It’s easy to assume that debt affects everybody in the same way. Whether you have a mortgage, credit cards, or short-term loans – debt is debt and anyone can get into it, right?

Well, not exactly. Structural inequalities and systemic barriers mean that certain groups in the UK are disproportionately affected by debt – and ethnic minorities are faring the worst.

It’s difficult to paint a comprehensive picture of just how significant this ethnicity debt gap is – none of the studies that collate the UK’s levels of debt include ethnicity in their analysis.

However, a 2014 study looked at the residents of Newham – the borough with the highest concentration of black and minority ethnic groups in the country – and found that the community had a significant problem with long-term debt.




‘Debt has affected almost all households in our study,’ wrote the researchers in their conclusion. ‘Over half the households we interviewed are already in debt and most of the rest have either been in debt or are at risk of debt.’

Within the population of Newham, Indian is the largest group with a 14% share, followed by Bangladeshi (13%), black African (12%) and Pakistani (10%). So it is significant that the study found ‘only one in 10 Newham residents says they are financially comfortable – compared with one in four Londoners.’

This isn’t a problem that is exclusive to Newham. You see it throughout the UK.

According to the findings of the Race Disparity Audit, one in five children in black households live in persistent poverty. And for those who aren’t in poverty, systemic inequalities mean there are limitations on earning and progression potential – which all increases the risk of falling into debt – and make it harder to get out of.

‘Everything from unequal pay to unequal opportunities, driven by a difference in skin colour’ (Picture: Ella Byworth for Metro.co.uk)

The impact of migration and cultural attitudes towards money also contribute to the unequal levels of debt in this country.

Tanya Daye is a blogger. Her parents are from Jamaica and she’s the first generation of her family to be born in the UK.

She says the financial reality of her life is completely different to what her parents experienced, and that generational dissonance has contributed to the serious debt she has found herself in.

‘There are pressures in this new financial world that my parents and my grandparents never had to face. Credit was never an option for them,’ Tanya tells Metro.co.uk.

‘Their idea of money is so different to mine. They had to hang on to every penny and work so hard to get their home. For me – credit often feels like a gift, like something I don’t necessarily have to give back.’

Tanya is keen to take responsibility for her debt and her problematic spending. She has spent years climbing out of debt before falling straight back into it, and she puts that down to carelessness and a lack of awareness about her personal financial situation.

But she does say that within the Caribbean community, money is not something that is widely spoken about. In fact, she says it often feels like a ‘secret’ within families, and she thinks she could have done with more specific parental guidance.



‘My dad always told me to save,’ she explains, ‘but nothing more than that. It almost felt like a taboo topic – we weren’t sitting around the dinner table talking about money or anything to do with wealth. I do think cultural influences play a part in that.’

Tanya is now taking positive steps to get herself out of debt for good. She attends Debtors Anonymous – a support group for people with cyclical problems with debt and overspending, and she realises that taking responsibility and changing her behaviour is key.

‘I always thought budgets were evil and horrible,’ says Tanya, ‘but now I realise that they are just a way of telling your money where it’s going in advance of getting it.’

But Tanya says another reason she found herself in debt is because she simply doesn’t earn enough money.

She isn’t addicted to shopping or fancy nights out, it’s simple, small overspending and unexpected expenses that triggered Tanya’s debt spiral – and that stems from earning a salary that doesn’t adequately cover her cost of living.

This isn’t surprising given the ethnicity pay gap that exists in the UK today.

Almost all black and ethnic minority groups of workers are paid less than their white British counterparts.

White British workers earn an average of 3.8% more, and the gap rises to 20% for some ethnic groups. This means that ethnic minority groups affected by this pay gap face a higher risk of getting into debt.


‘It’s clear that the existence of a racial debt gap in itself feeds a much bigger wealth gap between black and white households in the UK,’ explains Ken Okoroafor, personal finance expert and founder of The Humble Penny.

Ken says that in his experience of helping a diverse clientele with their personal finances, there are stacks of ‘unwritten structural inequalities’ that are fuelling this resulting debt gap.

‘Everything from unequal pay to unequal opportunities, driven by a difference in skin colour,’ says Ken.

‘It’s not that black households are not hardworking enough to make more money, or are not smart enough to stay out of “bad” debt and use “good” debt to create wealth instead.

‘It is that, for most of these households, the game is being played from a place of disadvantage. More times than not, there are no other choices available.

‘Understanding the cause and effects of the structural inequalities that feed the debt and wealth gap is a crucial step forward in helping to tackle them.’

Ken says there are two key inequalities at the heart of the debt gap. The first is home ownership.

‘With low income comes the need to seek out credit as a means to get by daily’ (Picture: Ella Byworth for Metro.co.uk)

The home ownership rates for black families is 24% – which is less than half the UK average of 53%.

‘More black families are renting properties, with relative housing costs much higher for renters than homeowners,’ Ken explains.

‘This means that more black families are spending a higher proportion of their incomes on rent.

‘This places black families at a much higher risk of poverty, with many resorting to short term borrowing to support their livelihoods on an ongoing basis.’


The second key inequality that Ken identifies is income and persistent poverty.

Between 2015-2018, black households were most likely out of all ethnic groups to have a weekly income of less than £400.

‘With low income comes the need to seek out credit as a means to get by daily,’ says Ken. ‘This gradually builds up and becomes the norm for a lot of black families.’

Ken believes that the only way to redress this debt gap is to take on the underlying problems that are causing the persistent disparity in wealth between white households and minority households in the UK.

He thinks the best place to start is open, honest conversation that will chip away at the stigma of being in debt.

‘Talking about it openly is a good thing for everyone, rather than having it sidelined,’ he says.

‘It’s my hope that this leads to a gradual change in attitudes and culture, with more resources being dedicated to researching these issues and making them mainstream enough for policy makers to take action.’

Bola Sol is a personal finance guru, and she says there’s another reason why minority communities are finding themselves disproportionately affected by debt.

‘Many of us are first generation in this country, and so we still need to ensure that our parents are OK financially,’ says Bola.

She adds that many children of immigrants feel pressure to achieve academically, but aren’t always equipped to deal with the structural disadvantages that will put them on the back-foot financially.

‘My advice would be to always read beyond what our parents told us to do,’ Bola tells Metro.co.uk.

‘A lot of our parents came here and told us to focus on just getting a good education, getting a good job and you’ll be fine. Now, in terms of the economy, we can see that that is not always the case. Often we’re still struggling to get jobs.

‘It’s important to know that education doesn’t finish with university, which is probably the hardest thing that many of us have to understand. You have to keep reading up on finance throughout your life.

‘What’s the latest with the Help to Buy ISA? What’s the latest with a lifetime ISA? How much is Stamp Duty now? Researching house prices in different areas. There has to be a continuous search for knowledge and a rejection of ignorance.’

She says the pressures that ethnic minorities and immigrant families in this country face should never be underestimated, and that ultimately the debt gap stems from not having the same advantages and opportunities as everyone else.

‘You come to this country, or you’re born here. Maybe you’re born into a less affluent family, and you’re given all these responsibilities,’ she explains.

‘You’re basically told from day one of your life; look, you have to behave properly. You have to set goals for yourself. You have to achieve certain things. And then you have to see your white counterparts in Britain, running around, doing as they wish, knowing they have a financial cushion that we don’t have.’

As we’ve written about this month, there are many different kinds of debt, there’s ‘good debt’ and ‘bad debt’, and we often place an unnecessary amount of social stigma on being in debt.

But the consequences of being in debt can mean your opportunities – personally and professionally – are limited. So, the fact that minority groups are disproportionately affected by debt is a serious concern.

What’s clear is that the debt gap is being perpetuated by the significant racial disparity in wealth in this country, and we will never close one gap without closing the other.

Debt Month This article is part of a month-long focus in November all about debt. Scary word, we know, but we're hoping if we tackle this head on we'll be able to reduce the shame around money struggles and help everyone improve their understanding of their finances. Throughout November we'll be publishing first-person accounts of debt, features, advice, and explainers. You can read everything from the month on the Debt Month tag. If you have a story to share, a topic you want us to cover, or a question that needs answering, get in touch at MetroLifestyleTeam@Metro.co.uk.

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