But Sergey Chernenko, associate professor of finance at the Krannert School of Management at Purdue University, who was not involved in Dr Howell’s research, said the new paper aligned with his own findings on the discrepancies based on race in Paycheck Protection Program Loans. TO an economic conference next month he will present a document who concluded that black-owned businesses were disproportionately excluded from the relief program.

“This fits and complements our finding very well that minority-owned businesses were less likely to get loans due to racial bias, and to the extent that they get them, they are more likely to get them from fintechs. only banks. Said Dr Chernenko.

The government designed the paycheck protection program to be virtually risk-free for lenders: they would advance small businesses up to $ 10 million – loan amount was based on headcount and payroll of the business – and the government would then repay the loans. in full for business owners who followed the rules. If the borrower defaults, the government would still reimburse the lender. In theory, any lender should have been prepared to lend to any qualified candidate.

It didn’t work that way. Many banks limited their loans to their current customers, which was a barrier for homeowners who lacked checking accounts or loans. But even black homeowners who had accounts were significantly more likely than those of other races to end up with a fintech loan, Dr. Howell and his co-authors found.

The effects were strongest in areas of the country with higher levels of racial animosity, which the study measured with variables such as the extent of local segregation in housing and the prevalence of Google searches at racial character.

Researchers tested – and found little evidence – other common hypotheses about the program’s racial lending disparities. Even after controlling for variables such as applicant’s zip code, industry, recent income, affinity for online lenders, loan amount, and date approved, the gap persisted.

This was not the case, they found, at the country’s largest banks. After researchers vetted these items, black-owned businesses appeared to be just as likely as any to get a loan from Bank of America, Citibank, JPMorgan Chase, and Wells Fargo.