"Corporate redlining" has cost Black neighborhoods millions
The number of SBA loans to Black-owned businesses has decreased 84% from its peak before the 2008 financial crisis, according to a new report from the Business Journals, citing lending data from the agency’s flagship 7(a) program. Overall 7(a) loans declined 53% during that time.
Why it matters: The precipitous decline in loans to Black-owned businesses, in particular, was despite 48% growth in the economy, a 101% increase in bank deposits and an 82% jump in commercial loans, the report notes.
Where it stands: "White neighborhoods receive roughly twice as much per person in small-business loans compared with Black neighborhoods," the data show.
- "Likewise, majority-white neighborhoods, on average, receive roughly twice as many small-business loans per capita."
Details: The country’s four largest banks — Citi, Bank of America, JPMorgan and Wells Fargo — which hold roughly 35% of the nation’s deposits, made 91% fewer 7(a) loans to Black-owned businesses in 2019 than in 2007.
How it works: Since banks are prohibited from collecting data on the race and ethnicity of borrowers, the reporters interviewed Black business owners in each of the company’s 44 markets and conducted a demographic analysis of small-business lending using census tracts.
The big picture: Experts say the data underscore the way bank and government policy have exacerbated racial disparities in wealth generation, homeownership rates, educational attainment and other measures of financial equality.
- Economists at Citigroup recently found that anti-Black racism had cost the economy $16 trillion since 2000.
The last word: “I don’t think most Americans understand the severity of the problem,” Orv Kimbrough, CEO of Midwest BankCentre, said in the report.
- “I call it corporate redlining.”