WASHINGTON–A new study from the National Bureau of Economic Research has found businesses in lower income markets primarily turned to fintechs to apply for Paycheck Protection Program loans from the SBA.
“We find that fintech is disproportionately used in ZIP codes with fewer bank branches, lower incomes, and a larger minority share of the population, as well as in industries with little experience in small business lending,” the National Bureau of Economic Research said. “Its role in PPP provision is also greater in counties where the economic effects of the COVID-19 pandemic were more severe.”
To understand whether these differences arise because certain groups are switching from traditional banks to fintech or if they are being newly served by fintech, the NBER said it studied whether fintech-enabled PPP loans were more widespread in areas with fewer traditional loans.
“Using the predicted responsiveness of traditional banks to the program as an instrument, we show that borrowers were more likely to get a fintech-enabled PPP loan if they were located in ZIP codes where local banks were unlikely to originate PPP loans,” the NBER said.
For the full report go here.