Effects of the Community Reinvestment Act (Cra) on Small Business Lending

41 Pages Posted: 4 Dec 2018 Last revised: 29 Apr 2020

See all articles by Lei Ding

Lei Ding

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Hyojung Lee

Harvard University

Raphael Bostic

Federal Reserve Banks - Federal Reserve Bank of Atlanta

Date Written: 2018-12-03

Abstract

This study provides new evidence on the effectiveness of the Community Reinvestment Act (CRA) on small business lending by focusing on a sample of neighborhoods with changed CRA eligibility status across the country because of an exogenous policy shock in 2013. The results of difference-in-differences analysis provide consistent evidence that the CRA promotes small business lending, especially in terms of number of loan originations, in lower-income neighborhoods. The generally positive effects of the CRA are sensitive to the types of CRA treatment. Losing CRA eligibility status has a relatively larger effect on small business lending activities, while the effects of newly gaining CRA eligibility are less pronounced. The results are fairly robust when alternative sample periods and control groups are used.

Keywords: Small Business, Credit, Community Reinvestment Act

JEL Classification: G21, G28, G32

Suggested Citation

Ding, Lei and Lee, Hyojung and Bostic, Raphael, Effects of the Community Reinvestment Act (Cra) on Small Business Lending (2018-12-03). FRB of Philadelphia Working Paper No. 18-27. Available at SSRN: https://ssrn.com/abstract=3295495 or http://dx.doi.org/10.21799/frbp.wp.2018.27

Lei Ding (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Hyojung Lee

Harvard University

1875 Cambridge Street
Cambridge, MA 02138
United States

Raphael Bostic

Federal Reserve Banks - Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

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