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Next City: “Mystery Shopper” Experiment Reveals Racial Gap in Small Business Lending

Next City, November 27th, 2017: “Mystery Shopper” Experiment Reveals Racial Gap in Small Business Lending

Earlier this year, in a large metropolitan area of the eastern United States, two men walked into the same bank branch on the same day, each at different times of the day.

They each came in with nearly identical business backgrounds and strong credit histories, and they each asked about a small business loan of $60,000-$70,000 to expand their business and to possibly hire a part-time employee. There were some key differences, like each man’s name and their company names — and their race.

Each was asked about the location of their business — about an hour away from the bank, they both said. The black business owner was then asked why he was in area, and he responded as directed by saying that he was in the area to meet with a potential client. The white business owner was not asked the same question.

That was one of many examples of “micro-aggressions” documented as part of a new study documenting discrimination against black business owners, done in partnership between university business professors and the National Community Reinvestment Coalition, a national network of grassroots groups focused on creating opportunities to build wealth.

 

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Photo Credit: Vitaly

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1 thought on “Next City: “Mystery Shopper” Experiment Reveals Racial Gap in Small Business Lending”

  1. Avatar

    business means make profit but unfair no way banks who thinks they may able to play smart trick strong back play customer ids time change how long they can play next to next generation and time is not as past

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

Complete the form to download the full report: