The Richmond Fed’s recent report, Community Development Financial Institutions (CDFIs) by the Numbers, provides findings from the 2019 Federal Reserve CDFI Survey. CDFIs are specialized financial institutions operating in markets that are underserved by traditional financial institutions.
Better-qualified black and Hispanic testers who shopped for small business loans at Los Angeles area bank branches were treated worse than less qualified white testers, a new study found.
The study, from the National Community Reinvestment Coalition (NCRC), also found steep declines in government-backed lending to black business owners between 2008 and 2016.
Nonprofit research organization MDRC and Grameen America, Inc., the fastest growing nonprofit microfinance organization in the United States, today released the early results of a research study, Microfinance in the United States: Early Impacts of the Grameen America Program. The study, funded by Robin Hood, is the most rigorous, independent, third-party evaluation of group microfinance in the United States, assessing Grameen America’s program, a microfinance model that provides small loans to low-income women entrepreneurs in the United States seeking to launch or expand small businesses.
FUND Community Institute continues to engage in dialogue and analysis around data from its landmark study, Perception versus Reality: Women and Change in the CDFI Industry (available at www.fundci.org). This month, we examined the prevalence of women as leaders of CDFIs, and how this role may have changed since the founding of the industry. The findings suggest that women are playing leadership roles in large numbers (although not at all sizes and types of CDFIs) and that the organizations they head up may be leading the way in fostering more inclusive, family-friendly work environments.
Nonemployer firms are important to the United States’ economy, comprising 81% of all small businesses, employing 17% of the American workforce, and generating $1.2 trillion in annual sales. While previous research has explored why individuals seek self-employment or what conditions drive nonemployers to become employer firms, less is understood about the financial experiences and challenges of nonemployers—namely, whether or not nonemployers are succeeding financially.
The Federal Reserve Bank of Richmond has researched developments in the community development financial institution (CDFI) industry on a regular basis since the 2009 inaugural launch of the biennial Survey of CDFIs in the Southeast.
The contribution and importance of small businesses to the nation’s economy is well-researched and understood; for minority-owned small businesses, the impact and significance are even greater. Not only do minority-owned small businesses help drive job creation, raise wages, and elevate better standards of living, they also offer a critical pathway for Black and Hispanic populations to close the racial wealth gap. An increase in entrepreneurship among people of color can create income for both entrepreneurs and the people of color who work at the businesses. Yet, starting a new firm or growing an established business requires capital, and Black and Hispanic businesses have higher barriers to accessing capital.
This National Consumer Law Center report examines the annual percentage rate (APR), including both interest and fees, allowed in each state and the District of Columbia for a $10,000 five-year loan. An APR cap is the single most effective step states can implement to deter abusive lending and ensure that families are not caught in a debt trap that’s nearly impossible to escape.
Given the relationship between a small business’s access to financing and its outcomes, and given the growing share of minorities in the U.S. population, it is important that creditworthy firms and entrepreneurs, irrespective of race or ethnicity, are able to secure adequate financing to achieve growth and success. Data from the Federal Reserve System’s 2016 Small Business Credit Survey allow for a closer examination of the experiences of minority-owned small businesses in applying for and obtaining financing.
The growth and survival of U.S. small businesses depend on how depository lending institutions and other financial intermediaries are attending to the credit needs of small firms. The financing and credit needs of small firms vary by business size, type of lender, business owner, and age of the business. Thus, all these components tend to contribute to the challenges small firms face when seeking access to credit. Nonetheless, 99.7 percent of firms with paid employees are small businesses, employing 47.5 percent of the private workforce in 2015 (SBA Advocacy, 2018). These tenacious businesses accounted for roughly 40 percent of U.S. private nonfarm output (Petkov, 2016), and for 63 percent share of net jobs between 2010 and 2016 (SBA Advocacy, 2017). This study predominantly uses public sources of information on U.S. banks to analyze the patterns in small business lending by evaluating aggregate data of depository lending institutions.