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PROVO — A recent study from BYU, Utah State and Rutgers University shows discrimination is still very real in the world of business. It shows that lenders don’t treat all entrepreneurs the same, and skin color is still a big factor.
The study was conducted by Sterling A. Bone, assistant professor of marketing at Utah State; Glen Christiansen, associated professor of marketing at BYU; and Dr. Jerome Williams from Rutgers.
Researchers had heard stories about lenders discriminating against non-whites, but they wanted to find out the seriousness of the problem.
They had nine different men ask lenders about a $60,000 loan to start a computer repair store. The men had similar builds, similar credit scores and were even dressed the same. The only differences were their names and their ethnicity. Christensen said, “We had the same shoppers shop multiple banks and had multiple incidents.”
The subjects approached lenders roughly 60 times. Christensen said it happened in “a major western city” that wasn’t Salt Lake City. Also, the subjects had hidden cameras recording what they experienced.
“White respondents were given more help with the application process, were given more encouragement in the application process and, a simple thing, as being given a business card, more often,” Christensen said.
White respondents were given more help with the application process, were given more encouragement in the application process and, a simple thing, as being given a business card, more often.
He also said African-American and Latino respondents were smiled at less frequently and also were told they would need to provide more personal information and documentation, like tax returns.
During the second part of the study, they asked entrepreneurs about their experiences getting loans. For African-Americans and Latino men, ethnicity was seen as a major factor in how they’re treated.
“For minority entrepreneurs, when they go shopping, for lots of things but particularly in the loan process, they think about their race all the time,” he said.
The third part of the study showed how personally minorities take rejection if they feel that rejection was based on their ethnicity. Researchers recruited people of all skin colors to apply for a loan online, only to reject every one of them.
In one group, subjects were asked to disclose their race, and in the other group, race was never brought up. African-American and Latino men in the group that had to disclose their ethnicity were much more likely to question their own value after being rejected.
“They significantly had lower self-esteem on the outcome of it than their white counterparts,” he said.