The State of Minority- and Women- Owned ... - Cleveland.com

Statistical Disparities in Capital Markets
though not in Column (4). The ENC indicator is not significant in any of the specifications, nor
are the interaction terms between ENC and race, ethnicity, or gender.
4. Differences in Interest Rates, Credit Card Use, and Failure to Apply for Fear
of Denial
Tables 6.21 through 6.23 provide confirmation from the 1998 survey of a number of other results
from the 1993 survey reported above.
Table 6.21, which is similar to Tables 6.13 and 6.14, finds that conditional on obtaining a loan,
African American-owned firms are charged a higher price for their credit—on average 1.06
percentage points nationally. However, African Americans in the ENC appear to pay less for
their loans than African Americans nationally.
Table 6.22, which is similar to Table 6.15, shows that African American-owned firms are much
more likely not to apply for a loan for fear that they will be denied. Based on all of the foregoing
evidence, this is perhaps a sensible decision—if and when they do apply they are almost twice as
likely as nonminority male-owned firms to have their application rejected. This is evident in the
ENC as well and also in the construction and construction-related industries. There is some
evidence of this phenomenon for Hispanics nationally as well.
Finally, Table 6.23, which is comparable to Tables 6.11 and 6.12, suggests that when the
financial institution does not know the race or ethnicity of the applicant—as is often the case in
an application for a credit card—there are no differences by race or ethnicity in the usage for
business purposes of either business or personal credit cards. There was also no evidence of race
effects in the use of credit cards in the ENC division (rows 3 and 4) or in construction (results
not reported here).
Our confidence in the strength of our findings from the 1993 NSSBF survey is elevated by these
findings from the 1998 SSBF survey, which strongly confirm the earlier results. Unfortunately,
African Americans continue to be discriminated against in the market for small business credit.
By 1998, this discrimination appeared to be on the increase for African Americans and to be
expanding to impact other minority groups, such as Hispanics, as well. This is an important
market failure, and one that governments such as the City of Cleveland cannot ignore if they are
to avoid passive participation in a discriminatory market area.
NERA Economic Consulting 221