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Small Business Economics

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05.07.2021

Discrimination in lending? Evidence from the Paycheck Protection Program

verfasst von: Rachel Atkins, Lisa Cook, Robert Seamans

Erschienen in: Small Business Economics | Ausgabe 2/2022

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Abstract

We assess the role of race in loans made through the Paycheck Protection Program (PPP). The PPP program, created by the U.S. government as a response to the Covid-19 pandemic, provides loans to small businesses so they can keep employees on their payroll. We argue that the historical record and PPP program design choices made it likely that many Black-owned businesses received smaller PPP loans than White-owned businesses. Using newly released data on the PPP program, we find that Black-owned businesses received loans that were approximately 50% lower than observationally similar White-owned businesses. The effect is marginally smaller in areas with more bank competition and disappeared over time as changes to the PPP program were implemented allowing for entry by fintechs and other non-traditional lenders.

Plain English Summary

We find that Black-owned businesses received loans through the Paycheck Protection Program that were approximately 50 percent lower than White-owned businesses with similar characteristics. However, this difference in loan size shrank over time as more non-bank lenders such as fintechs were allowed to participate in the program and began approving PPP loans. Loan size differences were also slightly smaller in zip codes containing a larger number of bank branches. These results are consistent with prior research which shows lending discrimination by commercial banks against Black borrowers. It is also consistent with studies showing that greater access to and competition among banks and other lenders can reduce discrimination. In light of these results we recommend that policy makers account for existing racial inequalities within banking or other systems in their program design to produce more equitable outcomes.

Vorheriger Artikel Did the Paycheck Protection Program and Economic Injury Disaster Loan Program get disbursed to minority communities in the early stages of COVID-19?

Nächster Artikel The determinants of bootstrap financing in crises: evidence from entrepreneurial ventures in the COVID-19 pandemic

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Titel: Discrimination in lending? Evidence from the Paycheck Protection Program
verfasst von: Rachel Atkins
Lisa Cook
Robert Seamans
Publikationsdatum: 05.07.2021
Verlag: Springer US
Erschienen in: Small Business Economics / Ausgabe 2/2022
Print ISSN: 0921-898X
Elektronische ISSN: 1573-0913
DOI: https://doi.org/10.1007/s11187-021-00533-1

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