You're describing a system in which the subgroups that have been historically advantaged remain those with ongoing access to capital.
The more opaque and subjective a system is, the more it will favour advantaged groups (principally those of high social class) - in my experience this is especially true of systems that are nominally intended to help historically disadvantaged groups (which tend to benefit high-class members of those groups). Objective standards, consistently applied and enforced, are disadvantaged peoples' strongest weapon against discrimination.
"The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread."
Re:Community Banking and Fintech
by lotsofpulp on Monday October 25, 2021 @07:48AM
(#28986739)
The only way to equalize the playing field between someone with access to capital and someone without access to capital is to redistribute it from those with the capital to those without.
Any other solution will just result in inflation or some other problem. If the root cause is not addresses, then the problem will persist (as reality shows).
If you only promote the standard formula winners, you risk failing to find the losers that can be eventually better when given the chance.
In other words, if the formula isn't perfect, it isn't good to apply it strictly. Some randomization of the low end threshold / lottery for the losers seems to be a good idea.
No, this is not obvious at all. Given a fixed risk tolerance (or risk/payoff curve), you can only do certain amount of lending, so either you lend to the best prospects ("fairly", in some abstract sense), or you lend less efficiently and give less overall social benefit (but direct the social benefit to some particular subgroup). Having a bunch of different ways of assessing credit just ends up as a time tax that forces people on the margin to apply a bunch of different times, which ultimately benefits no-one.
Where I live there's a single standard formula that every lender uses, which seems a lot more efficient.