Using ethnicity as our point of focus, we consider the dynamics of the demand for bank loans, and the willingness of banks to supply them, as the UK economy entered the Covid-19 pandemic in early 2020. Using the most recent 10 quarterly waves of the SME Finance Monitor survey we consider whether ethnicity of the business owner impacts on the decision to apply for bank loans in the first instance. We then question whether ethnicity influences the banks decision to meet or reject the request for a bank loan. Our pre-Covid results show that there were no ethnic differences in loan application and success rates. During Covid-19 both white and ethnic business loan application rates rose significantly, but the scale of this increase was greater for ethnic businesses. The presence of government 100% guaranteed lending also increased general loan success rates, but again the scale of this improvement was greater for ethnic businesses.
Professor Marc Cowling is Professor of Business Economics and Head of Research and Innovation in the College of Business, Law, and Social Sciences at the University of Derby. Marc Cowling is an expert advisor to The World Bank, Inter-American Development Bank, and the European Union DG Regio on these precise issues and is ranked amongst the Top 7% of research economists in the world. He is the most highly published and cited academic in the UK on issues relating to SME finance, the use of public policy instruments to support SME development, and evaluation methodologies which reflects his 30 years of experience researching in these areas.
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