Cassell, Schwan and Schneiberg (2023), “Bank Types, Inclusivity, and Payroll Protection Program Lending During COVID-19”, Economic Development Quarterly, online first. https://doi.org/10.1177/08912424231163485

Abstract

How do differences in bank or lending institution type shape access to credit for small businesses in poor and/or minority communities in the United States? Banking systems are populated by lenders that differ qualitatively in their organizational forms, business models and missions, and that connect—or fail to connect—to small business borrowers and local communities in divergent ways. The authors analyze data on the Paycheck Protection Program and its over 11 million loans made to businesses across the United States to trace how these differences shaped the flow of credit to poor and minority communities. The authors find substantial differences across seven lender types, both in their propensities to avoid or lend to firms in traditionally marginalized communities, and in how much they lend to poor and majority–minority communities relative to their nonpoor and majority White counterparts. From this variety within American banking, the authors identify two potential pathways for more inclusive lending.

The research reported was supported by a National Science Foundation grant #2218044 to PIs Marc Schneiberg and Mark Cassell and a Kent State Summer Research grant. Michael Schwan would like to thank the American Institute for Contemporary German Studies at Johns Hopkins University, Washington, DC for a 2021 AICGS-DAAD Research Fellowship and the American Council on Germany, New York City, NY for the 2021-22 DZ BANK Fellowship.