Did Biden-Harris’s reforms on the Paycheck Protection Program reduce racial disparities in lending?

Stefano Filomeni () and Francesca Querci ()
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Stefano Filomeni: Finance Group
Francesca Querci: University of Genoa

Review of Quantitative Finance and Accounting, 2025, vol. 64, issue 4, No 10, 1783-1808

Abstract: Abstract Introduced under the Trump-Pence Administration, the Paycheck Protection Program (PPP) provided short-term relief loans to small American businesses during the peak of the Coronavirus pandemic. The initial design of the PPP faced significant criticism from researchers due to racial disparities, among other issues, in its lending process. Minority groups received smaller PPP loan amounts during the original two tranches released in 2020. To increase equitable access for all, in February 2021 the Biden-Harris Administration enforced swift changes to the initial PPP aimed at favouring access to PPP loans for minority-owned small businesses that had been disadvantaged by the program’s original design under the Trump-Pence Administration. By exploiting a granular dataset of 1,759,270 PPP loans granted between Q2 2020 and Q2 2021 and by implementing a difference-in-differences approach (DID), this paper provides novel evidence on the effectiveness of the Biden reforms in reducing racial disparities within the Paycheck Protection Program. Indeed, we observe a significant increase in the volume of PPP loans granted to minority-owned businesses in the period following the Biden-Harris Administration’s reforms. Furthermore, among different minority groups, the reforms appear most effective for Native American minority groups (including American Indians, Alaska Natives, Native Hawaiians and/or Other Pacific Islanders), followed by Black Americans and Asian business owners. Our findings offer novel contributions to the existing literature on institutional discrimination, particularly regarding the initial PPP design. Our findings are especially valuable for policy makers as they underscore the importance of radical changes in addressing racial disparities. Our paper also offers evidence of how a public credit guarantee program should be designed to empower and promote economic inclusion for all, regardless of ethnicity, aligning with the UN’s Sustainable Development Goals.

Keywords: Paycheck Protection Program; Lending; Minorities; Institutional discrimination; Racial disparities; G01; G21; G28; J15 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11156-024-01348-3

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