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

Minority-owned banks have a mission to promote economic wellbeing 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 2006-2020. 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 if all US 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