Projects

Innovations for Underwriting Minority and Small Business Enterprises


Overview

FinRegLab is investigating ways to improve credit access for minority-owned companies and other underserved small businesses through the use of non-traditional data sources and mission-based lenders.

The research project is evaluating efforts by minority depository institutions, community development financial institutions, and other community-based lenders to explore ways that bank account records and other sources of cash-flow information can be used to scale their lending operations. It is also evaluating the predictiveness of different credit attributes using loan performance data from larger fintech lenders.

FinRegLab expects the project to be the first in a series of studies focusing on ways that data and technology can improve financial services for small businesses, which create two out of every three net new jobs in the U.S. and can be a critical path for wealth-building among households of color. The initial project started with a June 2024 landscape report focusing on changes in small business lending markets since the pandemic and has three main components:

Mission-Based Lenders’ Adoption

In one workstream, FinRegLab is working with Emmanuel Yimfor of Columbia University to structure studies of pilot programs by minority depository institutions, community development financial institutions, and other smaller lenders to explore the potential to scale their lending to minority business enterprises through use of automated data flows, non-traditional data sources, and partnerships with fintechs. FinRegLab published an October 2024 working paper on lessons from data and technology implementation initiatives and broader issues facing mission-based lenders as they expand their small business programs. 

Empirical Research

FinRegLab is partnering with Sabrina Howell of New York University to analyze data from fintech lenders who have been using automated sources of cash-flow data since before the COVID-19 pandemic. The analysis will compare the predictiveness of a range of metrics distilled from automated cash-flow data as well as traditional credit scores and report information to identify which data points are most useful in underwriting loans to minority business enterprises and other types of small businesses.

Stakeholder Engagement

The third workstream involves engaging market actors, policymakers, advocates, and other stakeholders to explore the implications of the research for market practices and public policy going forward. FinRegLab will use industry conferences, convenings and other outreach channels to share findings with key audiences.

The project will be structured to facilitate later empirical analysis of loans from the pilot programs as they conclude. Additional components may be added over time to assess the potential for mission-based lenders to combine “high tech” and “high touch” approaches and to increase the scale of their operations substantially through partnerships with fintechs.



Related Publications

  • Transforming Small Business Credit: Technology and Data Adoption in Mission-Based Lending

    This report details the experiences of mission-based lenders such as community development financial institutions (CDFIs) and minority depository institutions (MDIs) as they adopt electronic bank account data and lending platforms to increase lending to minority-owned businesses and other underserved entrepreneurs. The paper provides both a practical snapshot of how lenders manage data and technology adoption…


  • From Crisis to Opportunity: Financing for Underserved Small Businesses Since COVID-19

    This report delves into the evolving landscape of small business lending following the pandemic, identifying significant trends that are shaping the lending ecosystem. As the economy improves, lenders will face critical decisions about how to meet the capital needs of more small businesses, including record numbers of minority- and women-owned startups since 2020.


  • Technology Solutions for PPP and Beyond

    This Research Brief catalogues uses of new data and technologies to make it easier for small businesses to access federal Paycheck Protection Program (PPP) funds and other forms of credit. Solving PPP enrollment challenges is important to laying the foundation for a rapid and inclusive recovery and to building a more resilient small business sector…


Funding for this project is provided by:


This project is funded by a grant from the U.S. Department of Commerce, Minority Business Development Agency, and with support from Visa. Plaid is providing free account connectivity services to the pilot programs to allow loan applicants to authorize their account data to be accessed for underwriting.

Contact Us

FinRegLab, 1701 K ST NW, Suite 1150, Washington, DC 20006

1 (202) 951-4088 / contact@finreglab.org


Kelly Thompson Cochran

Deputy Director and Chief Program Officer
FinRegLab

Prior to joining FinRegLab, Kelly served as the Assistant Director for Regulations at the Consumer Financial Protection Bureau from 2012 to 2019, where she oversaw rulemaking, guidance, and regulatory implementation activities under various federal consumer financial laws. Kelly previously worked at the U.S. Treasury Department, the Office of the Comptroller of the Currency, and at a top 50 law firm, where she advised financial institutions on a wide range of legal and regulatory matters. She also conducted research on financial services innovation at the University of North Carolina at Chapel Hill. She currently serves on the Conference of State Bank Supervisors’ Advisory Committee on Artificial Intelligence.

Karla Renschler

Director of Small Business Research
FinRegLab

As Director of Small Business Research, Karla designs and leads FinRegLab’s initiatives to explore innovations in lending to small businesses with the goal of increasing access to financial services. She brings extensive experience as a researcher across non-profit, management consulting and private sector roles. Prior to joining FinRegLab, Karla worked in small business card lending at Capital One designing credit policies and products tailored to the needs of subprime small business owners and startups. She is passionate about the role of technology in closing gaps in the small business financial ecosystem and has first-hand knowledge of the challenges banks and other lenders face in implementing innovations in underwriting. Karla holds a bachelor’s degree in political science and global studies from UCLA.

Paula Ochiel

Senior Research Analyst
FinRegLab

Paula is a Senior Research Analyst who focuses on small business research projects and other initiatives. Her recent work has focused on data and technology adoption among mission-driven financial institutions to increase small business access to capital. Prior to joining FinRegLab, Paula served as an Impact Manager at ICA, a non-profit venture capital Community Development Financial Institution (CDFI) based in Oakland, California. In this role, she oversaw data collection, analysis, and reporting activities, and helped inform and develop the organization’s impact measurement strategy and research practice. Additionally, she advised collaborative initiatives aimed at improving data quality, standardization, and aggregation across the CDFI industry. Paula holds a bachelor’s degree in international studies and a master’s in development practice from the University of California, Berkeley.

Tejal Patel

Graduate Student Intern
FinRegLab


About FinRegLab

FinRegLab is an independent, nonprofit organization that conducts research and experiments with new technologies and data to drive the financial sector toward a safe and responsible marketplace. The organization also facilitates discourse across the financial ecosystem to inform public policy and market practices. To receive periodic updates on the latest research, subscribe to FRL’s newsletter and visit www.finreglab.org. Follow FinRegLab on LinkedIn.

FinRegLab.org | 1701 K Street Northwest, Suite 1150, Washington, DC 20006