The Chicago Crusader: Report shows disparities in bank lending

The Chicago Crusader, August 13, 2019: Report shows disparities in bank lending

A new report released recently by Woodstock Institute finds small businesses in lower-income areas and communities of color received fewer bank loans than businesses in higher-income and predominantly white areas across Illinois. The report Patterns of Disparity: Small Business Lending in Illinois examines and compares lending reported by banks under the Community Reinvestment Act (CRA) in the Bloomington, Carbondale, Champaign-Urbana/Danville, Chicago, Metro East, Moline-Rock Island, Rockford, Peoria and Springfield/Decatur regions.

The report builds on Woodstock Institute’s 2017 four-part series of research reports examining small business owners’ access to traditional bank loans in eight major metropolitan areas.

The report provides several recommendations for policymakers, regulators, banks and nonbanks that make loans to small businesses. The report’s top recommendation is that the Consumer Financial Protection Bureau and the Department of Justice conduct an investigation to determine the degree to which racial discrimination is at the root of the disparities identified in this and other similar reports. The report recommends that banks, too, play a role in trying to alleviate the disparities by providing better training of loan officers and by conducting periodic internal mystery shopping. The recommendation cites a 2017 study by the National Community Reinvestment Coalition finding that banks were twice as likely to offer white entrepreneurs help with their loan applications as they were to offer help to Black entrepreneurs.

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