Black borrowers have faced higher hurdles to getting loans, even before the Great Recession’s infamous credit crunch. But one subsection of the community has managed to evade financial institutions’ discriminatory practices, a new study from the University of Iowa shows.
According to the study’s lead author, University of Iowa sociologist Sarah Harkness, lenders perceive African-American women just as favorably as white males, and would lend them as much money. The reason: African-American females are generally perceived as single mothers who are industrious and hardworking, Harkness concludes.
To test her theory, Harkness gave the study participants — which included hundreds of undergraduate students and alumni from West Coast universities — a hypothetical $1,000 and asked them to look at fictional loan applications and determine how much money to loan. While the gender, race and education of applicants varied, their financial profile was the same.
What she found was that cultural stereotypes consistently influenced how much money the study participants were willing to lend, with African-American males and white women being perceived more negatively and least likely to receive funding.
“This meant being less forgiving of small errors such as typos. It also meant making unfavorable assumptions about the nature of the applicants’ employment (whether it was temporary versus permanent, for example) and their level of intelligence,” as a release on the study notes.