What Drives Racial Minorities to Use Fintech Lending? Evidence from a Structural Estimation

117 Pages Posted: 27 Oct 2021 Last revised: 18 Oct 2022

See all articles by Celine Yue Fei

Celine Yue Fei

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School; University of North Carolina (UNC) at Chapel Hill - Frank Hawkins Kenan Institute of Private Enterprise

Date Written: October 24, 2021

Abstract

Using a national sample of Paycheck Protection Program restaurants, I find evidence of a more negative minority-non-minority rating gap for fintech lenders, which suggests taste-based discrimination of Becker (1957). To quantify various channels' magnitude, I estimate an empirical matching model where I find that fintech-minority matches generate more value than other matches. Moreover, this fintech-minority additional value channel is the most important channel in explaining racial disparities in fintech usage. Disabling this channel reduces minority borrowers' usage of fintech by approximately 70%. Disabling lending relationships and bank branch channels only reduces minority borrowers' usage of fintech by less than 2%.

Keywords: Racial Barriers, Minority-owned Businesses, Fintech, Paycheck Protection Program, Small Business Lending, Bank Lending, Nonbank Lending

JEL Classification: D63, G2, G21, G28, H25, M14

Suggested Citation

Fei, Celine Yue, What Drives Racial Minorities to Use Fintech Lending? Evidence from a Structural Estimation (October 24, 2021). Available at SSRN: https://ssrn.com/abstract=3949148 or http://dx.doi.org/10.2139/ssrn.3949148

Celine Yue Fei (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

University of North Carolina (UNC) at Chapel Hill - Frank Hawkins Kenan Institute of Private Enterprise ( email )

Campus Box 3440, The Kenan Center
Chapel Hill, NC 27599-344
United States

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