LOGAN – Utah State University research shows minority and women applicants receive poorer treatment and more scrutiny from bank lending officers when seeking small business loans.
Dr. Sterling Bone is an Associate Professor of Marketing at USU’s Huntsman School of Business and he describes what he and his colleagues learned.
”The experience of a small business operator differs depending on if they’re a minority or if they’re women-owned business,” he explained. “We find that the difference in terms of how they are treated in terms of the information they’re asked to provide as part of a loan application for a small business loan, the level of service, encouragement, the information that they’re asked and information they’re provided on products differs.”
Dr. Bone said he and his colleagues are looking for different ways they can “de-bias” the employees who are servicing loan applications.
“And we all have stereotypes and biases, it’s part of our human nature,” he added. “But we’re trying to have employees aware and be able to recognize where they might be differing in how they serve various markets.
“One possible solution is to utilize technology, where you can remove race and gender from the equation, in terms of how decisions are rendered or how information is being provided in terms of small business loans.”
Dr. Bone and his colleagues Dr. Jerome Williams of Rutgers and Dr. Glenn Christensen of BYU studied 10 years of data on small business lending to analyze bank lending practices from 2008 to 2018. They also used mystery shoppers who met with bank lending officers to examine differences in the customer service experiences.