1、Journal of Financial Economics 146(2022)90118 Contents lists available at ScienceDirect Journal of Financial Economics journal homepage: Can FinTech reduce disparities in access to finance?Evidence from the Paycheck Protection Program Isil Erel a,b,c,Jack Liebersohn d,a The Ohio State University,Dep
2、artment of Finance,Columbus,43210 OH,USA b NBER,United States c ECGI,Belgium d University of California,Irvine,Department of Economics,3151 Social Sciences Plaza,Irvine,CA 92617,USA a r t i c l e i n f o Article history:Received 20 November 2020 Revised 16 May 2022 Accepted 17 May 2022 Available onl
3、ine 27 July 2022 JEL classification:E6 G21 G23 G28 G38 H25 Keywords:Financial technology PPP Coronavirus Financial inclusion Nonbank Online bank a b s t r a c t New technology promises to expand the supply of financial services to small businesses poorly served by banks.Does it succeed?We study the
4、response of FinTech to financial ser-vices demand created by the introduction of the Paycheck Protection Program.FinTech is disproportionately used in ZIP codes with fewer bank branches,lower incomes,and more minority households,and in industries with fewer banking relationships.It is also greater i
5、n counties where the economic effects of the COVID-19 pandemic were more severe.Sub-stitution between FinTech and banks is economically small,implying that FinTech mostly expands,rather than redistributes,the supply of financial services.2022 Elsevier B.V.All rights reserved.1.Introduction The COVID
6、-19 pandemic created“a crisis like no other,”with a global economic contraction of 3.1 percent in 2020.1 To support small businesses through the crisis,the U.S.government created the Paycheck Protection Program(PPP),which offered guaranteed and potentially-forgivable small businesses loans.2 With$66
7、9 billion to be disbursed over a period of a few months in 2020,the PPP was Corresponding author.E-mail addresses:erelfisher.osu.edu(I.Erel),cjlieberuci.edu(J.Liebersohn).1 World Economic Outlook Update,International Monetary Fund,Octo-ber 2021.unprecedented in speed and scale.3 To meet the extraord
8、i-nary demand for the loans,the Small Business Administra-tion(SBA)made the last-minute,first-time-ever decision to approve a number of non-traditional lenders special-izing in Financial Technology(FinTech)to distribute PPP funds directly alongside traditional banks.4 What effect did allowing FinTec
9、hs to participate have on the provision 2 PPP is an important part of the Coronavirus Aid,Relief,and Economic Security(CARES)Act:See https:/www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program asofMarch 2022.3 For comparison,the 7(a)program,which is SBA s main le
10、nding pro-gram,has guaranteed between$10 billion and$20 billion per year since 2010.https:/doi.org/10.1016/j.jfineco.2022.05.004 0304-405X/2022 Elsevier B.V.All rights reserved.群内每日免费分享5份+最新资料 群内每日免费分享5份+最新资料 300T网盘资源+4040万份行业报告为您的创业、职场、商业、投资、亲子、网赚、艺术、健身、心理、个人成长 全面赋能！添加微信，备注“入群”立刻免费领取 立刻免费领取 200套知识地
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12、cs 146(2022)90118 of financial services and on financial inclusion for small businesses?Our paper answers this important question.This multi-billion-dollar“experiment”to approve Fin-Tech lenders with the exogenous demand shock created by the COVID-19 crisis and the PPP program provide a unique oppor
13、tunity to study how FinTech changes the supply of fi-nancial services.Non-traditional and FinTech lenders are a relatively new but rapidly growing phenomenon.How they impact the commercial credit market will have important consequences for small businesses credit access,especially in ZIP codes with
14、limited access to the banking system.We find that FinTech is disproportionately used in ar-eas with fewer bank branches,lower incomes,and a larger share of the minority population.When we focus on ar-eas with bank branches and study substitution between FinTech lenders and traditional banks,we find
15、that the substitution is economically small,indicating that FinTech lenders are reaching new types of customers i.e.,small businesses in areas underserved by the banks.Why was the decision to approve FinTech lenders un-usual?Although the role of FinTech has increased in the financial services indust
16、ry,allowing financial intermedia-tion by FinTech lenders remains controversial.5 Regulators have argued that FinTech lenders require more regulation(Brooks and Calomiris,2020);and lawmakers have been particularly concerned about whether FinTechs act in a more discriminatory way than traditional bank
17、s.6 Yet Fin-Techs have argued that they are less discriminatory be-cause they do not rely on relationships or face-to-face in-teractions with customers.7 Given bank regulators ongoing concerns on racial and income disparities in access to fi-nance,our findings have implications for how FinTech ex-pa
18、nsion affects the small business lending market,where SBA-backed loans have material importance.Our first question is whether FinTechs provided more access to PPP loans in areas where these loans were needed more.Traditional financial institutions(i.e.,deposi-tory institutions)have been shown to be
19、inefficient in their allocation of financial services across customers of differ-ent sizes,locations,and demographics(Philippon,2015;Harvey et al.,2021).And,in the particular case of allocat-ing PPP loans,banks have been heavily criticized by the popular media for favoring their relationship borrowe
20、rs at the expense of smaller firms that were hit hardest by the pandemic.8 Granja et al.(2020)show that during Phase 1 of the PPP program,banks did not allocate credit to regions where it was needed.We show that at this time,FinTech lenders provided more PPP loans than traditional banks to 4 Accordi
21、ng to Non-Federally Regulated Lender laws,FinTech lenders with a state banking license cannot participate in SBA s loan programs unless they partner with a qualifying bank.5 See,e.g.,Buchak et al.(2018),Chernenko et al.(2019),Gopal and Schnabl(2020),Stulz(2019),Liebersohn(2020),and Gopal and Schn-ab
22、l(2020).6 https:/cleaver.house.gov/sites/cleaver.house.gov/files/Fintech _ Report _ 1.pdf;https:/www.occ.treas.gov/news-issuances/news-releases/2020/nr-occ-2020-112.html as of March 2022.7 See https:/ of March 2022.8 E.g.,“Banks Gave Richest Clients Concierge Treatment for Pandemic Aid,”NYT,April 20
23、20.areas with a worse economic shock.Studying Phase 2 of the program leads to interesting findings as well:While both traditional banks and FinTech lenders provided more PPP loans to the areas with a higher COVID-19 case rate and more unemployment claims,the response of the Fin-Tech lenders was abou
24、t ten times larger.Second,we study whether FinTech lenders provided PPP loans to businesses with limited previous access to the banking system relative to traditional banks.Survey ev-idence shows that minority-owned small businesses are less likely to access credit through a relationship with a bank
25、 and are less satisfied with the relationships they do have(Federal Reserve Bank of Atlanta Small Business Credit Survey,2019).Minority-owned small businesses are also more reliant on SBA loans than white-owned busi-nesses,even though pure FinTech lenders are currently not allowed to participate in
26、this market.Comparing borrowers located in the same county,we show that borrowers in ZIP codes with few bank branches,lower incomes,and a larger non-white share of the population were more likely to get a loan from a FinTech lender.Moreover,relative to Fin-Tech lenders,traditional banks provided a h
27、igher fraction of PPP loans to firms in industries with stronger ties to the banking system.Our findings show that banks base their PPP loans on past relationships,and they are geographi-cally constrained by the location of their physical branches,unlike online FinTech lenders,where prior relationsh
28、ips are less relevant.Third,we ask whether FinTech lenders“expand the pie”of financial services or merely redistribute it.Even for borrowers that could access traditional banks,Fin-Techs lenders may be quicker or more convenient,as Buchak et al.(2018)show for mortgage loans,especially during the ear
29、ly phases of the PPP program.To study whether small businesses substitute to FinTech lenders when local banks are less responsive to their demand for PPP loans,we use an approach that is akin to a shift-share(“Bartik”)design to predict local bank responsiveness independent of the magnitude of the CO
30、VID-19 shock.We find that borrowers respond to a lack of bank PPP provi-sion by somewhat substituting to FinTech lenders.But this substitution,which is significant statistically,is only about 27 percent of the decrease in traditional bank lending.Overall,we show that FinTech lenders expanded the acc
31、ess to the PPP program but did not fully close the gap in financial services across regions where banks operate.It is important to note that the incentives in play for PPP loan origination are different from standard credit as PPP loans are potentially forgiven.Nevertheless,our results speak to the
32、differences in the use of banking relationships as measured by branch networks and new technology to allocate government-backed credit,which is an impor-tant part of small business borrowing.Therefore,our find-ings have important implications for the potential effects of allowing(more)FinTech lender
33、s to participate in any type of fully or partially-guaranteed government loan pro-gram(e.g.,SBA 7a loans).9 Allowing greater FinTech partic-9 See,e.g.,Craig et al.(2008)showing positive effects of SBA-backed loans on employment in low-income areas.91 I.Erel and J.Liebersohn Journal of Financial Econ
34、omics 146(2022)90118 ipation has the potential to increase the efficiency of small business lending even during non-crisis periods.2.Literature review Recent literature investigates various aspects of the PPP program.Our paper is the first one to focus on how Fin-Tech lenders affected financial acce
35、ss to PPP loans by small businesses in areas traditionally underserved by banks and for borrowers with few connections to banks.Our findings are also related to research on the differences between Fin-Tech lenders and banks,and more broadly,on how non-bank lenders respond to shocks.Our paper is most
36、 related to two recent complemen-tary papers focusing on racial disparities in access to PPP loans.Chernenko and Scharfstein(2021)focus on the role of racial bias.They show that Black-and Hispanic-owned restaurants in Florida were significantly less likely than white-owned ones to get PPP loans,even
37、 controlling for bank networks.Howell et al.(2020)study the role of au-tomation.They show that FinTech lending and switching to automated lending processes by traditional banks help in-crease access to the PPP loans by Black-owned businesses.Differently from these papers,our work focuses on how FinT
38、ech helped close the gap in access to PPP credit in ar-eas with fewer bank branches and a larger share of the minority population.We contrast FinTechs with traditional banks,which rely on existing branch networks to supply PPP loans.Several papers have focused on who received PPP loans,especially in
39、 the first few weeks of the program.While these papers include FinTechs in their sample alongside other lenders,most do not show that FinTechs behaved dif-ferently than banks,as we do.Li and Strahan(2020)focus on the role of close relationships with banks for access-ing the PPP loans.Balyuk et al.(2
40、021)also find that bank-ing relationships matter:larger borrowers received the PPP funds early,and this preferential access by larger bor-rowers concentrates is most pronounced at top-10 banks.Cororaton and Rosen(2021)study public firms that got funding through the PPP and received significant media
41、 outrage as a result.Other papers have asked whether the program was effective at helping borrowers who needed it most.Granja et al.(2020)show that banks,in the first phase of the program,targeted regions that were less ad-versely affected by the pandemic and study its future em-ployment effects.10
42、Our paper also contributes to the literature on the dif-ferences between non-bank lenders and traditional banks.Beyond the setting of the COVID-19 pandemic,several papers study loan supply following natural disasters.Morse(2011)shows that payday lenders facilitate ac-cess to finance following disast
43、ers,and Cortes and Stra-han(2017)show that traditional banks reallocate capital across regions.To the best of our knowledge,there are 10 We also contribute to a broader literature studying the consequences of the COVID-19 crisis on financial and capital markets(see,e.g.,Green and Loualiche,2021;Fahl
44、enbrach et al.,2020;Pastor and Vorsatz,2020;Halling et al.,2020;Falato et al.,2021;Bartik et al.,2020;Faulkender et al.,2020;Lynch,2021).no papers focusing on the disaster response of FinTechs in particular(and how it differs from banks).Beyond the setting of disasters,research on FinTechs has found
45、 that FinTech lenders process loan applications faster than tradi-tional banks,improving the efficiency of financial interme-diation in mortgage markets,but they do not necessarily serve underserved borrowers with low access to finance.11 Gopal and Schnabl(2020)show the increasing importance of FinT
46、ech lending for small businesses,where the sam-ple includes asset-backed loans to purchase durable goods.Unregulated finance companies have traditionally been key players in this market,and their role has increased even more after the 2008 Financial Crisis,as shown by the authors.12 Balyuk et al.(20
47、20)study commercial loans through online lending platforms and show the importance of banking relationships for small businesses.In a setting where there is no credit assessment based on soft informa-tion,we find that FinTech lenders reach a wider borrower base while banks remain constrained within
48、their branch networks.Ours is the first paper to focus on how FinTechs can provide financial services to small businesses in under-served areas,including neighborhoods with a high share of the minority population and low median incomes.Beyond the PPP program,our findings on“expanding the pie”of acce
49、ss to PPP loans contribute to the litera-ture on financial inclusion.This literature has mostly fo-cused on households,but a few papers have also stud-ied small businesses in minority and low-income neigh-borhoods.13 Begley et al.(2020)and Chatterji and Sea-mans(2012)show how different types of regu
50、lations on SBA loans and on credit cards can hinder financial access for minority-owned small businesses.We focus on a differ-ent source of credit than these papers,but like these pa-pers,we find that deregulating credit supply has the great-est impact on borrowers with poor access to the traditiona
