'Let Us Put Our Moneys Together:' Minority-Owned Banks and Resilience to Crises
56 Pages Posted: 30 Sep 2022 Last revised: 29 Feb 2024
Date Written: February 28, 2024
Abstract
Racial and ethnic minorities disproportionately suffer more severe consequences during economic downturns, having heightened vulnerability in employment and credit. We investigate the role of minority-owned banks in mitigating these challenges, focusing on shared borrower-lender identity, and analyzing how these minority-owned banks affect employment through the Global Financial Crisis and the COVID-19 Crisis. Using multiple econometric specifications including propensity score matching and instrumental variables, our study reveals that communities with higher minority-owned bank market shares experience fewer employment declines through the two crises, thus exhibiting greater resilience. These banks achieve this by increasing lending to small businesses and households during crises. By addressing financial constraints, particularly for minority-owned businesses and households, minority-owned banks contribute to economic resilience, bridging racial gaps, and fostering community employment during times of crisis.
Keywords: minority-owned banks, minorities, shared identity, minority employment, bank credit, crises, economic resilience
JEL Classification: G01, G21, O12, J15, J21
Suggested Citation: Suggested Citation