"Let Us Put Our Moneys Together”: Minority-Owned Banks and Resilience to Crises

63 Pages Posted: 29 Jun 2023

See all articles by Allen N. Berger

Allen N. Berger

University of South Carolina - Darla Moore School of Business

Maryann P. Feldman

Arizona State University (ASU)

W. Scott Langford

School of Public Affairs - Arizona State University

Raluca A. Roman

Federal Reserve Bank of Philadelphia

Date Written: June, 2023

Abstract

Minority-owned banks have a mission to promote economic well-being in their communities. In particular, specialization in lending based on a central mechanism of shared-minority identity can yield an advantage in serving community needs through times of financial and economic crises. To test this proposition, we analyze individual banks in their local market context from 2006 to 2020. Results suggest minority-owned banks improve economic resilience in their communities during the global financial crisis (GFC) and the COVID-19 crisis through increased small business and household lending, but fewer benefits are found during other phases of the business cycle. Our results are robust and stand up to treatments of identification concerns, including propensity score matching (PSM) and instrumental variables (IV). Our results imply that if all U.S. banks behaved in a manner consistent with minority-owned banks through the GFC, at least 1.9 million more minority jobs would have been maintained and at least $50 billion more in credit would have been available to small businesses on an annual basis. These findings are consistent with predictions of the economic resilience literature but not those of the finance-growth nexus literature.

Keywords: minority-owned banks, minority employment, community banking, crises, economic resilience, small business credit, household credit, shared-minority identity

JEL Classification: G01, G21, O12, J15, J21

Suggested Citation

Berger, Allen N. and Feldman, Maryann P. and Langford, W. Scott and Roman, Raluca A., "Let Us Put Our Moneys Together”: Minority-Owned Banks and Resilience to Crises (June, 2023). FRB of Philadelphia Working Paper No. 23-13, Available at SSRN: https://ssrn.com/abstract=4492310 or http://dx.doi.org/10.21799/frbp.wp.2023.13

Allen N. Berger (Contact Author)

University of South Carolina - Darla Moore School of Business ( email )

1014 Greene St.
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

Maryann P. Feldman

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States

W. Scott Langford

School of Public Affairs - Arizona State University ( email )

411 N Central Ave #750
Phoenix, AZ 85004
United States
2527176016 (Phone)

HOME PAGE: http://www.scottlangford.us/

Raluca A. Roman

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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