Neighborhood Demographics and the Allocation of Paycheck Protection Program Funds

13 Pages Posted: 2 Feb 2021

See all articles by Paul Calem

Paul Calem

Bank Policy Institute

Adam Freedman

Bank Policy Institute

Date Written: December 22, 2020

Abstract

Neighborhoods with a high percentage of racial and ethnic minorities received significantly more Paycheck Protection Program dollars per small business than other areas, BPI’s analysis demonstrates. In particular, the nation’s largest banks — those with more than $50 billion in assets — robustly channeled PPP credit into communities with a high percentage minority population. The pandemic relief program also directed a relatively large share of funds to neighborhoods encompassing Opportunity Zones as designated by the Treasury Department. The research shows a neighborhood made up entirely of Opportunity Zones that is in the top fifth of percent minority population would receive about 50 percent more PPP dollars per small business establishment than an area without those zones and with the bottom fifth percent minority population, according to BPI’s estimates.

The analysis utilizes detailed loan-level data released by the SBA, merged at the ZIP code level with data from the U.S. Census Bureau and the Treasury Department, to examine the distribution of PPP funds in relation to the percent minority population of neighborhoods and presence of an Opportunity Zone. This is the first national study of which we are aware that analyzes the distribution of PPP funds across neighborhoods within counties.

Keywords: Paycheck Protection Program, Small Business Lending, Financial Inclusion, COVID-19

JEL Classification: G20, G28

Suggested Citation

Calem, Paul and Freedman, Adam, Neighborhood Demographics and the Allocation of Paycheck Protection Program Funds (December 22, 2020). Available at SSRN: https://ssrn.com/abstract=3776794 or http://dx.doi.org/10.2139/ssrn.3776794

Paul Calem (Contact Author)

Bank Policy Institute ( email )

600 13th Street NW
Washington, DC 20005
United States
2025892455 (Phone)

Adam Freedman

Bank Policy Institute ( email )

600 13th Street NW
Washington, DC 20005
United States

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