Using Technology to Tackle Discrimination in Lending: The Role of Fintechs in the Paycheck Protection Program
AEA Papers and Proceedings
vol. 112,
May 2022
(pp. 296-98)
Abstract
We assess the role of fintech firms in loans made through the Paycheck Protection Program (PPP), a US government policy response to the COVID-19 pandemic that provided loans to small businesses. We argue that fintech firms' reliance on technology rather than relationship-banking approaches used by traditional banks helps to address discrimination in lending, at least in part. Using newly released data on the PPP program, we find support for our arguments: while Black-owned businesses received loans that were approximately 50 percent lower than observationally similar White-owned businesses, the effect narrows considerably when fintechs are allowed to provide loans.Citation
Atkins, Rachel M.B., Lisa Cook, and Robert Seamans. 2022. "Using Technology to Tackle Discrimination in Lending: The Role of Fintechs in the Paycheck Protection Program." AEA Papers and Proceedings, 112: 296-98. DOI: 10.1257/pandp.20221030Additional Materials
JEL Classification
- E63 Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G23 Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- G28 Financial Institutions and Services: Government Policy and Regulation
- J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination