Oct 20, 2020 - Economy & Business

"Corporate redlining" has cost Black neighborhoods millions

Illustration of a hand in a business suit drawing a red line in front of a dollar sign
Illustration: Sarah Grillo/Axios

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.

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.

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