accelerator, modeled after a program in Cincinnati. “The existing system does not seem to be working as well as it needs to be,” Katz said.
Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.