Factors necessary to start a business
All the interviewees were keen to point out that education is a crucial requirement for going into business. When one business advisor was asked to identify the principal hurdle for Indigenous business, he said, 'Education, education, education!'21
Foley22 clarifies that education by itself does not ensure business success. Rather, it provides exposure to life skills, networking and business contacts.
In Anderson's study of Aboriginal people in Canada,23 the entrepreneurial process starts with the person identifying an opportunity and then realising this opportunity by converting it to viable ventures. To do this requires capacity, which can be partly built through education.
Of Indigenous Australians aged 18 years or over24:
- 28% have a post-school25 qualification (compared with 50% for the non-Indigenous population):
- 24% had a certificate or diploma (compared with 33% for the rest of the population)
- 4% have a bachelor degree or above (compared with 17% for the rest of the population).
The following quote26 from an Indigenous accountant is startling because he describes his decision to enter the accounting profession as 'audacious'. Accountancy is one of the world's oldest and most widely practiced professions, but Anthony Ashby, an Indigenous accountant who runs his own chartered accounting practice in Sydney, says it felt like a bold decision to pursue this profession.
Going through school growing up, there really were no role models of Aboriginal people who were accountants to draw on.
It seemed audacious going into it because it was not the norm. The norm for Indigenous people was to go into sports or maybe medicine, not business.
2 Financial literacy
Financial literacy is defined as 'the ability to make informed judgments and to take effective decisions regarding the use and management of money'.27 For example, it relates to understanding how to access options for minimising bank fees, negotiate loan facilities, manage repayments or access other financial services.28
Using this definition, the 2008 ANZ Survey of adult financial literacy in Australia found that Indigenous Australians had financial literacy scores which were significantly below the mean score.29 A low financial literacy level is a disadvantage which many carry across into their working lives.30
Research into Indigenous money management behaviour has also found limited access and exposure to financial institutions and comparatively low levels of home ownership.31 Hunter32 points out that competency in numeracy and literacy must be the platform for improvements in Indigenous self-employment.
3 Access to finance
It is widely recognised that Indigenous Australians, particularly entrepreneurs, lack ready access to finance. This is partly because of the low inter-generational transmission of wealth, but also because commercial sources of capital could be either risk averse or less likely to lend to Indigenous clients because of a perceived high risk.33
Foley34 found that when one spouse in the business is non-Indigenous, the couple generally experience easier access to capital in the early stages of the business than do couples who are both Indigenous.
In his study of Aboriginals in Canada, Anderson similarly finds access to finance a huge obstacle.35
While Indigenous Business Australia (IBA) provides loans to Indigenous business owners, the number of loans granted in 2007-08 was just 93.36