Racial Bias Skewed Small Business Relief Lending, Study Says
The New York Times
Black business owners were more likely to get Paycheck Protection Program loans from online lenders than banks, according to new research.
From the very start of the Paycheck Protection Program last year, it was clear that minority entrepreneurs, especially Black business owners, struggled more than white borrowers to find a willing lender. A new research project indicates that the problem was particularly pronounced at smaller banks — and human bias appears to be the main reason.
The majority of Black borrowers who received aid from the $800 billion relief program got their loan from a financial technology company, not a bank, according to an economic working paper released Monday. The skew toward those so-called fintechs was far sharper among Black borrowers than any other racial group.
“I was taken aback by the striking disparity — it was a surprising and unexpected fact, and we wanted to figure out why,” said Sabrina T. Howell, an assistant professor of finance at New York University’s Stern School of Business and the lead author of the paper.
